Month: January 2012

On Wednesday, the World Bank revised its global growth projections to reflect the deteriorating debt situation in Europe. Comprised of over 180 member countries, the World Bank predicted last June that global activity for 2012 would expand by 3.1 percent. The downgraded outlook now places global growth for 2012 at just 2.5 percent, with most of the growth slated for the emerging economies.

In fact, noted World Bank economist Justin Lin, Europe was likely already in recession and could trigger a return to the turmoil that led to the recession of 2009.

“The risk of a global freezing-up of the markets and as well as a global crisis similar to what happened in September 2008 are real,” Lin told reporters in Beijing.

The Bank of Canada agreed with the World Bank’s assessment of the situation in Europe saying on Wednesday that Europe will likely be in recession for most of 2012. The Bank also said it expected the impact will cost the Canadian economy about $10 billion due not only to lost export sales, but also a general decline in world-wide investor confidence and the impact this will have on global markets.

In November, the Federal Reserve likewise revised downwards its outlook for 2012. The Fed predicted that growth would expand by only 2.5 to 2.9 percent compared to its earlier view of between 3.3 and 3.7 percent. News of a more positive nature came in the form the Fed’s “Beige Book” which showed that for seven of the twelve regions surveyed, the last quarter of 2011 ended on a more upbeat note compared to the year before.

Despite the year-over-year gains, the recovery is still being held in check by two significant forces; a still-depressed housing market and stubbornly-elevated unemployment rate.

The longer-term view provides little optimism for a quick fix for either predicament. As a result, the Fed remains committed to its low-interest rate policy that will see the Federal Funds rate capped at 0.25 percent until mid-way through 2013.

Greece Close to Deal with Creditors

One hopeful sign from Europe is the latest news suggesting that Greece could be close to inking a deal with its major bond holders. Late last year, a committee made up of thirty-two of Greece’s private creditors was formed to lead the negotiations to set the guidelines for addressing about 200 billion euros ($254.6 billion) in debt due to mature in the first half of 2012.

An agreement reached Oct. 26^th of last year called for these soon-to-expire bonds to be swapped for new bonds with a significantly discounted face value expected to be about half of the original par value. Discussions are now said to be centered on the interest rate these new bonds will pay; insiders expect the annual interest rate will be between 4 and 5 percent with 20 to 30 year maturity dates.

Foreign currency markets reacted positively to the news of a potential agreement with the euro gaining half a percent on the dollar yesterday. The euro gained another 0.9 percent by early afternoon in New York rising to a 12-day high of $1.2853.

Scott Boyd is a currency analyst and a regular contributor to the OANDA MarketPulse FX blog

DirecTV (DTV) was downgraded today by UBS (UBS) to neutral from buy with a $46 price target, as the firm believes that subscriber growth will likely slow. Shares are lower by about 2.7 percent.

MGM Resorts (MGM) was upgraded today by Credit Suisse (CS) from underperform to neutral with a $13 price target, as activity on the Las Vegas strip is showing steady gains which should bode well for the bottom line. Shares are higher by about 3.6 percent.

According to a person familiar with the matter, Ford (NYSE:F) is marketing $1 billion of bonds backed by auto loans, Bloomberg reports.The individual says the offering, issued through Ford’s finance unit, could be sold as early as this week.Ford Motor (NYSE:F) has potential upside of 37.6% based on a current price of $12.13 and an average consensus analyst price target of $16.69.Ford Motor is currently above its 50-day moving average (MA) of $10.85 and should find resistance at its 200-day MA of $12.27.

Lions Gate (NYSE:LGF) shares are catching a bid today, up 4.3% today, after the NY Post reported the company was looking to sell its stake in TV Guide Network.The NY Post said Lions Gate was already in talks with several PE firms.Nielsen estimated the TV channel lost 20% of its viewers in 2011.

Is Google Search Plus Your World Really That Bad of An Idea?

by Jeannette Di Louie, Investment U Research

Wednesday, January 18, 2011

“Google May Have Just Made the Worst Mistake in its History This Week,” a Business Insider headline speculated on Friday.

And Forbes echoed similar sentiments, firmly stating with one of its own that “Google CEO Larry Page Just Made His First Big Mistake.”

But perhaps the most shocking headline of all concerning the reigning search champ’s alleged error was Gizmodo’s, which read: “Google Just Made Bing the Best Search Engine.”

That forceful declaration demands two immediate responses: “Really?” and “How bad could it have been?”

Now don’t get me wrong – because I actually prefer Microsoft’s (Nasdaq: MSFT) Bing over Google (Nasdaq: GOOG). But that doesn’t mean I have any illusions that Bing is anywhere close to being as powerful or as popular as Google.

Yet Bing did get a boost with Google’s announcement last week concerning its newest innovation. With Google Search Plus Your World (SPYW), the company managed to tick off prominent techies – like Gizmodo’s Mat Honan and Business Insider’s Matt Rosoff – enough to allegedly leave Google for good.

Google Search Plus Your World in a Nutshell

When it comes down to it, Google SPYW is really just an attempt at self-promotion.

Last year, Google launched a social media site called Google+ in an attempt to beat out Facebook. And since that’s no easy task, the search engine went a step further and came up with SPYW.

Search Plus automatically draws from information posted on Google+, generating query results based off of that data. So if John Smith logs into his Google account and then conducts a general internet search for one of his Plus buddies, he’s much more likely to get relevant results than otherwise.

This is “potentially groundbreaking” technology, as Wired Senior Writer Steven Levy points out. “If Google is able to leverage the knowledge it accumulates about you, it can deliver much better search results.”

On the downside, that capability doesn’t extend much further than Google+. John’s Facebook, for example, might as well not exist according to Google+.

The company says it’s looking into changing that, but it has some other kinks to work out, as Levy also points out:

“With SPYW, the search experience deeply becomes intertwined with Google’s social networking product. You see it in the search box, where the Google+ identity becomes the way to identify a person whose name is in a query. You see it in the search results, where Google+ content is overwhelmingly displayed compared to other social material from Google’s competitors. You see it in a ‘People and Pages’ list – suggestions for connections on Google+ –that appears in the same column as Google’s ads.”

In other words, SPYW is obnoxious in its self-promotion. Though, admittedly, anybody who doesn’t like the feature can simply turn it off and go back to a regular Google experience. And anybody who doesn’t have a Google account doesn’t have to worry about it at all.

So Did Google Mess Up or Not?

When everything is said and done, Google SPYW may very well have been far too bold a move to promote a still largely insignificant service. Then again, it might be the kick that Google+ needs.

At this point, it’s far too early to say one way or the other.

While Rosoff makes a good point in saying, “In tech…You lose when you make your customers angry,” and people don’t seem to be very happy with SPYW so far. But that’s mostly techies and not the main public.

Right now, a lot of assumptions are being made over a product that hasn’t really hit the market yet. And Google has the benefit of already having a loyal following that all but laugh at other search engine attempts.

Knowing that, don’t buy or sell into the hype. Just keep an eye (only one is necessary for the time being) on the situation and see what happens.

Good Investing,

Jeannette Di Louie

Article by Investment U

Bargain hunters are wise to pay careful attention to insider buying, because although there are many various reasons for an insider to sell a stock, presumably the only reason they would use their hard-earned dollars to make a purchase, is that they expect to make money. Today we look at a noteworthy recent insider buy.

The Iranian Threat: War of Words, or $200-a-Barrel Oil Concern?

by David Fessler, Energy and Infrastructure Specialist, Investment U
Wednesday, January 18, 2011

As I was standing at the pump yesterday morning, watching the dollar digits tick by, the outdoor speaker blared news about Iran’s latest threat to close the Strait of Hormuz.

Here we go again. I can see it coming. Another war. But this time, it’s going to be fought over what I’m pumping into my tank. How stupid is that?

Perhaps it’s not stupid at all. Could the Obama administration be doing it on purpose? Part of me thinks so. Perhaps it’s the administration’s way to get the country refocused on alternative energy…

“No country in the world can manage the shock that results from 15 to 17 million barrels of oil not entering the market,” said Mehr, Iran’s state-run news agency. Truer words have never been spoken.

The fact is, we aren’t going to wean ourselves off of oil any time soon. Like it or not, we’re a fossil fuel-based society. Can the world stand to have a fifth of the daily oil flow cut off for any length of time?

It’s more of a rhetorical question than anything else. The answer is, “No, of course not.” The real question is: “What would it do for oil prices?”

Short-Term Mayhem

In the very short term, they would likely double to $200 a barrel as soon as the news of the Hormuz closing hit the wires. That translates to $7.00 a gallon gasoline, and even more expensive diesel.

It would have devastating impacts on the nascent economic recovery we’re experiencing here, and it would kill economic growth just about everywhere else.

The United States, along with its oil-dependent allies, will quickly reopen the Strait of Hormuz, taking out Iran’s coastal military installations in the process. While they’re at it, they’ll likely bomb the daylights out of Iran’s nuclear installations just for good measure.

My guess is they’ll leave Iran’s oil export facilities untouched. That would ultimately be like shooting oneself in the foot. But I could be dead wrong on that one, too.

How long would Hormuz have to remain closed for a disruption to have an impact? That depends where you live. Here in the United States, the President would immediately open the Strategic Petroleum Reserve, but that’s less than 30 days supply.

If Hormuz gets reopened in a week or so, prices would start to stabilize, and begin to drop in a couple of weeks. Expensive crude would absolutely hammer profits for refiners like Valero Energy Corporation (NYSE: VLO), Sunoco, Inc. (NYSE: SUN) and Tesoro Corporation (NYSE: TSO) for the first quarter of 2012, if it happens sometime in the next month.

It also means prices at the pump will remain higher longer, until the expensive crude works its way through the system all the way to your tank.

Almost lost against the backdrop of the Iranian threat is the fact that Chinese GDP growth came in higher than expected at 8.9%. That’s extremely bullish for oil prices, as that implies crude demand continuing to increase for the Red Dragon.

Long-Term Refocus?

Longer term, prices will eventually drop back to levels in the $4.00 a gallon range, and probably stabilize there.

But we might also witness a redoubling of efforts towards natural gas. It’s never been cheaper, and we have so much of it. It’s almost criminal we aren’t doing more with it.

Alternatives like solar, wind and electric vehicles will all-of-a-sudden seem like great ideas. Nothing like $7.00-a-gallon gasoline to get Congress’ attention refocused on a national energy plan, and consumers focused on alternatives.

Right now, the whole situation is very slippery, no pun intended. With the United States and Iran, it’s a dangerous game of chicken that could send oil prices soaring. We’ll be watching.

Good Investing,

David Fessler

Article by Investment U

The Nikkei reports that Toyota (NYSE:TM) is planning to build an estimated 20,000 units of Aqua hybrid subcompact this month and about 30,000 units in each of the next two months.Toyota Motor (NYSE:TM) has potential upside of 16.2% based on a current price of $67.83 and an average consensus analyst price target of $78.79.

In trading on Wednesday, general contractors & builders shares were relative leaders, up on the day by about 3.8%. Leading the group were shares of Hovnanian Enterprises (HOV), up about 8% and shares of Beazer Homes (BZH) up about 5.8% on the day.