Posts Tagged ‘credit crisis’
American Eagle Clothing May Take Flight
By George Leong, B.Comm. for Profit Confidential
Picking the right stocks in the retail sector is not always easy, but if you pick the right retailer at an opportune time, you could make some good money. I like the retail sector and feel there is a buying opportunity there. (Read “It’s a Screaming Buy for Retailers!”)
Youth retailer The Gap, Inc. (NYSE/GPS) was struggling in November 2002 and February 2009, when the stock traded just above $10.00, as shown on the price chart below. In 2002, The Gap was struggling to renew its growth, while in 2009, America had just gone through the subprime credit crisis that drove the country and the world into a recession.
In both circumstances, The Gap bounced back, and in hindsight, it was a buying opportunity. The Gap is currently trading near its 52-week high at over $35.00, up over 250% since 2009. The situation with The Gap is not limited to this company, as it has also happened with numerous other major retailers at one point. The key is to find the right buying opportunity.
Chart courtesy of www.StockCharts.com
A major retailer that is also hurting at this point is American Eagle Outfitters, Inc. (NYSE/AEO), which is oriented to the youth market.
For American Eagle, the competition is fierce with Abercrombie & Fitch Co. (NYSE/ANF) and The Gap; but like The Gap back in 2002, I feel American Eagle is a potential buying opportunity if it can grow its operations and deliver revenues and earnings to investors.
Chart courtesy of www.StockCharts.com
American Eagle reported higher annual sales from FY05 to FY08, prior to a relapse in FY09 and FY10; … Read More
When Austerity Fails, Rob Bank Deposits
By Michael Lombardi, MBA for Profit Confidential
Politicians in Cyprus are pushing for a government vote on a tax on all bank deposits in the country—6.75% on deposits up to 100,000 euros, and 9.9% on deposits above that amount. (Source: Wall Street Journal, March 18, 2013.) This step by one of the smallest nations in the eurozone could propel economic problems in the region to another level.
What was the cause of the proposed action to seize a percentage of citizen bank deposits?
Cyprus has been experiencing a credit crisis with its banks becoming illiquid, so it needed money. Despite the European Central Bank (ECB) taking the “it will do whatever it takes” stance to get the eurozone going again, Germany and the International Monetary Fund (IMF) argued that the bailout to the nation should be limited to only 10 billion euros, though Cyprus needed 17.5 billion euros. So, Cyprus was sent looking for 7.5 billion euros on its own.
Even though Cyprus is one of the smallest nations in the eurozone, this country’s move to seize a percentage of citizen bank deposits goes to show what can be the next move for other countries in that region that are in financial trouble. It is Cyprus now; it could very well be Greece, Spain, Italy, or Portugal next.
Why could other countries be next? Because the debt-infested nations of the eurozone are still struggling.
Greece is in a depression. Spain, the fourth-largest nation in the eurozone, is experiencing staggering unemployment. The number of unemployed in Spain is increasing to a point where the social security system is running out of contributors. (Source: Financial Post… Read More
If the Shanghai Composite Index Is a Leading Indicator, Watch Out!
By Michael Lombardi, MBA for Profit Confidential
Export-oriented provinces in the Chinese economy have turned pessimistic and anticipate exports will only grow at the rate of five percent this year. In 2012, they targeted an export growth rate of eight percent to 10%.
What’s troublesome about this is that exports from the Chinese economy account for 20% of the country’s gross domestic product (GDP). This means that, if exports from China to other countries decline, the Chinese economy will suffer an economic slowdown. (Source: Epoch Times, February 7, 2013.)
The Chinese economy has become fragile due to the economic slowdown in the global economy. Its biggest trading partner, the eurozone, is still suffering, while other areas have anemic demand.
As export volume falls in China, it is creating trouble for China’s manufacturing sector. The Chinese Purchasing Managers’ Index (PMI) declined to 50.4 in January from 50.6 in December of 2012. (Source: National Bureau of Statistics of China, February 1, 2013.) A reading above 50 means expansion in manufacturing, while a reading below 50 means contraction. January’s reading is not far from the pivot point into manufacturing contraction.
Getting a read on the Chinese economy is not that easy. Some say statistics out of China are not that reliable. But here is the official word from the Chinese government: in the third quarter of 2012, GDP in the Chinese economy rose 7.4% from a year earlier—the slowest growth rate in three years. (Source: China Daily, December 30, 2012.)
While time and more data will make the picture clearer, with Chinese exports stumbling, a contraction in manufacturing activity could be next for the Chinese economy.
And it’s … Read More
No Quick Fix for Eurozone; a More Difficult Road Ahead
By Michael Lombardi, MBA for Profit Confidential
The eurozone credit crisis is taking center stage once again. As I have been saying in these pages, it is far from over, even though the European Central Bank (ECB) has announced that it will do “whatever it takes” to save the eurozone. Economic conditions in the region are still deteriorating.
The debt-infested countries in the eurozone are reaching their lows with widespread economic slowdown, but I am more concerned that the stronger nations are starting to show signs of struggle as well.
France, the second biggest economic hub in the region, is in a period of next to no growth. The country’s unemployment is higher than 10% and increasing. The International Monetary Fund (IMF) expects growth between 0.3% and 0.4% for the French economy this year. (Source: Wall Street Journal, February 12, 2013.)
In the fourth quarter of 2012, the eurozone countries saw the steepest quarterly decline in industrial production in more than three years. Industrial production in the eurozone declined 2.4% in the fourth quarter, compared to a meager increase of 0.2% in the third quarter—the sharpest decline since the first quarter of 2009. (Source: Wall Street Journal, February 13, 2013.)
Looking ahead, it seems the credit crisis in the region is there to stay. According to a study conducted by Ernst & Young, banks in the eurozone have a massive amount of bad loans sitting on their books. The auditing firm estimated that these bad loans make up a grand total of $1.23 trillion, or 7.6% of all the loans issued in the region. (Source: Deutsche Welle, February 11, 2013.)
Dear … Read More
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