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Will Housing Continue Its Uptick? GDP Could Scare The Market on Thursday

Christian Hill — Mon, 22 Jun 2009 17:30:51 +0000

No real surprise here, Existing Homes Sales are expected to increase. It should be a combination of two factors, too-good-to-pass-up deals on foreclosed homes, and families moving to new school districts over the summer to avoid switching schools mid-year.

Monday
Earnings Announcements: Walgreens (WAG)

Tuesday
Economic Reports: Existing Home Sales

Earnings Announcements: Oracle (ORCL)

Wednesday
Economic Reports: Durable Orders, New Home Sales, FOMC Rate Decision

Durable Orders are expected to fall dramatically since last month. I am not sure if this is due to no more income tax refund checks to spend on big ticket items or not, but with Personal Spending for May expected to increase, a drop in Durable Orders is surprising.

New Home Sales are expected to climb this month, and after last weeks surprise in Building Permits and Housing Starts, I have a hard time trying to figure out the New Home Sales report. If I had to pick, I would expect the report to meet or beat expectations. Just a gut feeling.

The FOMC Rate Decision is announced at 2:15, and I don’t expect a change to be made to the current 0.0-0.25 percent rate

Earnings Announcements: Monsanto (MON), Rite-Aid (RAD),

Thursday
Economic Calendar: Q1 GDP Final

Expectations are for no revision to the first quarter GDP figure. At this point, I doubt there would be a surprise showing improvement. If anything, the report may show a tenth of a point or so larger contraction for the first quarter GDP.

Earnings Announcements: Con-Agra (CAG), Palm (PALM)

Friday
Economic Reports: Personal Income and Spending, Michigan Sentiment

As mentioned earlier, Personal Income and Personal Spending for May are both expected to show an increase. I guess the surprise is that the expected increase in spending is larger than the expected increase in income. With money tight for everyone, an increase in spending is quite surprising.

The Michigan Sentiment reading is expected to show no change since the last report, which is about what I expected. With rising gas prices, uncertainty about the economy and slowing job losses, the consumer has many offsetting considerations.

Source: Will Housing Continue Its Uptick? GDP Could Scare The Market on Thursday

4 Ways To Recession Proof Your Portfolio

William Patalon III — Mon, 15 Sep 2008 13:38:22 +0000

Wall Street is on its knees, and the taxpayer is on the hook for well over a trillion dollars to prop up the financial system.

Meanwhile, the wider US economy is sliding into a recession.

William Patalon III says there are four solid ways to protect your portfolio from these forces: 1) Buy dividend-paying stocks; 2) Buy gold; 3) Buy companies focused on overseas market; and 4) Don’t panic…

The following extract is taken from a research report published over the weekend by Money Morning…

No. 1 – Stock Up on Dividend stocks

Many investors are so scared by the wild gyrations the stock market has seen of late that they’ve jettisoned everything in their search for safety.

Not only is this a massive mistake from a timing standpoint, it’s also a major misstep because of all the dividend income those folks are going to forego.

Dividend-paying stocks tend to be more stable than their non-dividend paying brethren -particularly during rocky stock markets. In other words, stocks that have income streams attached are treated better, especially when the going gets tough.

They also outperform non-dividend paying stocks by even more in down markets than they do in up markets.
By consistently reinvesting dividends during down markets, investors can substantially expand their asset base, which puts them way ahead of the game when markets recover and stock prices soar – as they always eventually do.

And the savvy investors who owned them watched as their own portfolios easily outperformed the market averages and roundly trounced the returns of portfolios that were devoid of or light on dividend-paying shares.

And there are some excellent investment candidates. Two of the best are the PowerShares International Dividend Achievers Fund (PID) and the Alpine Dynamic Dividend Fund (ADVDX), two exchange-traded funds (ETFs) that we like a great deal.

The PowerShares International Fund is a global-income portfolio that can help you spread your risk, while also earning income. The Alpine fund is a more-specialized fund that uses a “dividend harvest strategy” that can boost the fund’s yield.

Both funds invest in companies that have survived countless business cycles, and that are likely to survive this downdraft, too.

Because dividend-paying stocks tend to be downdraft resistant, portfolios with higher yields tend to last longer and pay stronger. That’s something that’s important to all of us, but especially to investors who are nearing retirement, or who have already retired.

No. 2 – Go for Gold

When times are tough, gold soars.

And frankly, the economy has been tough: $4 gasoline, the housing crisis, rampant inflation, plummeting stocks…

But all the while, gold prices vaulted a cool 26.5% in the past year.

Missing out on gold is already costing investors a pretty penny. What’s more, most experts are forecasting gold prices to rise at least another 75.6% by the end of this year.

So, how does one profit from gold? It’s simple. You don’t have to wade through a plethora of flashy websites offering bullion or risk it all on a junior mining company.

Instead, here are five ways to profit from gold right away – from the most lucrative to the least risky.

Gold Fields Ltd. (GFI): South Africa’s Gold Fields Ltd. is the world’s fourth-biggest gold producer – with about 90 million ounces in reserve from its operations in Africa, South America and Australia.

It recently reported that its fourth-quarter production would beat its previous forecast by up to 120%.

Overall, the company has a solid balance sheet and ample reserves. But if anything scares investors away, it’s Gold Fields’ location.

South Africa mines are frequently a political tool between the country’s labor unions and state-owned utility provider Eskom Holdings Ltd. (OTC:ESKAY), which controls 95% of the country’s power.

Eskom recently jacked electricity prices up 27.5%, and unions decided to hit the government where it hurts – by striking- thus gutting the government of taxes from its vast gold profits.

That is just one example of why this stock is a risky gold play. Gold could reach another record but Gold Fields may not see a penny of it if its miners are on strike.

Yamana Gold Inc. (AUY): When gold prices are high, investors should pay extra attention to mining companies with increasing production levels because they translate into a bigger bottom line.

For its second quarter this year, Yamana Gold Inc. produced almost 10% more gold than it did in the previous quarter.

What’s more, its gold production is expected to double to 2.2 million ounces per year by 2012, primarily from its Brazil and Argentina mines.

That’s because Yamana Gold went on a spending spree in the past two years, buying up junior mines around the world to lock in reserves.

“Now it is about production, cash flow and earnings,” Chief Executive Officer Peter Marrone told Reuters.

It’s also about dividends. The company recently kicked up its investor payout by 300%, a strong vote of confidence to its production and stock performance.

Consumer Spending Threatened by High Prices and Lower Wages

Jason Simpkins — Tue, 22 Jul 2008 15:13:17 +0000

Consumer spending, which accounts for more than 70% of the economy, will be seriously threatened in the months ahead, as prices continue to rise, wages plateau, and government stimulus checks wear thin.

Consumer spending has remained strong in recent months, even jumping 0.8% in the month of May. But that boost was largely inflated by the $50 billion in government rebate checks that were cashed and put to use in the month.

The stimulus will total $107 billion this fiscal year, but that may not be enough, as consumer prices are rising across the board. The consumer price index (CPI) increased 1.1% in June, driving the rate of inflation over the past 12 months to 5%, and it looks as though prices will continue to rise as many businesses grapple with higher raw material costs.

Sara Lee Corp. (SLE), the maker of many American food products, such as Jimmy Dean sausages, said yesterday (Monday) that it would be forced to boost the prices of its meat products by one-fifth this year.

“Price increases vary a lot by type of products but the increases will be as low as zero and some products we will decrease on and other increases [will be] in excess of 20%,” C.J. Fraleigh, Sara Lee’s chief operating officer for North America told the Financial Times.

Kraft Foods Inc. (KFT) said prices for its products will jump by 12%-13% this year, and even as much as 25% in some of its cheese categories. Kellogg Co. (K), ConAgra Foods Inc. (CAG) and Tyson Foods Inc. (TSN) are some of the food companies also planning price increases that will invariably contribute to inflationary pressures in the United States.

Meanwhile, the high price of oil has contributed to a sharp escalation in the price of gasoline and many other consumer products. For instance, global chemical producer Dow Chemical Co. (DOW) recently raised prices on all 3,200 of its products, some by as much as 20%, in the single-biggest price increase in the Michigan-based company’s 111-year history.

The problem is going to get worse in the months ahead, as a survey by the National Association for Business Economics (NABE) has found that almost four times as many businesses plan to charge more for their goods and services next quarter than expect to reduce prices.

The poll of the 101 NABE members was taken between June 19 and July 10, and found that a record 75% paid more for materials last quarter and expected to pay more this quarter as well. A net 28% of respondents said they were forced to increase prices from April through June as a result.

Worse, only 20% of the businesses surveyed said salaries increased in that time, the lowest number in four years and an 11% drop from the group’s previous survey in April. Only 9% of the respondents said they would increase payrolls over the next six months, the fewest in five years.

The information corroborates a separate report from the Department of Labor last week, which said wages, adjusted for inflation, were down 2.4% in the 12 months ended in June.

Employers have cut jobs each month in 2008, with payrolls tumbling for the sixth consecutive month in June. The total number of job losses in the first half of the year was 438,000.

The national unemployment rate has gone up by a full percentage point in the past year, to 5.5%.

Source: Consumer Spending Threatened by High Prices and Lower Wages

Three Ways to Play Peak Food

Jennifer Yousfi — Thu, 03 Jul 2008 15:14:46 +0000

Editor’s Note: Money Morning’s Jennifer Yousfi has been talking a lot about the impact of rising corn prices on US food producers. With input costs of animal feed spiraling out of control, many producers are struggling to keep their heads above water. For investors, says Jennifer, this means no “slam-dunk” profit play. But Jennifer says she’s found three companies that she thinks offer good bargains…

Cashing in on Commodities: Three Ways to Profit From Record Meat and Dairy Prices

By Jennifer Yousfi

Last week, Tyson Foods Inc. (TSN) announced it would sell its Canadian plant to XL Foods Inc. for $105 million, pending regulatory approval. Canadian livestock farmers were sad to see the American firm go.

“It’s very disappointing to see Tyson leaving Canada,” Rick Paskal, a feedlot owner in southern Alberta, told Reuters.

“We had three bidders for our cattle. Today we’re down to two. That’s a pretty black day, as far as I’m concerned,” Paskal said, referring to the only two major beef packers left after Tyson’s planned exit.

While the move may be bad news for Canada’s beef farmers, it’s quite the opposite for investors: This shift is part of a “back-to-basics” refocusing strategy for Tyson, which made its name in the poultry market.

“Without hesitation, we believe the sale … is a positive, as the Canadian beef business not only has been a material drag … but likely would have continued to generate losses for the foreseeable future,” wrote BMO’s Kenneth Zaslow in a note to clients after the sale was announced.

And while it continues to struggle to make money with its domestic chicken business, Tyson is looking to capitalize on powerful global trends — one being the so-called ‘BRIC’ economies of Brazil, Russia, China and India.

Its BRIC market of choice: India.

Just this week, Tyson announced it had acquired a 51% stake in India’s Godrej Foods Ltd., which sells retail fresh chicken, chicken nuggets and patties, MarketWatch.com reported. It is a subsidiary of Godrej Agrovet Ltd., an agri-biotech company that has yearly sales of about $250 million.

Tyson, one of the largest U.S.-based producers of poultry products, says the joint venture will be situated in facilities in such key India cities as Mumbai and Bangalore, and will generate $50 million in annual sales. The U.S. company will use its production methods to help Godrej improve and expand production, build newer facilities to expand the duo’s reach, and to develop new kinds of products.

“We believe the timing is right for us to bring our expertise and resources to this emerging market,” Rick Greubel, international president at Tyson, said in a statement.

Once largely a backyard enterprise, poultry is now one of India’s fastest-growing agriculture-related markets. India is the world’s sixth-largest poultry producer and is watching as chicken consumption advanced at an average annual pace of 11.3% between 1990 and 2000. Now India’s consumers are shifting their tastes – from only eating fresh chicken, to embracing frozen poultry products.

Tyson’s shares have plenty of room to rebound: At yesterday’s closing price of $14.31 each, they’re down 40% from their 12-month high.

General Mills Inc. (GIS) is another of the food-manufacturing firms to be hard hit by the soaring cost of raw ingredients. For its fiscal fourth quarter ended May 25, a 12.9% increase in sales wasn’t enough to offset the bottom-line damage brought on by rising commodity costs.

Net income declined 17.4% to $185.2 million, or 53 cents per share, down from $224.1 million, or 62 cents per share, for the same period a year prior, Forbes reported.

But investors who strike here may be buying into a high-quality company whose fortunes are about to turn: General Mills is one of those rare companies that appears to be passing its increased costs along to its customers by raising prices – but without taking a big sales hit.

Remarkably, the company may actually be boosting its overall sales via this initiative.

“General Mills is justifying the premium it has to charge to make it through rising input product cost… and seeing higher sales volumes even as it is raising prices,” analyst Matt Arnold of Edward Jones analyst Matt Arnold told Forbes.

It’s the kind of company we like here at Money Morning: It has a terrific brand name, offering such products as Pillsbury breakfast pastries and baked goods, Green Giant canned vegetables, General Mills cereals, and Yoplait yogurt.

Chief Executive Officer Ken Powell spent 20% more on U.S. marketing, spurring higher sales during the most recent quarter – one of the five keys to picking a bear market stock. And it just announced a 10% increase in its dividend payout – a second of those five bear-market investing secrets [Check out our related story on bear-market investing by Investment Director Keith Fitz-Gerald in this issue of Money Morning].

Dean Foods Co. (DF) is another firm that has felt the harsh sting of high commodity prices, but the Dallas-based firm has also slashed costs at the same time it increased prices — and boosted its profit outlook.

We also like Dean because it’s carving out a solid niche in the organic food portion of the food market – a niche that’s gaining popularity as a graying U.S. population becomes more concerned about what it eats. Organic products command a market premium, making it easier to raise prices in an inflationary environment.

Source: Cashing in on Commodities: Three Ways to Profit From Record Meat and Dairy Prices