Is a Relief Rally Due for Bonds and Yield Stocks?

To sustain a panic, it takes a lot of energy, a constant flow of fear and confusion to power the flight instinct.

In the bond market, the panic that has sent interest rates surging has certainly fed on plenty of worry and has already carried on a long time. The yield on the 10-year Treasury note has shot from 1.63% in early May to a two-year high above 2.90% this week, scaring tens of billions of investor dollars out of bond funds and raising the price of credit across the economy.

Source: Yahoo Finance

The move from historically low rates to something closer to “normal” levels has been driven by better confidence in U.S. economic growth and the related guidance by the Federal Reserve that it intends, before long, to scale back the pace of its bond-buying stimulus plan from the $85 billion monthly clip it’s employed since September.  (more)

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“Bottom Could Fall Out Of The Economy As It Did In The Great Depression”

While most Fed pundits are focusing on the Arvind Krishnamurthy paper referenced earlier discussing the Fed’s “optimal exit” options, another paper, one by Robert Hall of the Hoover Institution and Stanford titled “The Routes into and out of the Zero Lower Bound” may be worth a perusal. The main reason is that while the author admits QE has been largely a failure for the mainstream economy (“the United States and most other advanced countries are closing on five years of flat-out expansionary monetary policy that has failed in all cases to restore normal conditions of employment and output“) in part due to a collapse in collateral values, and in part due to no capex spending as we have warned for the past two years, i.e., “the combination of low investment and low consumption resulted in an extraordinary decline in output demand.”
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U.S. Feedlots Placed 10.4% Fewer Cattle in July as Numbers Fell

U.S. feedlots reduced the number of cattle added to their herds by 10.4 percent in July amid tight animal supplies after the worst drought since the 1930s spurred higher feed costs.

About 1.722 million head of cattle were moved into feedlots last month, down from 1.922 million in July 2012, the U.S. Department of Agriculture said today in a report. Thirteen analysts surveyed by Bloomberg News projected a 1.6 percent drop, on average. The feedlot herd totaled about 10 million as of Aug. 1, down 5.9 percent from a year earlier. Analysts expected a 4.2 percent slump. (more)

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McDonald’s Corp. (NYSE: MCD) Earn a 6.3% Yield From a Dividend Grower

Every Daily Profit reader knows that I’m a huge fan of dividend growth.

I think it’s the best strategy for building wealth and collecting income along the way.

I like dividend growth for its simplicity. All that’s required is finding high quality stocks led by executives who are committed to the shareholders.

Just buy and hold a portfolio of dividend growers for the long term, and watch your portfolio grow.

As the years roll by, rising streams of cash roll in. Because investors are willing to pay a higher price for more income, the share price rises with rising dividend payouts.  (more)

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BNN Top Picks

Jason Donville, President & CEO, Donville Kent Asset Management give his Top Picks; RIFCO Inc. (RFC TSX-V) , Cipher Pharmaceuticals (DND) , Constellation Software (CSU TSX)

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Cemex (NYSE: CX) is in Danger of Plunging 50% -- Sell Now

During the past few months, an economic slowdown in China has led to a series of economic headwinds for many of the country's key trading partners. Indeed, for the first time in several years, economists have raised the prospect of a possible recession in Asia and Latin America, joining the ranks of major European economies already mired in a slump.
For Mexico's Cemex (NYSE: CX), the world's third-largest cement maker and producer of concrete, any additional slowdown could cause real distress for its rebounding stock. For investors who have managed to profit from this stock's heady two-year rally, now is the time to book profits as shares could give back those gains if cash flow doesn't improve.

Even before the recent slowdown in China and elsewhere, Cemex was having a tough time. Anemic levels of construction have hurt pricing and demand for cement, leading this company to bleed cash. Cemex had -$639 million in free cash flow in 2012, and is on track to post another -$410 million loss in free cash flow this year. Negative free cash flow is a real problem for any company carrying more than $15 billion in long-term debt.  (more)
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Default: The Student Loan Documentary

Default: the Student Loan Documentary chronicles the stories of borrowers from different backgrounds affected by the student lending industry and their struggles to change the system. No matter when their loans were taken, many borrowers find themselves in a paralyzing predicament of repaying two, three or multiple times the original amount borrowed, with no bankruptcy protection, no cap on fees and penalties and no recourse to the law. The consequences are dire, with stories of borrowers in financial and emotional ruin.

This version was released on PBS late October 2011 and has since gone on to screen at over 142 public broadcasting stations, screened at over 200 college campuses and events, featured in over 200 media outlets including The Nation, Forbes, the Washington Post and the Wall Street Journal.

We are happy to release the documentary for free online, for anyone who wants to learn more about student debt and for groups who want to organize for change. 
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