Wednesday, October 27, 2010

3 Tech Dogs Attempting Turnarounds

It's good to be Apple (AAPL: 308.05, -0.79, -0.25%) now. Giant gains in sales, earnings and market share make headlines. Headlines get the attention of potential customers. Their curiosity leads to further sales, earnings and market share gains. And so on.

For the three companies below, momentum has been carrying them in the opposite direction in recent years. Each has suffered setbacks in market share and steep share price declines (at least some of which can be traced to Apple's success).

Humbled companies can be good to stock investors, provided their managers have figured out what's wrong and are willing and able to fix it. With Wall Street's expectations low for such companies, it doesn't take much good news to give shares a lift. The odds are perhaps against these companies, but each has its fans among Wall Street analysts. Here's a look at their arguments in favor of buying shares. (more)

The Top 10 Ways to Save Money

I recently reached a milestone in my life on Twitter: The number of people following my tweets passed the 1,000 mark. I’m still a piker compared with champion Twitterers like Ashton Kutcher, but four figures sounds impressive to me. To thank everyone, I promised that I would tweet my top ten savings tips.

I’ve always believed that the trick to saving money is just that -- a trick. You don’t have to win the lottery, strike it rich on Wall Street or even earn a six-figure salary to build a comfortable savings cushion. You just have to play psychological tricks on yourself to stay focused on spending less and keeping more cash in your pocket.

Over the years, we’ve written about a lot of these strategies in Kiplinger’s Personal Finance, and the promise I made on Twitter encouraged me to mentally cull through those tactics to choose the ones that I think are most practical and effective. And here they are, each in Twitter-ready form of 140 characters or less (with a bonus for visitors to

1. Start right away. Don’t wait till you make more money. The more you make, the more you spend. For ideas on how to make a salary of any size go further, see our story on easy ways to stretch your paycheck.

2. Start small. It will add up to big piles of money over time. To see how fast your money will grow, plug in your numbers at our How much will my savings be worth? calculator. (more)

Greece Likely to Default By 2013 as Debts Remain, El-Erian Says

Greece is likely to default over the next three years because budget-cutting won’t be enough to reduce the nation’s debt burden, Pacific Investment Management Co. Chief Executive Officer Mohamed A. El-Erian said.

It’s in Greece’s interest to default “as long as you can contain the contagion to other countries and it is done through orderly restructuring and repricing to retain competitiveness,” El-Erian said at a conference sponsored by the Economist magazine in New York yesterday. Like Latin America’s “lost decade” in the 1980s, “the alternative doesn’t promise growth and employment generation,” he said.

The extra yield, or spread, investors demand to hold Greek debt instead of similar-maturity German bonds jumped to a two- week high today. The European Union and International Monetary Fund approved a 110 billion-euro ($153 billion) aid package on May 2 in exchange for Greece agreeing to cut public-sector wages and pensions and raise taxes on fuel, alcohol and cigarettes. (more)

Chart of the Day

Mish: Thanks to Fed, Bubble Builds in Junk Bonds; We Know How Bubbles End

The Fed's misguided policies have not done a thing for small businesses, the unemployment rate, or the real economy in general but they have induced a mad dash for yield in junk bonds, easily in a bubble state right now.

Byran Keogh writing for Bloomberg says Fed-Induced Rally Makes Riskiest Debt Priciest

The lowest-rated junk bonds are the most expensive corporate debt following a Federal Reserve- induced rally in high-risk assets, adding to concern fixed- income securities are overvalued.

The extra yield investors demand to hold global bonds rated CCC or lower instead of government debt is about 10.1 percentage points, or 3.4 percentage points narrower than the average over the past 12 years, according to Bank of America Merrill Lynch index data. Debt with B ratings is the only other part of the market trading tighter than its historical average.

The rally in the lowest-rated company bonds has sparked a surge in issuance. MGM Resorts International, the biggest casino operator on the Las Vegas Strip, Energy Future Holdings Corp. and other companies have sold $6.5 billion of bonds this month rated CCC+ or lower by Standard & Poor’s or Caa1 or lower by Moody’s Investors Service, data compiled by Bloomberg show. (more)

U.S. consumers’ confidence rises in October

(MarketWatch) — Consumer confidence rose in October, though it remains near historically low levels, with a monthly gauge compiled by the Conference Board increasing to 50.2.

“Consumers’ assessment of the current state of the economy is relatively unchanged, primarily because labor market conditions have yet to significantly improve,” said Lynn Franco, director of the Conference Board’s consumer research center, in a statement Tuesday.

Although economists declared that the recession officially ended last year, the nation’s employment market remains weak. Earlier this month, the government reported that nonfarm payrolls fell 95,000 during September, while private-sector payrolls gained a modest 64,000.

Economists polled by MarketWatch had expected a confidence reading of 50 for October.

The Conference Board’s index helps analysts compare fluctuations in confidence, with a reading of 100 for the base year of 1985. Generally when the economy is growing at a good clip, confidence readings are at 90 and above. (more)

BNN: Top Picks

Nick Majendie, senior portfolio manager and director, Majendie Wealth Management shares his top picks.

click here for audio

Silver Subject to Price Manipulation, Chilton Says

As an investigation of the silver market by the top U.S. commodity regulator entered a third year, a member of the Commodity Futures Trading Commission said today there have been “repeated attempts” to influence prices.

“There have been fraudulent efforts to persuade and deviously control that price,” said Commissioner Bart Chilton at a hearing today in Washington, alleging there have been violations of the Commodity Exchange Act. “Any such violation of the law in this regard should be prosecuted,” he said.

The five-member commission began investigating allegations of price manipulation in the silver futures market in September 2008. The CFTC said in a report that year that it had received “numerous letters, e-mails and phone calls” during the last 20 to 25 years alleging prices were being manipulated downward.

The CFTC proposed today new rules against manipulation and disruptive trading practices. Proving manipulation has challenged courts and lawmakers since the early attempts to regulate U.S. commodity markets in the 1920s. (more)

U.S. facing $120 trillion on plastic

Warning that the U.S. dollar today is backed only by "promises" from the same politicians who created today's economic disaster, longtime monetary expert Craig R. Smith documents in a new book that the nation already faces some $120,000,000,000,000 ($120 trillion) in debt, deficit and unfunded liabilities.

And unless something drastic and dramatic happens, America soon could follow the pattern established in Germany's Weimar Republic shortly after World War I when it created 1,000,000,000,000,000,000,000 (1 sextillion) Marks, destroying its own economy with hyperinflation, crashing its currency, wrecking social values of thrift and work and paving Hitler's rise to power.

The analysis comes in "Crashing the Dollar: How to Survive a Global Currency Collapse," by Smith, who is founder and chairman of Swiss America Trading Corp., and co-author Lowell Ponte, a contributing editor at Newsmax magazine.

The book says that while the problems have been developing for some time, "President Barack Obama and liberal Democratic policies are pushing the United States toward inflation or even hyperinflation, and … this could destroy the U.S. dollar and other major currencies." (more)

Record-low mortgage rates will be gone in 2011: MBA

(MarketWatch) — Mortgage rates may be as low as they’ll get — rates are on course to rise, slowly moving toward 5% by the end of next year, according to the Mortgage Bankers Association’s economic forecast, released Tuesday at the group’s annual convention here.

The group predicts rates on the 30-year fixed-rate mortgage will average 4.4% in the fourth quarter of 2010, increasing to a 4.7% average in the first quarter of 2011, and climbing to 5.1% by the end of next year. That’s barring any “blockbuster” announcement from the Federal Reserve next month, said Jay Brinkmann, chief economist of the MBA.

The Fed has said it could take more policy actions to stimulate growth, and Brinkmann said that’s likely to come in the form of an additional purchase of Treasury securities. But the market has already anticipated that, and the move has already been priced into current rates, he added.

Brinkmann said he expects a pickup in purchase originations next year, but 2011 volume for mortgages to buy a home will still only be roughly at its 2009 level. Refinance business, however, is expected to drop next year, as mortgage rates begin their rise from record lows. (more)