Thursday, September 5, 2013

Why Incomes Could Fall For the Next 30 Years

Every downturn in America’s economic history has been followed by a recovery. And since the 1930s, those recoveries have only taken a couple of years to materialize.

Even now, in the aftermath of a deep recession, the economy is growing and the unemployment rate is falling. But the next few decades could be uncharacteristically bleak, according to a new study.
Economists Richard Burkhauser of Cornell University and Jeff Larrimore, a staffer on the Congressional Joint Committee on Taxation, warn that demographic factors -- which have largely aided the U.S. economy in the past -- could end up pushing incomes down for the next 30 years or more. If other factors don’t force incomes up, we may be at the beginning of the longest period of economic decline in American history.

It’s well understood that incomes went up in the 1980s and 1990s but stagnated from 2000 to 2007. The median income fell sharply during the 2007-2009 recession and has yet to recover.  (more)

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Caterpillar Inc. (NYSE: CAT)

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company's Construction Industries segment offers construction machinery and related parts, including backhoe, skid steer, multi-terrain, track-type, skid steer, compact, and wheel loaders; track, wheel, and mini excavators; track-type tractors; motor graders. Its Resource Industries segment provides electric rope and hydraulic shovels, draglines, drills, forestry products, highwall miners, off-highway and articulated trucks, electric drive mining trucks, wheel tractor scrapers, compactors, mining trucks, wheel dozers, paving products, tunnel boring and underground mining equipment. The company's Power Systems segment offers reciprocating engine powered generator sets; integrated systems for the electric power generation industry. Its Financial Products segment provides retail and wholesale financing alternatives for Caterpillar equipment, machinery, and engines; offers property, casualty, life, accident, and health insurance, as well as insurance brokerage services; and purchases short-term receivables.

To review Caterpillar's stock, please take a look at the 1-year chart of CAT (Caterpillar, Inc.) below with my added notations:

1-year chart of CAT (Caterpillar, Inc.)

CAT has created a simple chart pattern known as a symmetrical triangle. Combining a down trending resistance (red) with an up trending support (blue) forms the triangle pattern. As the support and resistance converge on each other the pattern is created. Since there is no true way to know which way the stock will break, most traders will wait for the breakout or breakdown before entering a trade.

If CAT were to break to the downside, traders might want to wait to see how the stock reacts to its 52-week low support at $80 (teal) before going short.

The Tale of the Tape: CAT has formed a simple symmetrical triangle. A trader could enter a long position on a break above the down trending resistance (near $87) with a stop set under the entry level. However, if CAT were to break below the trend line support (currently near $82), a short trade could be entered with a stop above the trend line.
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Green Mountain Coffee : GMCR is in a powerful bull trend with a recent breakout from a quadruple-top

Green Mountain Coffee Roasters (GMCR) — Just when it looked like this stock was about to lose analysts’ attention, it reported its fifth consecutive quarterly earnings beat. This was coupled with being named to the Nasdaq 100 index while also being ranked No. 10 on Fortune Magazine’s list of “The 100 Fastest-Growing Companies.”

Revenue for fiscal Q3, ended in June, rose 11% from the prior year, and the company raised its full-year EPS guidance to $3.19-$3.24 from its previous guidance of $3.05-$3.15.

Eight of the nine analysts who cover the stock raised their fiscal year (FY) 2013 estimates, and six of the nine raised FY 2014 estimates. Fortune reported the three-year average for revenue growth was 65%, profit growth was 95%, and total return was 45%.

GMCR is in a powerful bull trend with a recent breakout from a quadruple-top. However, MACD is overbought, and trading at 26 times FY 2013 earnings seems expensive for a food stock. GMCR will likely move higher, but try to buy it under $80 with a trading target of $95.

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A Real Collapse in the Dollar, Gold Could Be $30,000 an Ounce - Dr. Paul Craig Roberts

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JC Penny JCP: Chart Says This Doomed Retailer Could Plummet 73%

The conflict in Syria, combined with fears of Federal Reserve tapering bond purchases, has caused market jitters. On concern over a U.S.-led attack, the S&P 500 gapped below the 50-day moving average this week, creating a steep downtrend. Only a close above 1,670 would reverse this.

For the first time in many months, I am not recommending a new long position in this column. My strategy is to instead short vulnerable stocks that display technical and fundamental weakness until the S&P's downtrend line is broken to the upside.

The failing retailer J.C. Penney (NYSE: JCP) fits this bill. The department store chain has been struggling since shares peaked at an all-time high near $82 in 2007. With declining sales, a failed attempt to rebrand itself and lackluster quarterly results, the stock is currently trading at just over $12. And shares look like they could fall further.  (more)

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