Dollars And Nonsense

Contributed by: Zacks Market Commentaries (http://www.zacks.com/) –

The market’s weak performance year to date shows its loss of momentum from last year’s impressive run. Lingering doubts about the sustainability of the U.S. economic recovery, due to global headwinds and domestic weak spots, have been weighing on investors’ behavior. this has resulted in extreme volatility and an overall down drift in stock prices.

Is it possible to make sense of this all around turbulence? and can one profitably navigate this choppy market?

My one-word answer to both those questions is: yes.

My goal here is to help you make sense of it all and give you a few investment tools along the way to deal with this market environment.

A Debate is Raging

Investors are trying to size up two competing outlooks for the U.S. economy: one calls for a slowdown in growth, while the other is for a relapse into another recession. The latter outlook is also sometimes referred to as the ‘double-dip recession’ outlook.

I am looking for the economy to continue on its expansionary trajectory, albeit at a moderate pace. this view is amply borne by an objective reading of the economic scene; be it concerns about Europe, China’s growth prospects or recent developments in the U.S. economy.

My sense is that we are close to the stage where this view will take hold, helping the markets to drift higher. The second-quarter earnings season, just days away now, should help us get there, particularly if management teams can provide adequate guidance. Current expectations of corporate profitability, if confirmed by management teams on the second-quarter earnings calls, would help the market find its footing.

Let’s Size Up the Headwinds!

Here is a quick review of the major issues that the market has been grappling with recently:

• Dark European Clouds: Fears of European sovereign debt defaults, which originated in Greece but also plague Spain, Portugal, and Ireland, have not gone away, despite the joint EU/IMF ‘bailout’ package. this issue affects the U.S. economic outlook in two distinct but related ways.
  1. This issue keeps alive the fear of a global liquidity crunch through default(s) by one or more of the at-risk countries. this would drag down the European banking industry with it. and given the integrated nature of global finance, this could quickly morph into a global liquidity crunch. I don’t put much stock in this doomsday scenario. The odds of a default by one of these countries are very low. and the onset of the ‘stress tests’ should also improve confidence in European banks.
  2. European response to the crisis has involved deep spending cuts to bring deficits under control. While the long-term utility of fiscal restraint can’t be denied, this move carries the risk of pushing Europe into a deep recession. a European recession is unlikely to force the U.S. into a downturn, but will no doubt cause a moderation in growth.
• China’s Growth Prospects: China has been trying to address its property bubble and incipient inflationary pressures by slowing down its economy. As a result, we may have already seen the peak in Chinese growth in the first-quarter GDP growth rate of close to 12%. Current growth expectations are in the 10% vicinity for this year and next. I see downside risks to these estimates, but I am hard pressed to call an 8 – 9% growth rate as the end of the Chinese growth story.
• Labor Market Concerns: The economy’s job-creating performance thus far has been sub-par. While the labor market’s tepid performance is undeniable, if we look across the whole of 2010, we find a slow and steady positive trend in private sector job creations.
• Soft Economic Readings: Recent economic reports show a softening of the growth momentum in the U.S. economy, but interpreting those to mean the onset of a double-dip recession would be a stretch. most indicators are still showing levels that indicate economic expansion.

While these issues are real, I do not foresee any of them, individually or in combination, derailing the current ongoing recovery. Some moderation in growth can reasonably be expected, but a slowdown from a 3 – 3.5% growth momentum to something like 2.5 – 3% can hardly be called a downturn. We should also not lose sight of corporate fundamentals, with cash-rich solid balance sheets and strong earnings profiles prompting increased outlays for capital expenditures and hirings. While there may be some downside risks to current earnings growth expectations, even significantly lower growth numbers than these would be inconsistent with the onset of another recession.

Making Money in this Market

It was easy to make money in last year’s bull market – everything went up, including the lowest quality and riskiest stocks. but today’s market has hardly anything in common with last year’s scene.

You don’t need to be a professional to make money in this market. but make sure you understand that what worked last year is pretty much of little value at present. You can still find winners out there, but you need to do a bit more due diligence to identify them. While such winners have many attributes, three really stand out – Earnings Growth, Quality, and Valuation.

• Earnings Growth: The most important attribute of a winning stock is its earnings growth profile. but just plain vanilla earnings growth is not enough to push the stock price higher. Current consensus earnings expectations already capture the company’s growth prospects. It is more about the potential for the stock to have earnings surprises so it can grow at levels above current expectations. That’s what really makes stocks soar. The Zacks Rank helps you capture this key growth potential attribute. at any given time, stocks with a Zacks #1 Rank offer the best earnings growth profiles of the entire market.
• Quality: Quality has its subjective components, but I am referring to the quality of the company’s product/service, financial health and management. You want to invest in a company that enjoys a competitive advantage in its product/service market, is in strong financial health and is led by a proven management team. there is nothing subjective about any of these attributes.
• Valuation: If all the positives about a company are already out there in the market, then you may have already missed the bus. How can you tell if that is the case? looking at the company’s valuation multiples, such as price-to-earnings (P/E) or price-to-book (P/B), and comparing those to its peers should give you a good idea of relative valuation. Buying a quality stock at a discount to its peers is your best bet for generating an above-average return.

Where to Start

To profitably navigate the current market and implement the above stock-selection framework, you’re invited to take full advantage of the professional-grade resources on Zacks.com. Today we’re providing you with a 30-day free trial to Zacks Premium. this is a particularly good time to gain immediate access to all the market-beating resources available at Zacks Premium, including detailed research reports on over 1000 stocks, the Zacks Industry Rank and the Zacks Mutual Funds Rank. Over the next 30 days, you can use these tools to evaluate your portfolio, then find and track better alternatives.

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Best,
Sheraz Mian

Sheraz is the Director of Research at Zacks Investment Research where he relies on access to valuable data to assess winning stocks and funds. now, you can gain access to the same research he uses every day for free. Just try Zacks Premium for 30 days at no cost and no obligation.

Zacks Investment Research

Navigating Today's Erratic Market | Stock Market News & Stocks to …

Veteran pitcher Ian Snell cleared waivers on Sunday and has accepted a minor-league assignment and will report to Tacoma today, the Mariners announced Sunday.

Snell, 28, was designated for assignment on Tuesday after continuing to struggle in a starting role for the Mariners. He is expected to start against Salt Lake this Tuesday for the Rainiers.

Snell was 0-6 with a 6.41 ERA in 12 games for Seattle, including 0-5 with a 6.11 ERA in eight starts with 21 walks and 17 strikeouts in 35 1/3 innings.

The M’s moved the right-hander to the bullpen, but he gave up three hits and four runs in 2.0 innings in his last outing Monday in St. Louis before being waived.

Right-handed reliever Brian Sweeney took his place on the roster, but has yet to appear in a game.

In seven Major League seasons, Snell has a 38-53 record with a 4.80 ERA in 803 2/3 innings. He was acquired by the Mariners at the trade deadline last year along with shortstop Jack Wilson as part of a seven-player trade that sent former first-round draft pick Jeff Clement to the Pirates.

Wilson has been on the disabled list, but was activated prior to Sunday’s game and will be with the team for their 1:10 p.m. start against the Reds.

Snell clears waivers, accepts assignment to Rainiers

(Source: the Decatur Daily)By Eric Fleischauer, the Decatur Daily, Ala.

Mar. 21–When economic historians look back at America’s effort to leave the great Recession behind, they will see a war between federal will and individual psychology.

Most economists agree that aggregate demand must increase to end a recession.

The most important element of aggregate demand is consumer spending. another element is governmental spending.

A recession can result when a drop in consu-mer spending leaves an excess of inventory.

Ma-nufacturers halt production, resulting in layoffs. Layoffs further reduce consumer spending, resulting in more layoffs.

It is at this point where most economists look to an increase in government spending as a partial solution.

The goal is to increase aggregate demand. Consumers are unable to oblige. to prevent a devastating downward spiral, government spending can pick up consumers’ slack.

Seen close up, though, it becomes apparent that it is not just consumers’ inability to spend that causes the problem. It is their reluctance to spend.

Seeing headlines declaring a recession scares people. Spending drops and saving increases.

Both are wise for individuals, but both war against a federal government’s efforts to escape a recession.

Recent statistics make clear the psychological impact of being in a recession is widespread.

Household debt dropped 1.7 percent in 2009, to $13.5 trillion.

That is an amazing statistic when added to this one: It is the first annual drop in consumer debt since tracking began, in 1945.

A related sign of how people react to being in a recession: the personal savings rate for households was negative in 2006 and 2007, the first years that had occurred since before the depression.

In 2009, the personal savings rate, according to the Commerce Department, reached 4.3 percent, the highest in more than a decade.

This same trend is apparent at the workplace. not only are households saving more, they are working harder.

Productivity rose by a remarkable 6.9 percent last quarter, and 7.8 percent in the quarter before that.

The rate never exceeded 2 percent in the previous four years, according to the U.S. Department of Labor.

The federal government’s battle to increase aggregate demand is not just waged against individuals.

Local and state governments, recognizing that the

recession will drop tax receipts, also reduce spending.

Politicians, who with some accuracy expect their constituents to have short memories, are busy bashing the Obama administration for spending too much in its first year.

When one looks at the psychological forces that opposed the federal government’s efforts to avert a depression through stimulus spending, it may be the critics have it backward. Obama may have spent too little.

Contact Eric Fleisch-auer at his blog, www .mile304.com, or at eric@decaturdaily.com.

To see more of the Decatur Daily, or to subscribe to the newspaper, go to http://www.decaturdaily.com

Copyright (c) 2010, the Decatur Daily, Ala.

Distributed by McClatchy-Tribune Information Services.

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The Decatur Daily, Ala., Eric Fleischauer column: Did Obama spend enough?

The American legal system has established “guardianships” for the specific purpose of protecting vulnerable individuals–called “wards”–when a judge or judicial officer determines that the ward’s decisionmaking capability is so impaired that another person–the “guardian”—needs to be given the right to make these decisions. A guardianship is particularly appropriate for wards who are suffering from Alzheimer’s disease and related dementia, as well as advanced alcoholism and similar afflictions that render the person unable to care for his or her health and other needs. A “conservatorship,” twin to the guardianship, is set up to conserve the ward’s assets; the conservator acts as a custodian.

The legal obligations of the guardian and conservator. as defined above, these legal vehicles seem completely sensible and necessary. After all, people who are so incapacitated that their decisionmaking is unreliable obviously need professional assistance; left unprotected, their health and wealth are at risk. the law considers the connection between the guardian (or conservator) and the ward to be “fiduciary” in nature, a legal relationship of confidence or trust between two or more parties. Indeed, for legal purposes, a “fiduciary” duty requires the highest possible standard of care. It recognizes that the ward needs to have utmost confidence, reliance and trust in the guardian or conservator, whose aid or protection is essential. the fiduciary, therefore, is required to act at all times for the sole benefit and interests of the ward, with absolute loyalty to those interests.

The reality of guardianships and conservatorships. Unfortunately, vulnerable individuals are easy targets for the unscrupulous. Equally unfortunate is the fact that the legal system, having established these processes, frequently fails to supervise how they actually work. not surprisingly, when there is a lack of oversight, as Elaine Renoire, a particularly experienced observer of guardianships and conservatorships, warns in her website http://www.StopGuardianAbuse.org, “(The system) operates to ensnare the most vulnerable people in a larger and larger trawling net, . . . a feeding trough for unethical lawyers and other ‘fiduciaries’ appointed by the courts to protect, but many of whom become nothing more than predators.”

Victims of guardianships and conservatorships. Ms. Renoire argues that wards are easily exploited by the system, frequently forfeiting their freedom, property, “and their very lives,” because, first, judges and court administrators fail to monitor these processes, and second, the state legislatures and the federal Congress fail to regulate legal practices. the result? according to Ms. Renoire, judges, who she claims are either “uncaring” or “corrupt,” fail to provide adequate due process to the wards, who in turn fail to get adequate notice of the proceedings that will result in the determination of their competence. even when they are notified, Ms. Renoire reports that they are rarely defended by attorneys. and in those instances for which counsel is provided, these lawyers, again in her words, “(Are often) too closely affiliated with other professionals who make their living in this special area, and do not properly represent the victims’ interests. Corrupt judges do not apply the required evidentiary standards in (adjudicating incompetence), and frequently fail to obey the protective statutes . . .”

So, what’s the bottom line? according to http://www.StopGuardianAbuse.org, “(Guardians and conservators) are given power of life and death, burying their wards in nursing homes where they are kept chemically restrained with unnecessary and dangerous drugs; family members are denied any say in their care, and sometimes (they’re) denied visitation, except under guard at their own expense!”
Is the system abusive? Is it possible that the guardianship/conservatorship system is as flawed as is claimed? according to the February 15th, 2009 edition of the “Minneapolis Star-Tribune,” the process is at least as ineffective as Ms. Renoire believes, and can be negligent–and perhaps corrupt–in practice.
The front-page headline blares: “2 years and $672,808 gone,” with an accompanying picture of a now-smiling older lady. She’s identified as Peggy Greer, approaching her 86th birthday, four years after she and her family members battled the Minnesota judicial system to free her from a guardianship/conservatorship nightmare that cost two years of her life and drained her entire life savings–nearly $700,000.

Peggy Greer’s situation is fairly typical. In 2004, just after she turned 81, her life was in crisis. her eldest son, a drug addict, was living with her. After suffering a back injury, she also became drug-dependent. That summer, her daughter, Judith, petitioned the local probate court to appoint her and her brother as Ms. Greer’s guardians and conservators, claiming that her mother was “suffering from dementia and chemical dependency,” rendering her “unable to arrange to her medical care,” and “unable to manager her estate (and) vulnerable to financial exploitation.” the latter claim was particularly relevant, because Peggy Greer was about to inherit a substantial amount of money.

Subsequently, a local firm was appointed as the guardian, and Wells Fargo was named as conservator. despite the fact that her condition had improved–she was considered to be neither chemically dependent nor suffering from dementia–Ms. Greer was sent to live in a nursing home, at a cost of $5,700 per month. She complained that she wanted to return to her home, but her chemically-dependent son was still living there, and the guardian refused her request to go home.

The family, realizing that at least an interim solution was required to stem the outflow of funds from the inheritance, attempted to relocate her into a less expensive assisted living facility; the guardian declined the request, arguing that “It would cost a lot to get her discharged from one nursing home and admitted to a new one when we all anticipated she would be returned to her home pretty quickly.”

Perhaps not surprisingly, that didn’t happen. the family filed a petition to replace the guardian. Legal expenses consequently skyrocketed. After a year of the conservatorship, these fees totaled at least $45,000; adding in the other costs, including the nursing home rent, the $226,800 inheritance—which was one of the justifications for the conservatorship itself—was exhausted. Additional funds would be necessary.

The conservator, Wells Fargo, petitioned the court to sell Peggy Greer’s home, despite the fact that the guardian was trying to move her back into it. Nonetheless, Wells Fargo pursued the sale, claiming that “The protected person is not able to return to independent living.”

The probate judge finally agreed to a “reverse” mortgage, whereby a bank captures the equity in a home in exchange for making periodic payments that allow the homeowner to remain in the home. In the case of Ms. Greer—again, not particularly surprisingly—the bank that received the reverse mortgage was Wells Fargo.

At this point, Charles Heintz, the chemically-addicted son, died, which allowed Ms. Greer to return to her home.

Although she was able to take care of most of her own needs, she received constant, 24/7 care from a home health agency. the cost? $26,000 a month! although her nursing home doctor recommended that this assistance be discontinued, the guardian refused.

Finally, in January, 2007, the guardian agreed that this care, now totaling more than $55,000, should be scaled back, a decision that neatly coincided with the liquidation of her funds. as her son described the situation, “Once the money ran out, almost to the day, suddenly the care was no longer needed.” Peggy Greer summed it up this way, “My money was all used up, was all gone, without my knowledge or OK or anything.”

The final tally, as of October, 2007, reported that the total spent on her behalf since March 2005 was $672,808. the guardian and the conservator each earned more than $11,000, with the conservator earning an additional fee from the reverse mortgage. the amount owed by Ms. Greer: $ 48,388. Total assets remaining: zero.

Legalized Elder Abuse: Guardianships and Conservatorships | best …

The average fixed rate on a 30-year mortgage was 5.14 percent this week, up from 5.05 percent last week, Freddie Mac said Thursday.

Mortgage rates are closely tied to yields on long-term government debt. The average fixed rate on 30-year mortgages has steadily risen since hitting a record low of 4.71 percent the week of Dec. 3.

The Federal Reserve is pouring $1.25 trillion into mortgage-backed securities to keep rates low this year. The program, aimed at making home buying more affordable, is set to end next spring.

Still, qualifying for a loan is hard because lenders have severely tightened requirements. The best rates are available to those with good credit and a 20 percent down payment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders across the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed mortgage rose to 4.54 percent from 4.45 percent last week.

Rates on five-year, adjustable-rate mortgages averaged 4.44 percent, up from 4.40 percent last week. However, rates on one-year, adjustable-rate mortgages fell to 4.33 percent from 4.38 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 point for 30-year loans. The fee averaged 0.7 point for 15-year and 0.6 point for five-year loans and for one-year mortgages.

Mortgage rates end the year above 5 percent

Looking to get a mortgage to purchase the house of your dreams? If you are then it is important that you look closely at today’s mortgage rates to see how they are faring at this time. however, it is important to remember that these rates can change quite drastically from day to day. therefore if you don’t have the time to keep up with them yourself it is worth employing a mortgage broker to do it for you instead.

Using the services of a mortgage broker they are able to quickly look at today’s mortgage rates and identify those that are the lowest and which you should then consider applying for. They are going to work extremely hard at ensuring that they find you the best deals to ensure that they earn their fees when your loan is approved.

However, if you are someone who does have time to be able to look at what rates are being offered on a daily basis then the internet is the ideal tool for your research. there are hundreds even thousands of websites that will quickly tell you what rates are currently being offered by various banks and lending institutions. then all you need to do is take some time to look closely at what their qualifying requirements are before you begin applying for such loans.

Also another way of obtaining today’s mortgage rates is through asking some of the banks and lending institutes is to request they provide these to you. Many now will send this information to customers through sending a message to one’s mobile phone or by sending them a daily email. but whatever method you use you are sure to find a mortgage that will be one that you can afford.

Thinking About a Mortgage? Check Today's Mortgage Rates