Month: October 2013

By Mitchell Clark, B.Comm. For Profit Confidential

As more and more companies report, it’s apparent that quite a few are beating Wall Street consensus (usually either on revenues or earnings, rather than both), and it’s happening in industries where you want to see leadership.

What Wall Street consensus actually becomes is typically a well-managed dance between sell-side analysts and a company’s chief financial officer. Consensus estimates generally don’t mean very much in the way of real economic growth, which makes it all the more significant when you do see real growth.

Alaska Air Group, Inc. (ALK) has been a hot stock over the last four years, and the last 12 months especially.

The company handedly beat Wall Street consensus, revealing a solid upturn in its airline business. The stock has gone up considerably but is not expensively priced, given current earnings. The company pays a dividend and is highly likely to get upgraded after such a strong quarter.

Total revenues including passenger, freight, and mail rose 22% during the third quarter of 2013 to $1.56 billion.

Along with this growth, the company was able to keep a handle on expenses with total operating costs rising only eight percent to $1.09 billion (aircraft maintenance costs dropped four percent to $54.0 million). This boosted total operating income 75% to $470 million. GAAP net income rose substantially to $289 million, or $4.08 per diluted share, way up from $163 million, or $2.27 per diluted share, in the third quarter of 2012.

Alaska Air Group purchased 1.45 million of its own shares this year for $83.0 million. The company has been paying down debt and holds the number-one spot in the U.S. Department of Transportation list of on-time performance.

It was a great quarter for the company, with a record earnings performance. This stock, in my view, is poised for more near-term gains and could move considerably higher as the company expects solid business conditions going into next year.

Chart courtesy of www.StockCharts.com

The position’s been in consolidation since May. It’s a stock market leader and a meaningful component of the Dow Jones Transportation Average.

This index, which I view to be an important leading indicator, recently broke through the 7,000 level, which is another all-time record high and a major accomplishment. (See “Dow Jones Transports Showing Life Again; Will the Stock Market Follow?”)

Even though Alaska Air Group isn’t expensively priced on the stock market, with so many transportation stocks trading right near their highs, any good financial reports are like confirmation earnings, helping to justify the recent run-up.

So while growing companies like Alaska Air Group can still see their share prices advance, I’m still mostly a fan of considering higher dividend paying stocks for new buyers. I want a good degree of safety (and income) from a company, especially in a stock market trading at an all-time high on what is mostly very lackluster financial growth.

By George Leong, B.Comm. For Profit Confidential

Hooray, gasoline prices at the pumps have declined to their lowest levels this year! Better yet, they’re looking to head even lower, as oil prices begin to unravel below $100.00 per barrel.

The level of oil reserves jumped by 5.2 million barrels for the week ended October 18, according to the Energy Information Administration (EIA). There are some 379.8 million barrels of oil in our reserves, and that doesn’t include those in the Strategic Petroleum Reserve.

With the rise in reserves and lower demand due to the recent government impasse, the country is importing only 7.7 million barrels per day versus the four-week average of 8.0 million, according to the EIA. (Source: “Summary of Weekly Petroleum Data for the Week Ending October 18,” Energy Information Administration web site, last accessed October 25, 2013.)

Today, the United States is less dependent on foreign oil than at any time in its recent history. The country is producing more domestic oil specifically from the shale oil in North Dakota and Montana. (Read “Why You Shouldn’t Be Worried About Surging Oil Prices.”).

The EIA says North America is now the biggest producer of usable shale oil in the world, and it’s only going to get bigger as new technologies surface that can extract even harder to get oil. In 2012, shale gas represented 39% of total natural gas production in 2012 in the United States, according to the EIA. Canada was second at 15%.

In my view, the rapid development of shale oil will continue to lessen the country’s dependence on OPEC oil, and this is good for both the economy and geopolitical side.

This is why the oil prices for West Texas Intermediate (WTI) oil, which is produced domestically, has continued to decline and is currently much lower than Brent crude oil at around $109.00 per barrel.

Take a look at the chart below comparing the oil prices of WTI (dark green line) versus Brent (red candlesticks).

In 2008, the oil prices gap between the two crudes was small. But since then, the spread between the two has widened, and this will likely continue as the domestic oil production rises and lowers WTI oil prices.

Chart courtesy of www.StockCharts.com

Also add in the tar sands oil flowing in from Canada, and we could see domestic oil prices decline even more. And then there’s also the energy created by wind and water, along with the major move for green energy usage, which will inevitably lessen the demand for oil, driving oil prices even lower.

In fact, if the U.S. continues to produce more oil and if the country allows the transport of oil from Canada along the Keystone line, we will probably see a declining need for OPEC oil.

In the end, there could be a time when gasoline oil prices decline much lower as we move forward.

With this in mind, you could look to play the bearish side of oil prices via the use of bearish exchange-traded funds (ETFs) that profit as oil prices decline, like PowerShares DB Crude Oil Short ETN (NYSEArca/SZO). For more aggressive traders, there’s PowerShares DB Crude Oil Double Short ETN (NYSEArca/DTO); however, the risk is high with these ETFs, so I’d advise that only traders consider this option.

Equities continues to climb higher but it might be time for markets to consolidate, says Jyske Bank Senior Strategist Ib Fredslund Madsen.

Hear why and what else investors should be aware of the week ahead.

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Video courtesy of http://en.jyskebank.tv

EURJPY: Bullish, Targets Further Upside.

EURJPY- With continued bullishness seen, a recapture of the 135.49 level is envisaged. Further out, resistance resides at the 136.50 level followed by the 137.00 level. A break of here will pave the way for a run at the 137.50 level with a push through that level aiming at the 136.50 level. Its weekly RSI is bullish and pointing higher supporting this view. Supports are seen at the 133.50 level and the 132.00 level followed by the 131.50 level. Further down, support stands at the 131.00 level with a break of here targeting the 130.50 level. All in all, the cross remains biased to the upside in the medium term.

By fxtechstrategy.com

By HY Markets Forex Blog

Crude futures traded little changed before the release of the US economic data which may show when the Federal Reserve will begin to taper its monetary stimulus in the world’s largest economy.

In New York, crude futures fluctuated after dropping by 2.9% last week, the most in five weeks; meanwhile a series of U.S government data is expected to be released this week, including figures for industrial production which are expected to show a climb in its output in September.

Its “premature” to comment on what decision OPEC will take on production at a December meeting, U.A.E. Energy Minister Suhail Mohammed Al Mazrouei said in Singapore, earlier today.

“There’s a lot of economic data this week,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “Weaker data will be bad news for the oil market. There is resistance at the 200-day moving average at about $98.70, and support” at $95, he added.

The West Texas Intermediate deliveries for December came in at $97.71 per barrel on the New York Mercantile Exchange, while Brent crude December settlement gained 51 cents to $107.44 a barrel on the ICE Futures Europe exchange. The European benchmark crude came in at $9.71 to WTI futures.

Crude Futures – Factory Outputs

The industrial production in the world’s largest economy rose by 0.4% in September, while manufacturing gained 0.3%, compared to the previous reading of 0.7% in August, analysts forecasted

Meanwhile, members of the Federal Open Market Committee will begin their two-day meeting tomorrow, as market participants are hoping to get a hint as to what the Fed’s next move may be. After the release of the disappointing US payroll data and the 16-day government shutdown, analysts are expecting the Federal Reserve to delay tapering its $85 billion monthly bond purchases till at least next year March.

The Organization of Petroleum Exporting Countries is meeting in Vienna on December 4.

Last month, Iraq’s crude exports declined 62.1 million barrels according to Asim Jihad, a spokesman from the oil ministry. Shipments from the southern terminal of Basra came in at 54.6 million barrels in September, while exports from Kirkuk as at 7.5 million barrels, Asim confirmed in an email yesterday.

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By HY Markets Forex Blog

European stocks futures were seen in the green territory, while investors focus on the anticipating U.S data on industrial production and housing for signs of the condition of the world’s largest economy.

Reports released showed that Germany’s largest steelmaker, ThyssenKrupp AG may not be able to sell its plant in Brazil, while Europe’s largest tour operator TUI Travel Plc may move after it closed further development.

Futures for the pan-European Euro Stoxx 50 index expiring in December gained 0.4% to 3,039 at 7:10am in London, while the UK FTSE 100 edged up 0.3% higher. At the same time Germany’s DAX index rose 0.35% higher to 9,017.31 and the French CAC 40 climbed 0.37% at 4,287.94.

The Stoxx 600 advanced 0.5% last week as disappointing US data increased speculations that the Federal Reserve will delay tapering its stimulus measures until at least next year March.  Futures for the Standard & Poor’s 500 index advanced 0.3%, while MSCI Asia Pacific index gained 1%.

European Stocks – Economic News

Meanwhile, the next Federal Open Market Committee meeting is scheduled on October 29-30, where members of the Federal Reserve will discuss on whether to scale back or delay it asset-purchasing program.

“Market participants are betting that the Fed will not taper before some point in 2014, while investors will pay close attention to earnings, providing there are no negative surprises they are likely to bid the markets up.” Stephane Ekolo, chief European strategist at Market Securities in London, wrote in an e-mail.

In other news, the ongoing issue between Germany and the US regarding the spying case could go into deeper consequences. The German newspaper Bild am Sonntag, reported that the US National Security Agency (NSA) has been spying on German Chancellor Angela Merkel since 2013.

In Italy, the government is due to hold a bond auction of zero coupon bonds maturing in 2015 and 10-year benchmark bond. Italy’s target is to sell €2.25 billion of two-year bonds and €0.75 billion of bonds maturing in 2023, summing to €3 billion.

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The post European Stocks Climbs Ahead of Fed Meeting appeared first on | HY Markets Official blog.

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By MoneyMorning.com.au

This week is Retirement Week in Money Morning.

Each day we’ll present advice and insight on planning and saving for retirement. This will include actionable information for anyone, regardless of age, proximity to retirement or current financial position.

The highlight will be a genuine live conference call on Thursday afternoon hosted by your editor, featuring Greg Canavan and Vern Gowdie. The conference call is now fully booked. But based on the amount of interest, we’re certain we’ll organise another event like this soon.

But so you don’t miss out we’ll do our best to offer you the next best thing in this week’s Money Morning. So today we’ll give you our take on the single biggest problem you face as you head towards retirement…

Saving for retirement is a big deal. Although it really shouldn’t be.

After all, it’s not as though you’ve only got one crack at it ‘a minute before midnight’.

If you’re like most people, you have (or had) 40-45 years to plan for retirement. Of course, the longer it takes you to get your plan right the less time you’ve got to benefit from it.

The last thing you want is to get to retirement age only to realise you need to keep working. Or worse, that you’ll need to rely on the government to provide you with a retirement income.

Capital Growth and Dividend Growth

That’s why – within reason – it makes sense to begin saving for retirement as early as you can. Not that we suggest you start hoarding cash the minute you leave school and get your first job.

It’s OK to have some fun first.

But by the time you hit your 30′s, then we’d say that is when you should start taking retirement savings a bit more seriously.

The question is, where should you start?

As we try to explain in these daily letters, the single best way to build wealth is to invest in growing businesses. If you can’t or don’t want to invest in a growing business then you should invest in businesses with a stable outlook that can pay a portion of their profits to you (dividends).

But even there, it’s so much better if the dividend paying company can grow its business so that over time it can pay you a gradually rising income.

So there you go. There’s your retirement plan. Invest in growing businesses, preferably businesses that can pay you a percentage of their profits.

Easy. What are you waiting for?

If only it really was that easy. Trouble is, investing isn’t just about reward. There’s that small matter of risk too…

RBA Backs Aussie Investors into a Corner

Risk is the biggest problem for investors. Or to put it another way, it’s the fear of losing money.

Everyone can understand that emotion. It’s especially understandable in the current environment. A lot of people lost a lot of money in 2008 after piling into the bull market that ended in 2007.

Many investors thought that after the 2001 crash, the market couldn’t possibly crash again. And besides, wasn’t China the new saviour? As long as China kept buying Australia’s resources there was no way Australian stocks could fall.

And of course, Australia was the ‘lucky country’.

Anyway, you remember how that turned out.

For those investors who lived through two stock market crashes in the space of eight years, we get that they’re nervous about taking the plunge into stocks. But the truth is, with interest rates at a record low, the Reserve Bank of Australia has backed investors into a corner.

To the extent that you have no option but to take risks in some form or another.

(By the way, Money for Life Letter editor Nick Hubble shares his view on risk – specifically price risk – below. Make sure to check it out. Plus, you can read more of Nick’s thoughts on investing in the current climate, including five simple ways to boost your savings here.)

Who Doesn’t Want to Buy Cheap Stocks?

And yet many investors are still sitting things out. They’re waiting for the inevitable crash. They believe that when the market crashes within the next couple of years they’ll get the chance to buy stocks on the cheap.

We’re not saying it’s an unreasonable approach. It’s just fine. Who doesn’t want to avoid a crash? Who doesn’t want to buy stocks cheap?

Our reservation is that there’s no guarantee stocks will crash by 50% or more this year, next year, in five years or even in 20 years.

Remember the chart we showed you a few weeks ago. It was a chart of US price inflation since 1947:

Source: Federal Reserve Bank of St Louis

This is what central banks have achieved with inflation – a gradual but persistent rise. This is what they now want to achieve with asset prices.

Even though they have caused huge instability and volatility in recent years, that isn’t their goal. Their goal is to manage and manipulate stock prices in a gradually rising pattern.

Whether they will ever achieve that goal is another question.

But what we do know is that they’ll try. And you know what that means? That’s right, years and perhaps decades of low interest rates and money printing.

It may not result in stocks going up in a straight line. But our bet is you’ll see stocks rise for at least the next two years as more and more investors succumb to reality. The reality is that if you want to grow your wealth for retirement you can’t do it by not taking risks. That means buying stocks.

In short, the market is risky. That’s a fact you’ve got to accept if you want any chance of building up a retirement nest egg.

We’ll have more to say on this tomorrow, including simple strategies for managing risk in an uncertain market.

Until then, make sure to check out Nick Hubble’s views on risk in today’s other article.

Cheers,
Kris+

From the Port Phillip Publishing Library

Special Report: UNAVOIDABLE: Australia’s First Recession in 22 Years

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By MoneyMorning.com.au

The October issue of The Money for Life Letter, is all about ‘price risk’.

Actually, it’s about the absence of price risk, or getting rid of it. But you need to understand what it is before you can get rid of it. Otherwise you won’t know it’s gone…

Price risk is what financial advisors call the risk of an investment’s price fluctuating. Your shares have price risk, because their price goes up and down.

Property does too. You might think all investments have price risk, but dividends and annuities don’t, for example. Wine can have price risk if you plan on selling it, but it doesn’t if you are happy to drink it instead if the price falls.

It might seem odd to have a name for such an obvious concept. The point is to separate a particular type of risk out from the others so you can discuss it in isolation. For example, price risk is a different type of risk to the risk of a broker committing fraud, or governments like Greece defaulting on their bonds.

But the problem with price risk is that it creates uncertainty.

An investment might be worth $100, but because of price risk it can be priced at $50 one day and $150 the next. That uncertainty is a retiree’s biggest enemy because your income is reliant on fluctuating investments while your living expenses are fairly steady and unavoidable. If the price of an investment falls, you have to sell more of it to cover the same amount of living expenses. That leaves you with fewer assets when prices go up again.

So, it might pay for you to test your retirement wealth for price risk.

Do you know how much of your wealth relies on assets that go up and down in price?

If there was a crash in prices across the board – the stock market, property market, bond market, etc. – how would your retirement finances fare?

Would they be in trouble?

It’s no coincidence that Australian retirees were worst hit by the GFC, according to a report by HSBC. They own more price risk-sensitive investments than other countries. But it doesn’t take a financial crisis to bring the dangers of price risk home.

I’m especially worried about the dangers of price risk to your portfolio because of demographic changes. In short, as more and more baby boomers retire, they will sell more and more of the assets they have accumulated. That selling will put a lot of downward pressure on investment prices.

I’m always looking for ways you can escape this selling pressure, and recently presented my best idea in The Money for Life Letter. I show how to opt out of price risk and the uncertainty that goes with it.

So stop and think about your investments. Just how much of your wealth is affected by ‘price risk’?

I bet you’ve never thought to ask yourself that question before. And yet it’s undoubtedly the key to ensuring you preserve your wealth in retirement.

Nick Hubble+
Editor, The Money for Life Letter

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USDCHF stays within a downward price channel on 4-hour chart, and remains in downtrend from 0.9177. Initial resistance is at the upper line of the channel, as long as the channel resistance holds, the downtrend could be expected to continue, and next target would be at 0.8800 area. Key resistance is at 0.8965, a break above this level will indicate that the downtrend from 0.9177 had completed at 0.8890 already, then the pair will find resistance around 0.9100.

Provided by ForexCycle.com

By Investment U

This is a follow-up to several segments I did in the past year about Macau, the gambling center for Asia and especially for the Chinese.

The Chinese, by the way, love gambling so much the Chinese government is looking for ways to slow down the amount their citizens are leaving in Macau. That’s a good sign.

Recently released earnings and revenue numbers for the hotels operating in Macau were through the roof, and Las Vegas Sands Corp. (NYSE: LVS), one of the casino hotel operators I’ve talked about in the previous segments, has had its price target raised by almost all the analysts who follow it. And it’s all because of its Macau operations.

JP Morgan raised its LVS target to $80 from its current $72 to $73 range based solely on increased earnings projections – 8.1% for this year and 8.8% next – just from the Asian operation.

This gives the stock a forward P/E of about 19, but JPM said, based on the growth potential, this is not expensive.

Stifel, Nomura and Susquehanna analysts all have had similar increases in earnings and growth estimates with target prices as high as $82 in 2014.

Gambling is just another way to ride the huge expansion of the middle class in China, and they are leaving a lot of their money in Macau.

Take a look at LVS.

A Small Senior Housing Play With Big Upside

As the boomers enter their senior years the demand for just about anything that caters to the elderly will explode. And housing for the elderly will be one of the absolute essentials going forward.

Capital Senior Living Corp. (NYSE: CSU) runs over 100 senior housing and assisted living facilities in almost half of the U.S., and most of its operations are privately paid, so it has little or no exposure to Medicare cuts.

And its average monthly cost is around $2,500 for independent living and $3,700 for assisted living facilities. That’s well below its competitors of over $4,000 per month.

Most of CSU’s future growth will come from the fact that it is a small operator that is able to acquire new properties that are too small to attract the attention of the cash-rich big REITs.

Most property sales in this part of the industry result in bidding wars by the big-name REITs, but CSU is able to avoid this trap by buying small operations the REITs are not interested in, at very attractive prices.

But this size advantage won’t last forever. It is expected to grow revenues by 15% this year and 10% next. Its under-the-radar bargain buying will not be there indefinitely.

The high P/E of 80 will scare away investors unfamiliar with CSU, but it is not an accurate measure of this type of operation. The cash from facility operations, CFFO, which is the real measure of this type of a real estate operation, is at a very attractive 11 times.

It pays no dividend. CSU is using all its cash to fund growth. So what this one lacks in income it makes up for in big growth potential. And the lack of a dividend in this market will keep its price out of the stratosphere and under most radars but, as I said, not forever.

It has as much as a 35% upside in the next year.

Take a look at senior housing.

The “Slap in the Face” Award: Kiss it Goodbye

And finally, maybe the most entertaining “Slap in the Face” award in a long time.

This comes from a Henry Hebeler article in MoneyWatch, and it’s about lending money to relatives. All of us, I’m sure, have been in this barrel at least once.

According to Hebeler, the first rule when relatives ask for money is just give it to them. Never expect to be paid back because, in all likelihood, you won’t be. Even with a written contract, forget about it.

He talked about counseling your parents, in-laws or siblings about budgeting or planning for a rainy day. Right! I can see my sisters sitting there being counseled by me.

And borrowing from a relative is never about a minor issue. They are always big, expensive problems. Believe me, I know from personal experience. They don’t call for 50 or 100 bucks.

The best thing to do is just give it to them because not only do you have almost no chance of recovering it, a loan over $1,000 can become a tax issue, too.

The new Golden Rule: Forget about it.

Article By Investment U

Original Article: It’s Not Gambling if You Know You’re Going to Win