China is the country with the largest population in the world at over 1.3 billion people. The land covers approximately 3.7 million square miles. The country is governed as a communist country, although they have developed a quasi-capitalist sector for business. China has the second largest gross domestic product (GDP) at approximately $7.0 trillion; behind the U.S. at $15.0 trillion and ahead of Japan at $5.8 trillion. The leaders opened up the centrally planned economy in the late 1970s and early 1980s to allow economic growth through trade, which has allowed China to grow at an unprecedented rate for a country its size. From 2001 to 2011, China grew at an annualized rate of 10.5%.
As the key stock indices continue to climb higher, optimism amongst investors and stock advisors rises to a dangerous level.
According to the Advisor Sentiment tracked by Investors Intelligence, an indicator I follow to gauge optimism in the stock market, the number of stock advisors who are bullish towards key stock indices is at its highest since April of 2011. (Source: Investors Intelligence, May 22, 2013.) To bring this into perspective, in April of 2011, the key stock indices like the S&P 500 started to decline, dropping nearly 20% through October of that year.
The stock market is becoming very overbought and very overpriced. It’s not a matter of “if” the market faces a major set-back, but “when.”
The U.S. economy continues to struggle and early indicators of economic slowdown are flashing warning signs. Consider the Business Outlook Survey by the Federal Reserve Bank of Philadelphia, which provides an outlook for manufacturing activity in the Philadelphia area. The survey indicates demand has been weak, with new orders and shipments declining and inventories building up. (Source: Federal Reserve Bank of Philadelphia, May 16, 2013.)
The index of current manufacturing activity in the Philadelphia region registered at negative 5.3 in May compared to positive 1.3 in April. Any number below zero indicates conditions in the manufacturing sector are becoming poor.
This isn’t the only troubling statistic that shows the U.S. economy is headed towards an economic slowdown. Our economic growth is questionable; unemployment is still staggering; the majority of jobs created since the financial crisis have been in low-paying jobs, and a significant portion of the U.S. population is on food stamps…. Read More
Apple Inc. (NASDAQ/AAPL) has had a nice upward run since declining to its 52-week low of $385.10 on April 19, 2013.
While the maker of the “iPhone” and “iPad” tries to rejuvenate its business in light of increased and fierce competition from rivals, Apple is also currently caught in a fight against the tax authorities on allegations of tax evasion.
This is not what Apple and CEO Tim Cook want at this time, given the company is under immense pressure to deliver fresh products to the marketplace that have that “wow” factor.
The iPhone has been around since June 2007, and to tell you honestly, with the exception of a faster processor, larger screen, and some refinements to its “iOS” operating system, the iPhone has really not kept up with the advancements in some of the competing “Android” phones, specifically those made by Samsung Electronics Co. Ltd. through its increasingly popular “Galaxy” line.
Apple continues to lead the pack in the U.S., but as far as the global market, Nokia Corporation (NYSE/NOK) is holding onto the top market position. Nokia’s “Lumia” line, operating on the “Windows 8” mobile platform by Microsoft Corporation (NASDAQ/MSFT), is gaining some ground.
Yet for Apple, the landscape for smartphones and tablets is changing rapidly; it’s now about which company can bring the best phone, armed with the best functionality, to the market the quickest.
I’m in the process of looking at changing my smartphone from my current “iPhone 4” to either the “iPhone 5,” “Samsung Galaxy 4,” or the “BlackBerry Z10” or “BlackBerry Q10” (with the physical QWERTY keyboard) by Blackberry (NASDAQ/BBRY), formerly Research In … Read More
But while the prices of gold stocks have pulled back significantly this year, demand for physical gold bullion has gone through the proverbial roof.
The U.S. Mint had to halt the sales of its most-sold 1/10-ounce gold bullion coin. In Australia, the Perth Mint is working in overdrive to fill rising orders. The British Mint reports British consumers’ buying of gold has accelerated as well.
In the first quarter of 2013, total demand for gold bullion from China amounted to 294 tonnes, as jewelry demand in the country increased by 19% from the same period last year. Bar and coin investment demand rose by 22% from the first quarter of 2012. (Source: World Gold Council, May 16, 2013.)
In India, demand for gold bullion came in at 257 tonnes in the first quarter, up 27% from the first quarter of 2012. Retail investments in gold bullion edged up by 52%, and demand for jewelry was up 15% in the first quarter.
Likewise, demand for gold bars and coins in the U.S. were up by 43% in the first quarter of 2013 compared to the first quarter of 2012.
And that’s not all! The biggest driver of gold bullion prices in my opinion, central banks, bought more gold.
The first quarter of 2013 marked the seventh straight quarter when central banks accumulatively added more than 100 tonnes of gold bullion to their reserves. But we still have central banks, such as the Bank of China and the Russian central … Read More
The action in the stock market continues to amaze.
When stocks go up on bad news (like last week’s higher initial claims for jobless benefits and lower-than-expected housing starts), you know you don’t want to be short.
Cisco Systems, Inc. (NASDAQ/CSCO) is a component of the Dow Jones Industrial Average, and for such a mature technology stock, it recently reported a very solid quarter.
In its fiscal third quarter (ended April 27, 2012), Cisco announced sales of $12.2 billion, for a net gain of five percent over the comparable quarter. It was the company’s ninth consecutive quarter of record sales.
Earnings grew 14.5% to $2.5 billion, while earnings per share grew 15% to $0.46 per share, beating consensus estimates.
John Chambers, Cisco’s CEO, noted improving signs in the U.S. economy and other markets. Business conditions for the company are also improving.
Like many cash-rich, large corporations, Cisco recently repurchased 41 million shares of its own common stock, spending $860 million.
This, of course, is a pittance. The company finished its latest quarter with cash and cash equivalents of $47.4 billion.
Wall Street boosted the company’s earnings estimates and share price target.
Cisco is ripe for more gains on the stock market because of its valuation.
The company also offers a dividend yield of 3.2%, which is attractive in this market. The company’s huge cash hoard also makes it highly likely that at some point this year, the company will issue another dividend increase.
All institutional investors want to see in this stock market is stability and certainty.
Cisco provided that certainty in its latest earnings report, and this is … Read More
The stock market has only one direction in mind and that’s up. I sense there’s froth building up. This current market action reminds me a bit of what happened in 1999, but the situation is different in that interest rates are at record lows, the Federal Reserve is providing liquidity, and the valuation of stocks is much more reasonable versus that of 1999.
My concern is how far the stock market can rise before we see a correction of any significant magnitude. Yet even with selling, it would be a buying opportunity, not a sign to exit.
The one key thing you need to make sure of is that your portfolio is diversified to withstand any major selling in a particular sector and market cap. Case in point: if you were heavily weighted in the precious metals, such as gold and silver, your portfolio would have been devastated by now.
This doesn’t mean you shouldn’t have any metals in your portfolio, but you need to have ample diversification, which is the key to success in the stock market.
If your assets are well diversified, it would be fine to play a possible upside bounce in gold. (Read “Is Gold’s Near-Beath Crisis Over-Exaggerated? Concerns of a Market Meltdown May Not Be.”)
The reality is that it doesn’t matter if you are investing in real estate, gold, stocks, art, or classic cars; the prudent way to protect your assets is to make sure you are diversified in the stock market.
The concept of spreading the investment risk is portfolio management—a process that encompasses the creation, monitoring, and adjustment of … Read More
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