Saturday, July 10, 2010

U.S. stocks rise, log best week in nearly a year

(MarketWatch) -- U.S. stocks climbed Friday, capping their best week in nearly 12 months, as optimism ahead of the second-quarter earnings season powered a strong rebound from the market's worst levels this year.

The Dow Jones Industrial Average (DOW:DJIA) closed up 58.73 points, or 0.6%, to 10,187.72. The Standard & Poor's 500-stock index (MARKET:SPX) added 7.68 points, or 0.7%, to close at 1,077.93.

Alcoa Inc. (NYSE:AA) rose 2.1% ahead of its second-quarter report due Monday, and put in the best performance of a Dow component this week.

The four-day rally represents a bounce back after the Dow sank last week to its lowest point since October in its worst five-day performance leading up to July 4 since 1896.

The Dow has climbed 5.3% this week, its best weekly performance since the week ended July 17, 2009. The rally comes as investors have grown hopeful that the market's recent drop to 2010 lows may have exaggerated expected effects on corporate earnings from the slumping euro and slower global growth. (more)

15 Stock Picks from Top Mutual-Fund Managers

As any good contrarian investor knows, the time to buy is when there’s blood on the streets. The roads of America may not yet be sanguinary, but virtually every stock on the list below has been bleeding for the past two or so months. That means they’re a lot cheaper than they once were, and in many instances undeservedly so.

We took advantage of the recent Morningstar Investment Conference in Chicago to buttonhole a baker’s dozen of managers and ask them to name the single stock that investors had to own. Their answers are below. Share prices and related data are as of the July 6 close. (more)

Bloomberg Businessweek - 12-18 July 2010

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The World Financial Report, July 9, 2010

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Gold and silver: Good news and the bad

Less than 1% of total global assets in 2009 were in gold-related investments

“The future ain’t what it used to be”…Yogi Berra

Judging by several e-mails I’ve received from anxious readers of my articles during the past few days, some of you are wondering if you should have ‘sold in May and gone away.’

Let’s look at a chart from last year and see if that strategy would have worked in 2009.

Here is the daily bar chart for gold from last year. Selling in May (green rectangle) and going away would not have been a good idea in 2009. The good news is that the best buying opportunities for buying gold and silver usually come in May – June – July.

“There can be no other criterion, no other standard than gold. Yes, gold which never changes, which can be turned into ingots bars, coins, which has no nationality and which is eternally and universally accepted as the unalterable fiduciary value par excellence” ... Charles Degaulle. (more)

Commercial real estate transactions collapse 90 percent from 2007 to 2009. The next taxpayer bailout in the $3.5 trillion CRE market

The massive commercial real estate market is already plaguing the weak balance sheets of banks. It is the case that each Friday, we are likely to see one U.S. bank fail because due to high levels of commercial real estate (CRE) debt on their books. This market is likely to cause the failure of hundreds of banks and put the economy down into another real estate funk. The amount of commercial real estate transactions shows no sign of recovery in this market. And why would there be any recovery? This is an area for hotels, strip malls, condos, and other projects that usually reflect a healthy and growing economy. We do not have that and the problems embedded in CRE are going to stifle any growth for years to come. First, we should look at the trend in commercial real estate prices: (more)

7 Ways to Play This Hot Sector

The Food and Agricultural Organization of the United Nations (FAO) estimates that about 1.02 billion people are undernourished as of 2009 -- the highest amount since 1970. The global crisis of 2008 certainly didn't help, as remittances, aid, and foreign direct investment all decreased rapidly, leaving many of the world's poor without food or peripheral options.

According to the World Bank, "Over the 1981 to 2007 period, the share of net aid flows to developing countries has become negative for Latin America and for East Asia, and it has declined substantially for South Asia."

Investment in agricultural must increase in the next few decades if we expect this trend to reverse -- it worked in the 1970s and 1980s -- and there are certain ramifications for global businesses considering the magnitude of investment needed. (more)

Second Highest Weekly Short Covering Spree In Euro Contracts Follows Drop In Commercial Gold Shorts

The most recent CFTC Commitment of Traders report confirms our expectations that there was a major short covering squeeze in Euros. In fact, with net short positions declining to -38,909, or a 34,761 drop in contracts week over week, this was the second biggest short covering rampage in EURs in recent years. The only bigger one occurred 4 weeks ago, when 50k net short contracts were covered. The current net short speculative interest outstanding is back to early February 2010 levels. Keep in mind that precisely a month ago, on June 8, we saw the biggest net number of EUR short contracts on record at 111,945. All weak hands have now been shaken out, and without any marginal sellers, a long USD positions would be counterintuitive sense, especially with Goldman and CS selling the other side of the trade. (more)

3 ETF Ideas for the Third Quarter

The first half of 2010 is officially in the books, but few of the questions on investors' minds at the start of the year have been answered.

When 2009 drew to a close, few expected the remarkable rally to continue into the new year. The consensus was that the easy gains had been made since the bear market lows last March, and that markets would demand more concrete evidence of improving economic fundamentals if the bull run were to continue.

The first six months of the year have given investors several reasons to be optimistic. The emerging markets of the world continue to expand at impressive rates, while many advanced economies -- including some of those hit hardest by the recent downturn -- have halted contraction and begun growing again. Factories are coming back on line, and demand for raw materials has jumped considerably from 2009 lows. (more)

The Economist - 10 July 2010

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Top 10 Reasons For a Double-Dip Recession

The economic elites are confident that there won't be a double-dip recession, just as they were confident that there wouldn't be a recession in 2008. That turned into the worst economic downturn since the 1930s. Once again there are a number of warning signs that the economy is falling into recession and these are being ignored.

We have entered another period similar to late 2007 and 2008, when the economic establishment had a rosy view of the economy, but a number of indicators were flashing warning signs that a major downturn was coming.

Neither the Federal Reserve, the IMF, nor Wall Street correctly predicted a recession would begin in December 2007. None of these august bodies even realized the greatest economic downturn since the Depression was taking place even months after it had begun. Bullishness once again reigns supreme among the economic elites as one indicator after another is signaling trouble ahead.

Here are 10 reasons to think that a there will be a recession soon:

1. The ECRI weekly leading indicators have dropped to minus 7.7%. There has been no case since its existence when a recession didn't take place if this indicator fell to minus 10%. This doesn't mean that it has to fall that low, a recession is still very likely if it even gets close. Falling below zero and staying in that range for any period of time also signals a recession. In the 2007, the recession began three months after this indicator turned negative. (more)

Potential Gold Bubble Forming?