Foreclosures: More Expected In 2008

A study showed that 139 of California's ZIP codes fell within the top 500 for total foreclosure filings in the United States. The next highest count for any state is less than half that at 72 and is in another sun-belt state Florida.

The number one ZIP code in the nation for foreclosures is still, however, in the Rust Belt. It's Cleveland, 44105, with a total of 784 filings during the three months ended June 15. The hardest hit ZIP in California was Sacramento, 95823, where there were 634 default notices, repossessions and auction notices. It had the sixth most foreclosure filings for any zip code in the nation.

California boasts a vibrant economy and a fast growing population. High number of foreclosures occur due to serious underlying economic problems such as job layoffs or plant closings. But the California foreclosure spike, as well as those in Florida, Arizona and Nevada, was set up by a huge appreciation in house prices that put the market beyond affordability. In last few years the house prices have appreciated in double digits making it an attractive proposition for real estate investors. Developers bid up land prices to get product to market. When markets cooled, speculators added to downward price pressure by unloading their properties onto already lengthening inventories. In many of these markets, prices fell below what investors paid. Many of them havent been able to pay up for the mortgage, leading to foreclosure.

Many Sun-Belt buyers bought their high-priced houses using 2/28 adjustable rate mortgages (ARMs) which featured very low initial, or teaser rates that reset much higher after the first two years of fixed payments. ARMs are set up for borrowers to show they can keep up mortgage payments and then refinance out into affordable fixed-rate loans after two years. Many buyers used ARMs to get into a house with little regard for whether they could afford the payments, betting that rising prices could build enough home equity they could tap for cash. When prices stabilized or fell, that safety valve disappeared. Owners couldn't pay monthly bills, and they had no equity to draw on.

In the Rust Belt, it was the ripple effects of a dying industrial economy instead of speculation that crushed the finances of many borrowers in states like Michigan, Ohio and Indiana. People in these area have lower than average income, higher than average unemployment and a large stock of older, single-family homes. Many of them sell for less than $100,000, some for under $30,000.

In Sacramento, 95823, by contrast, residents depend more on government jobs and service industries for employment, although wages are still below average for the state. Homes there are more modern and more valuable than in 44105; even modest three-bed/two bath houses go for several hundred thousand dollars.

Neither the Rust Belt nor Sun Belt are likely to see easier conditions any time soon. In the Sun Belt, the subprime mortgage mess will take many months to work through as the many borrowers who took out 2/28 and 3/27 ARMs during 2005 and 2006 will hit their reset points this year and next.

It is expected that delinquencies will peak by the end of the year and so will foreclosures in 2008.

(Source: CNN Money)

10 Top Places Hit Hardest By Foreclosure

Zip City State Total filings

44105 Cleveland OH 783
30310 Atlanta GA 709
80219 Denver CO 705
48228 Detroit MI 679
95823 Sacramento CA 634
48205 Detroit MI 634
48224 Detroit MI 583
89031 Las Vegas NV 575
80239 Denver CO 553
48219 Detroit MI 549

Stock Review: Inverness Medical Innovations IMA

Inverness Medical Innovations, Inc. engages in the development, manufacture, and marketing of in vitro diagnostic products for the over the counter pregnancy and fertility/ovulation, and the professional diagnostic test markets worldwide.

It operates in three segments:

• Consumer Diagnostic Products, Vitamins
  
• Nutritional Supplements, and
  
• Professional Diagnostic Products.

The Consumer Diagnostic Products segment provides Clearblue home pregnancy and fertility/ovulation prediction tests; Clearblue Easy Digital pregnancy and fertility/ovulation prediction tests; the Clearblue Easy Digital brand, the digital pregnancy test; Clearblue Easy Fertility Monitor, the hormone-based reusable monitoring devices; pregnancy and fertility/ovulation prediction products; and Persona, a diagnostic monitoring device. The Vitamins and Nutritional Supplements segment markets various vitamins and nutritional supplements. This segments products include Stresstabs, a B-complex vitamin with added antioxidants; Ferro-Sequels, a time-release iron supplement; Protegra, an antioxidant vitamin and mineral supplement; Posture-D, a calcium supplement; SoyCare, a soy supplement for menopause; ALLBEE, a line of B-complex vitamins; and Z-BEC, a zinc supplement with B-complex vitamins and added antioxidants. The Professional Diagnostic Products segment offers membrane test products for pregnancy, drugs of abuse, RSV, Influenza A/B, strep throat, HIV, C.difficile, Lyme disease, chlamydia, H.pylori, fecal occult blood, D-dimer, mononucleosis, and rubella; enzyme linked immunosorbent assay tests for various infectious and autoimmune diseases, as well as a automated instrumentation for processing ELISA assays, as well as AtheNA Multi-Lyte test systems, IFA/Serology products, and Ischemia tests. The company was founded in 2001 and is headquartered in Waltham, Massachusetts.

Top Stocks: Money Flow

Here are the top individual stocks in terms of money flow. A negative number means that as the stock rises, there is increased selling of shares. A positive number means that as shares sink, buyers come rushing in.

Inflows (buying on weakness):

• Google (GOOG)= +$70 million
• Citigroup (C) = +$66 million
• CVS (CVS)= +$51 million
• Ciena (CIEN) = +$35 million

Outflows (selling on strength):

• Kraft (KFT) = -$137 million
• Apple (AAPL) = -$119 million
• AT&T (T) = -$99 million
• Microsoft (MSFT) = -70 million

(Source: ValuePlays)

A Review On The Market

Stock market saw a dip today after a 3 day rally. The biggest culprit was the oil prices, that jumped to its highest level in 9 months. The Dow fell by 26.50, the Nasdaq by 0.11 and S&P 500 index by 1.86. Settling inflation data at both the wholesale and consumer level helped a bull rally at the market. Overall last week, the Dow gained 1.6%, the S&P 500 gained 1.7% and the Nasdaq gained 2.1%. Stocks posted their worst selloff since February before the 3-day runup, on fears that the Federal Reserve will have to raise interest rates sometime this year due to strong economic growth and greater inflationary pressure.

Today

• Oil prices settled at $69.09 a barrel for the day.
  
• Gold also added $1.20 to to $659.90 an ounce today.
  
• Treasury prices edged higher, putting the yield on the 10-year note at 5.14%.
  
• Dollar eased against the euro and was higher versus the yen.
• U.S. home builder sentiment fell to its lowest level in over 16 years due to rising mortgage rates and more strict lending practices.

Companies

• Alcoa (AA) stock prices rose following a report that mining group BHP Billiton is reconsidering a takeover bid for the Dow component aluminum producer.
• Yahoo (YHOO) jumped more than 5% in after-hours trading following the news that present CEO Terry Semel will step down to be replaced by co-founder Jerry Yang. Investors believe that the new CEO would bring life back to the media giant after been outright beaten by rival Google (GOOG).
• The fast-food chain Wendy's said it was exploring a possible sale of the company and also cut its 2007 earnings forecast, sending the stock down 3.7 %.
• Share of Apple (AAPL) rose after the company said that its widely anticipated iPhone will have a longer battery life than it originally expected, putting to rest one of the key concerns about the new wireless phone.
• British media outfit Pearson is in talks with General Electric about a joint bid for Wall Street Journal publisher Dow Jones that would permit the controlling Bancroft family to keep a minority interest, according to a report published Sunday afternoon.
  

Upcoming

• Tuesday and Thursday will be crucial for the market, since economic indicators like the housing stats for May and regional manufacturing reports will be issued.
• Analysts expect a rather choppy week.
• Few important companies report earnings this week, namely Best Buy, Fed Ex and Morgan Stanley.

Stock Review: GSI Commerce GSIC

GSI Commerce, Inc. provides e-commerce solutions that enable retailers, branded manufacturers, entertainment companies, and professional sports companies to operate e-commerce businesses in the United States and internationally. It offers services through its integrated e-commerce platform, which is comprised of three components: technology, logistics and customer care, and marketing services. The company's services include e-commerce engine, Web store management tools, Web infrastructure and hosting, order management and processing, reporting and analytics, fulfillment and drop shipping, customer care, buying, user experience and design, content creation, online marketing, and e-mail marketing. GSI Commerce was founded in 1986 and is headquartered in King of Prussia, Pennsylvania.

Key Stats

Market Cap: 1.03B
Trailing P/E: 19.55
Forward P/E: 32.57
PEG Ratio: 0.95
Price/Sales: 1.59
Price/Book: 4.43
Profit Margin: 8.69%
Operating Margin: 1.36%
Return on Assets: 2.82%
Return on Equity: 29.03%
Revenue: 641.59M
Qtrly Revenue Growth: 28.00%
Gross Profit: 278.30M
Diluted EPS: 1.13
Total Cash: 134.01M
Total Debt: 78.66M
Total Debt/Equity: 0.343
Operating Cash Flow (ttm): 42.55M

(Note: Green color represents positive indicator, red color represents negative indicator)

Blackstone IPO Date Fixed

Blackstone Group's much-anticipated initial public offering IPO of its management company will occur during the week of June 25.

Blackstone, the world's largest private-equity firm, will sell 12.3% of its management arm in an offering expected to value the entire company at around $32 billion. Investors will have little voting say in Blackstone itself; instead, their stake would be tied to the management committee that runs the company.

Blackstone said it plans to offer 133.3 million common units at $29 to $31 each. Another 20 million units may be sold to meet demand, boosting the IPO as high as $4.75 billion plus $3 billion from China making it $7.75 billion. However with plenty of additions and clauses, Blackstone said the IPO could value the firm at $33.6 billion, roughly one-third of Goldman Sachs Group Inc’s market value. This grand total will boost Blackstone’s carry in the financial services industry, making comparisons with some of Wall Street’s heavy public hitters like Goldman Sachs and Morgan Stanley. Blackstone plans to list its shares on the New York Stock Exchange under the symbol "BX."

Blackstone has expanded its planned $4 billion IPO to $7 billion to accommodate the Chinese investment. This investment gives China a taste of the booming private equity market. China will take 9.9% non-voting stake in Blackstone, leaving it under the radar screen from U.S. govt scrutiny. China has agreed to hold their investments for atleast 4 years for which they bagged a 4.5% discount. This whole deal is a win-win proposition for both parties. For China it means a role in the global private equity market and higher profits, where as for Blackstone it means increase in access to Chinese markets.

Earlier this week, Blackstone raised eyebrows when it disclosed that Chief Executive Stephen Schwarzman made $400 million in 2006, nearly double the combined compensation for the CEOs of Wall Street's five biggest investment banks. Schwarzman will control about 24 percent of Blackstone after the IPO.

Stock Review: GameStop Corp GME

GameStop Corp. operates as a retailer of video game products and personal computer (PC) entertainment software. It sells new and used video game hardware and software, and related accessories and other merchandise. The company also offers video game accessories that include controllers, memory cards, and other add-ons; PC entertainment accessories, such as joysticks and mice; and strategy guides and magazines, as well as trading cards. In addition, it operates electronic commerce websites under the names gamestop.com and ebgames.com, as well as publishes Game Informer, a multi-platform video game magazine. GameStop operates 4,778 stores in the United States, Australia, Canada, and Europe, primarily under the names of GameStop and EB Games. The company was founded in 1994 and is headquartered in Grapevine, Texas.

Key Stats

• Market Cap: 5.72B
• Trailing P/E: 33.82
• Forward P/E: 19.65
• PEG Ratio: 1.00
• Price/Sales: 1.05
• Price/Book: 3.92
• Profit Margin: 3.08%
• Operating Margin: 6.51%
• Return on Assets: 7.88%
• Return on Equity: 12.86%
• Revenue: 5.56B
• Qtrly Revenue Growth: 23.00%
• Gross Profit: 1.47B
• Diluted EPS: 1.08
• Qtrly Earnings Growth: 111.30%
• Total Cash: 307.33M
• Total Debt: 749.55M
• Total Debt/Equity: 0.506

(Note: Green color represents positive indicator, red color represents negative indicator)

Retail Sales See Some Hope

Now that consumers get used to high gas prices, retail sales at chain stores have picked up again. Sales were better in June as compared to May.

Sales at retail stores rose 1% for the week ended June 9 from the prior week. It was the strongest week-over-week showing since the week ending February 3, 2007 when sales rose 1.3%. Year-over-year, sales rose 2.1% for the period. Sales were mixed for the first week of June with the healthiest week-over-week gain in four months, but the year-over-year pace was a tad softer.

Last week, some of the nation's biggest retail chains, including Wal-Mart (WMT), Target (TGT), Gap and J.C. Penney reported May sales which sent out mixed signals. Wal-Mart, the world's largest retailer, had a weak sales gain of 1.1% last month and offered a softer outlook for June as gas price pressures and the ongoing housing softness continues to restrict the buying ability of its mostly paycheck-to-paycheck consumers. However other merchants actually enjoyed better sales, including Wal-Mart's rival Target, department store chain Kohl's (KSS) and a handful of teen clothing shops.

Feds To Help Out On Subprime Lending

The Federal Reserve recently decided to use a public hearing to gain more knowledge about the current state of mortgage lending business. The aim is to cut down on lending abuses. Fed Governor Randall Kroszner said their main purpose is to gather information on how to make rules in future to stop fraud and abusive practices, ensuring that it does not create more problems for qualified consumers who deserve home loans.

Currently subprime mortgages are extended to borrowers with poor credit histories at high interest rates. Default rates in the subprime segment of the U.S. mortgage market have jumped as the housing industry has slowed and prices have fallen and the spread of its woes to other areas of the economy has been widely feared.

At least 20 lenders in the subprime mortgage sector have gone out of business as a result. Some large lenders have been badly hit as well, such as Bank of America (BAC) and Countrywide Financials (CFC)

Some U.S. lawmakers have criticized the Fed for failing to take steps it could have taken to avoid unfair or abusive lending practices.

The subprime crisis has triggered broader concerns that the fallout may spread to mainstream lenders and damage the economy. It also has led to a debate over whether legislation will be required to address this issue.

Fed enforcement under the act would apply to both bank lenders as well as non-bank institutions that do not answer to federal banking regulators but who have been supplying a growing share of mortgage loans.

In other news home foreclosures in May jumped 90% from a year earlier, reflecting a poor spring housing market. The May foreclosures totaled 176,137, up 19% from April.

Exxon + Enbridge = New Pipeline

ExxonMobil XOM and Enbridge Inc Canada's No. 2 pipeline company, said they will work together to develop a new oil pipeline to carry about 400,000 barrels of crude a day from the Midwest to refineries on the U.S. Gulf Coast. The pipeline would transport U.S. and Canadian crude oil from Patoka, Illinois, to Beaumont, Texas, and onward to refineries around Houston. The reason for this pipeline is to carry burgeoning output from Canada's oil sands to new markets. The oil sands contain an estimate 174 billion barrels of recoverable reserves. Production from the oil sands is expected to reach close to 3 million barrels a day by 2015, about triple current production.

eBay Goes To Radio

eBay Inc. has decided to begin auctioning advertising airtime on 2,300 participating U.S. radio stations, expanding on an existing plan to sell cable television ads. This move will put eBay in direct competition with Google. eBay sees hundreds of thousands of sellers in its online auction markets as potential advertisers within the media marketplaces it is seeking to develop. The ad auction push has met with some resistance from broadcasters who fear the auctions could put stiff pressure on advertising rates.

How The Trade Deficit Got Better

According to a government report America's trade deficit narrowed down a bit, mainly driven by the drop in consumer spending on imports. Imports outstripped exports by $58.5 billion in April, down from the $62.4 billion in March.

To the surprize of analysts and economists the trade gap narrowed despite the rise in the price of oil imports. The 8% rise in the price of an oil price was partially balanced out by 3% drop in the consumption of it. Therefore the overall oil imports fell by more than $1 billion, helping the trade deficit.

Imports fell by 1.9%, due to slowdown in the U.S. economy and consumer spending. The weak dollar has made imported goods more expensive which lead to cut down of spending. The weak dollar has also made exports cheaper in other nations, making it more competitive. Another evident reason for slowdown in spending was that Walmart reported the worst sales comparison in its history in April.

In addition, exports edged up 0.2% to hit a record high once again. Export of services grew 0.5%, while export of goods was essentially flat, with food, feed and beverages being the category showing the best growth.

The government report also showed that America's trade gap with China continued to climb to $19.4 billion, up 12% from March and 13% from year-ago levels. The imbalance between the imports and exports with China now account for about a third of the overall trade deficit, and is nearly twice the size of the trade gap with oil producing nations.

(Source: CNN Money)

Stock Tumble On Inflation Fear

Inflation fears cause the Dow to tumble over 129 points, and European markets fall after the European Central Bank raises rates.

CFOs Take On The Economy

A survey indicated that Chief financial officers CFOs are taking a darker view on the U.S. economy. They have less confidence the growth rate this year.

The Duke University/CFO Magazine Business Outlook found that 30% of CFOs had become more pessimistic on the direction of the U.S. economy. Only 26% were more upbeat, which is near the 5-year low hit in September 2006. A total of 484 U.S. CFOs were surveyed.

The optimism index has dropped to a level that is low by historical standards. With pessimists outnumbering optimists, the prospects for the U.S. economy are poor.

Majority of the CFOs felt that the their main concerns were rising energy prices and slowing consumer demand, driven by the cooling U.S. housing market.

21 Top Stocks With Healthy Returns

The table above shows stocks with Earnings Per Share and Relative Price Strength Ratings of 80 or better, trading at 10 or higher, with at least 200,000 shares traded daily. The 21 listed stocks all surged at least twofold in price over the past year. They are ranked by Return on Equity ROE, with a minimum value of 20%.

(Source: Yahoo Finance)

Wholesale Inventories See An Upward Movement

Inventories at U.S. wholesalers rose 0.3% recently as stocks of nondurable goods posted the biggest percentage increase in 5 months. Wholesale sales outpaced inventories in April, rising 1.3% after a 2.1% gain in March. The rise in inventories matched economists' expectations for a 0.3%.

The March inventory gained 0.4% while the March wholesale sales increased upward to 2.1%.

The inventories-to-sales ratio, a measure of how quickly stocks would be depleted at the current sales pace, fell for the fourth straight month, indicating high sales.

Stocks of durable goods, items meant to last at least three years, fell 0.5% in April, the biggest drop since July 2003, after a 0.1% decline in March. Inventories of nondurables rose 1.6%, the biggest rise since a 2.0% increase in November 2006, after a 1.1% increase in March.

Automotive inventories fell 3.5%, the largest drop since a 4.0% fall in April 1998

(Source: CNN Money)

Why Oil Prices Are Up

Oil prices turned higher recently due to drop in refinery activity, flat crude stocks and arrival of cyclone on the Persian Gulf. Growing gas supply had no effect on the gas prices. U.S. light crude rose 29 cents to settle at $65.90 a barrel on the New York Mercantile Exchange.

In its weekly inventory report, the Energy Information Administration EIA said gasoline supplies were up by 3.5 million barrels. Analysts were looking for a gain of 1.4 million barrels. Crude stocks rose by 100,000 barrels, while distillates, used to make heating oil and diesel fuel, increased by 1.9 million barrels. Analysts were looking for a gain of 300,000 barrels of crude and an 800,000-barrel rise in distillates. However a decline in the refinery activity played an important role in pushing prices higher. Refineries ran at 89.6% capacity, a surprise drop from last week's 91.1%.

The average gas price hit a record high of $3.227 a gallon two weeks ago due to refinery problems. But recently refineries have begun to come back online and gasoline stocks have grown, helping gas prices. Gas stood at $3.14 a gallon nationwide Wednesday.

The arrival of cyclone, the strongest storm to reach Oman in 30 years, disrupted the country's crude exports of 650,000 barrels per day for a second straight day adding to supply worries that have underpinned the market. The cyclone is expected to have a bigger impact on shipping in the Gulf rather than on Iran's oil facilities, which are concentrated inland and away from the storm's projected track.

The AMEX oil index, which includes stocks of big oil companies like BP, Exxon Mobil XOM, ConocoPhillips COP, Chevron CVX and Royal Dutch Shell RDS.A, is up about 5% in 2007.

7 Top Insider-Owned Stocks

In general higher insider owned stocks are safer. This trading levels are not as intense as others leading to less volatility. When the insiders hold a bigger chunk of the pie, investors can trust them to perform well since their own money is at stake. However there are still plenty of risks involved with heavy insider ownership like the relative inability of outside and dissident shareholders to spur changes.

Listed below are top 7 insider-owned stocks, along with their key holders, and ratings.

Company	% Owned by Insiders	Key Shareholder	CAPS Rating
Garmin (Nasdaq: GRMN)	45%	Chairman/CEO	*****
Telefonos de Mexico (NYSE: TMX)	43%	Chairman	*****
American Financial Group (NYSE: AFG)	41%	Chairman	****
Kinetic Concepts (NYSE: KCI)	38%	Founder/Chairman	****
Rohm and Haas (NYSE: ROH)	35%	Director	****
Global Industries (Nasdaq: GLBL)	23%	Founder/Chairman/ COO	*****
Perini (NYSE: PCR)	23%	Chairman/CEO	*****

You can find the complete article here.

Walmart Takes A Break

Walmart WMT has decided to scale back the number of planned U.S. superstore openings in 2007 by more than 25% in an effort to focus more on existing stores. One of the reasons for this decision was the current sagging sales growth and difficulties in expanding its sales of apparel and home decor items. This move would improve service and offerings at existing stores, and will help Walmart cut capital spending to $15.5 billion in 2007.

Wal-Mart will open 190 to 200 new supercenters in the current 2008 fiscal year, rather than the 265 to 270 it originally had announced. The company plans to open about 170 supercenters annually in future years.

Execs also highlighted Wal-Mart's efforts to conserve energy and resources, which have also led to cost savings, and noted their commitment to international markets including China and Mexico. Faced with increased saturation in the United States, Wal-Mart is looking to international expansion to help fuel future growth. They have found success in some countries but have also stumbled in markets such as Germany, which it was forced to abandon.

The stock price has been wayward lately. Announcement of $15 billion stock repurchase plan helped the boost the stock prices. However Walmart has also been found guilty of bad compensation plans. They are accused of not providing their employees good health care and benefits. Walmart execs argue that the company has introduced programs that offer inexpensive health insurance for employees. In response critics believe that the new, cheaper program is not a solution because it requires employees to shell out for high deductibles that are hard to afford on Wal-Mart wages. Traders and investors have played this reputation/image factor of Walmart, driving prices downwards.

Mortgage Applications Take A Dip

U.S. mortgage applications declined recently due to reduced demand for home refinancing. Refinancing took a hit due to higher long-term interest rates.

The Mortgage Bankers Association's mortgage application index slipped 1.7%. A rise in applications to buy homes was overshadowed by the drop in refinancing applications. The Mortgage Bankers Association's purchase index rose 1.5%, but home refinancing fell 6.1%.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, rose 0.03% point to average 6.35%. Refinancing represented 38% of total mortgage applications, down from 39.7% the prior week.

On a four-week moving average, which smoothes out volatility, all three of the Mortgage Bankers Association's seasonally adjusted indexes have fallen. The mortgage applications index, also called the market index, is down 2.1%; the purchase index is off 0.3% and refinance index is down 4.3%.

Stock Review: Blackboard Inc (BBBB)

Blackboard Inc. is a provider of enterprise software applications and related services to the education industry. Blackboard Inc.'s clients primarily include colleges, universities, schools and other education providers, as well as textbook publishers and student-focused merchants who serve these education providers and their students. The Company's software applications can be installed locally at a client site or hosted centrally in its data centers. Approximately 87% of Blackboard Inc.'s installations were installed locally and approximately 13% were hosted by it. Blackboard Inc had over 3,400 clients in approximately 70 countries holding more than 4,700 licenses of its software.

Blackboard Inc. clients were primarily U.S. post-secondary education institutes, which accounted for approximately 62% of its total revenues last year. Blackboard Inc. also sometimes serves as an application service provider, offering hosting for its clients that prefer to outsource the management of the hardware, bandwidth and servers necessary to run its applications. In addition to its products, it offers a variety of professional services, including project management, custom application development and training.

Key Stats

• Current Price = $41.81
• Market capital = $1.20B
• EPS = -0.32
• Trailing P/E = N/A
• Forward P/E = 58.07
• PEG Ratio (5 yr expected) = 4.08
• Profit Margin = -4.46%
• Operating Margin = -2.34%
• Return on Assets = 0.90%
• Return on Equity = -6.31%
• Revenue = $200.63M
• Gross Profit = $127.47M
• Qtrly Earnings Growth = 1213.50%
• Total Cash = $25.88M
• Total Debt = $18.83M
• Shares Short = $3.92M
• Short Ratio = 14.2
  

(Note: Green color represents positive indicator, red color represents negative indicator)

Worker Productivity Below Estimates

Worker productivity in the Q1 was much lower than original estimates, according to a government report. Productivity increased by 1% in the quarter, down from the original estimate of a 1.7% gain, but matching the consensus of economists. The slower economic growth cut into productivity gain, which measures the output of U.S. workers. The slower productivity raised inflation, as the unit labor costs rose 1.8% in the quarter. It indicates growth was not so great in the first quarter and that went straight into productivity.

The lower productivity and higher labor costs could keep the Federal Reserve from moving to cut rates to spur the economy in the face of the slowing economy. Higher labor cost could lead to job cuts. U.S. employers announced plans in May to eliminate 71,115 jobs, up 32% from May 2006. It was the second consecutive month in which job cuts increased from the same period a year ago.

Still, year to date, the pace of job cutting remains below last year's level, but the gap is rapidly closing. Heavy downsizing in the computer industry dominated May job cuts. Heavy job cutting in the computer industry reflects a slowdown in business spending on new technology.

White House's Economic Forecasts

The White House recently lowered its forecast for economic growth this year even as it slightly upgraded its outlook for unemployment. The administration expects the GDP to grow by 2.3%, down from a previous projection of 2.9%. The main reason for the downgrade was due to extremely weak start in Q1 2007. The economic growth was merely 0.6% in this period, its worst showing in more than 4 years. The economy did much better in 2006 growing by 3.1%. The administration expects the economy will regain speed and grow by 3.1% in 2008 and 2009.

Federal Reserve Chairman Ben Bernanke, the administration and private economists expect the economy will rebound in the months ahead. The housing sector will play an important role in deciding whether the economy will improve or get worse. As of now no one is quite clear whether the housing market has bottomed out or there is more in store.

However the unemployment rate, which averaged 4.6% last year is expected to dip to 4.5% this year. That is slightly better than its old forecast that the unemployment rate would hold steady at 4.6%. Next year, the administration predicts the unemployment rate will edge up to 4.7%. Surprisingly the employment rate has remained strong even though the economy is showing signs of weakness. Analysts believe the reason has been that only housing and auto sectors were affected and did not affect other types of sectors.

Inflation directly affects the consumer prices. Inflation has been increasing this year due to higher prices for gas and other energy products. The administration expects consumer prices to rise by 3.2% this year. That's higher than the 2.6% increase previously projected. However the administration also expects consumer prices to rise by 2.5% in 2008 and edge down to 2.4% in 2009.

The White House's economic forecasts are issued twice a year. The administration's projections are in line with those offered by private analysts.

(Source: Yahoo Finance)

Which Way Is Gold Moving ?

Gold for August delivery closed at $675.10 an ounce on the New York Mercantile Exchange. August gold, which gained more than 2% last week, touched a three-week high recently at $679.50 before ending that session slightly lower.

The dollar cut its losses during part of the trading session after the Institute for Supply Management reported that the nonmanufacturing side of the U.S. economy grew at a robust in May. The gold prices move in the reserve direction of the dollar. The dollar has been bouncy lately, keeping the gold prices at bay.






Recent factors affecting gold prices

• Bank of Spain has sold over 25% of their gold reserves in 3 months into the market, holding the Gold prices from upward movement.
  
• With the Indian marriage season now stopping, Indian retail demand for gold will drop too, causing the gold prices to stop rising furthur. However the investment buyers hold the key. With supply and demand slowing right now, the investment buyer is in a position to swing the price. The funds will follow the lead of these buyers.
  
• Another important factor which may have been overlooked is the increasing likelihood of strike action by the 280,000 miners in South Africa. This is because South Africa is the largest producer of gold and platinum in the world.

A Higher Ground: U.S. Service Sector

The dominant U.S. service sector grew at its fastest rate in a year in May, beating market expectations for a slightly slower pace.

The Institute for Supply Management's ISM services index rose to 59.7 in May from 56.0 in April. The analyst had actually expected a slight decline of 55.3. Analysts believe this is a very strong number and a key piece of the recent strength seen in U.S. data.

The stock market did not respond to these strong numbers from the service sector. However the dollar did respond gaining some ground to euro. Also the bond prices weakened on signs of strong growth. The services sector represents about 80 percent of U.S. economic activity, including businesses such as restaurants, hotels, hair salons, banks and airlines.

Federal Reserve Chairman Ben Benanke Speaks Up

According to Ben Bernanke

Elevated levels of inflation excluding food and energy may not recede as weakness in the housing sector is likely to restrain economic growth for longer than expected. Although core inflation seems likely to moderate gradually over time, the risks to this forecast remain to the upside. The adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected. The rate of increase in housing costs, which had contributed to a rise in core inflation, seems likely to slow, although the timing of that deceleration is uncertain, However, the tight labor market has the potential to contribute to price pressures

The dollar fell, U.S. stock market futures lost ground, and Treasury bond prices got some help due to Bernanke's comments about the housing sector's drag on the economy, suggesting the Federal Reserve is likely to hold interest rates steady at 5.25%.

Slowest Rate: House Prices In 2007

Freddie Mac, the second-largest U.S. home funding company said house prices rose in the Q1 of 2007 at the slowest annual rate in 14 years. Home prices did not keep pace with inflation during the quarter. As the housing market settles near the bottom of its cycle during the second half of this year, national home price growth will probably slow further, with price declines in many parts of the country. Existing home sales rose in Q1 2007 compared to Q4 2006, but were down more than 9% from a year ago. Home prices rose 1.3% in Q1 on an annualized basis and 2.8% year over year, which was its slowest annual rate of growth since the Q1 1993, when prices increased by 1.6%.

Pending sales of existing U.S. homes in April unexpectedly fell to its lowest since February 2003. The April Pending Home Sales Index fell 3.2% to 101.4 from an upwardly revised level of 104.8 in March. The index registered 99.3 in February 2003. Analysts were expecting the April index to be 105. Higher foreclosures and bad subprime lending industry lead to dampen home sales market.

Milk Hits A Record

The price of milk hit a record $21.30 per 100 lbs. at the Chicago Mercantile Exchange recently, and more records are likely due to strong demand for dairy products both here and overseas. The international demand for dairy products is driving the market prices. The world market price for non-fat dry milk is approaching $2.50 a pound. A year-ago non-fat was being sold in the U.S. at about 80 cents a pound. Nonfat dry milk is widely used overseas for a variety of foods, and demand has been strong because of low supplies in Europe and the United States. Recently, economists predicted the retail price of a gallon of milk could increase 10 percent or more this year, to $3.30 per gallon, from $3.00.

Stock Review: Loews (LTR)

Loews Corporation, through its subsidiaries, provides commercial property and casualty insurance primarily to businesses, associations, professionals, and groups and individuals. Its property insurance provides property coverage, marine coverage, and boiler and machinery to various businesses. It offers management and professional liability insurance; and risk management, information services, warranty, and claims administration services.

The company also engages in the production and sale of cigarettes. It involves in the interstate transportation and storage of natural gas through approximately 13,400 miles of natural gas transmission pipeline. In addition, the company operates 44 offshore oil and gas drilling rigs that are chartered on a contract basis for in the exploration and production of hydrocarbons. These rigs are located primarily in the Gulf of Mexico region, Brazil, and the North Sea. Further, Loews owns and operates hotels. It operates 18 hotels, including 16 in the United States and 2 in Canada. Additionally, Loews distributes and sells watches and clocks.

Private Equity Investing: Whose Next ?

Last month China agreed to buy a stake in Blackstone Group, one of the leading private equity firms in the United States. The question now is which governments will be the next to partner up with a major private equity firm?

Oil producing nations are believed to be the most likely candidates. The rise in the oil prices has lead to huge trade surpluses and lots of cash for Middle East and Central Asian countries. The cumulative surplus in trade and investments for oil-producing countries grew to 20% of GDP last year, up from 5.4% in 2002. Oil states don't publicize much about their investments so tracking where their funds is difficult. So far the oil nations have invested most of their oil riches into low-risk assets like U.S. Treasury bonds. But some governments have been putting money into more aggressive, return-oriented investment funds. Not only government, but retail investors around the world are investing in the world of private equity.

UAE has formed private equity firms which have been involved in major buyout deals in the U.S. Taking a stake in the private equity firm is different from merely investing in its funds. China's deal with Blackstone gives them 9.9% stake in Blackstone's management company. This deal opens the door for oil producing nations to also experiment with their investments to seek high returns. This is a scary feeling all together for the U.S. government and the Federal Reserve will be watching very closely for any such deals.

As of now this is all speculative. Oil producing nations especially UAE is hesistant to invest in U.S. after the Dubai Ports World's debacle. Dubai Ports World's effort to manage U.S. ports was met with a strong backlash from U.S. politicians which eventually lead them to sell off their investments. Dubai Ports World scared a lot of people in the Middle East and made them wary of large investments in the U.S. China found an intermediate solution to this politician backslash by limiting their ownership to less than 10% and taking non-voting rights. This solution can work for other nations in the future.

It is going to be interesting to see what other nations are going to do about investing in U.S. private equity.

Chinese Market Make A Dreaded Fall

China's main stock index tumbled 8.3% on 4th June in its second biggest drop this decade. The Chinese govt is to be blamed for the huge drop after they increased the stock trading tax to control the bull market. The index lost 15.3% from last week's record intra-day high, erasing about $340 billion of value.

Many fund managers and analysts said the index, which had risen 62% this year had room to fall much further in coming days as the excesses of the bull run were corrected. But many also said they did not believe the market as a whole was going into free fall. It is expected that 3rd-tier stocks pushed up by speculative buying will likely fall further. But stocks with solid earnings growth potential should be able to withstand the sell-off.

Front-page editorials in official newspapers assured investors the market's medium- and long-term outlook was still positive, and that the tax hike was merely aimed at speculators. But this failed to halt the selling, as it was little comfort to millions of individual investors who had entered the market in recent months to make money from short-term trading. Nevertheless, many analysts and fund managers said they did not believe the government, which has made a strong stock market central to its economic reforms, would permit an extended slide.

Bulls Step Aside In June

Come June, with the bulls stepping aside for a while, a 3-month stock rally could hit a road block. There is still alot of money that could possibly be invested in the stock markert, but the bulls know there is not much coming out this month.

In the coming week there will be few economic reports like April factor orders, April trade balance and the May services sector reports. However none of these reports cause much market movement. Analyst predict not much movement in June, with the occasional up day as more deal news comes out.

Analyst also predict that if there is any pullback in the market, it will be temporary, since the factors that lead to the 3-month stock rally is still intact. Factors like better earnings, company buyback, mergers & acquisitions, steady interest rates, confidence from the Federal Reserve about the economy are all still in place. These factors helped recharge the bulls after a late-February through early March stock selloff that was sparked by worries about a global growth slowdown. The Dow Jones industrial average and the S&P 500 have both risen for 8 of the last 9 weeks. Both ended last week at all-time highs. The Russell 2000 small-cap index is at a record high. The Nasdaq composite is at a more than 6-year high.

Summer, starting with June, tends to be tough for stock investors, as the old "sell in May and go away" expression suggests. It's tough because with fewer traders around, there is less money trading hands and less of an incentive to put new money to work. This June is unlikely to be an exception, particularly as there is little expected in the way of market-moving news other than corporate deals. Q1 earnings are done with and the Q2 earnings reports won't start until next month. The next Federal Reserve policy meeting is not until the end of the month and they are expected to hold steady on interest rates. Most of the major economic reports for the month of June were already released, the 1st day of the month, leaving investors less to chew over in the next few weeks.

All in all, June is going to be the month where bull investors keep away.

(Source: CNN Money)

Stock Review: Baidu

Baidu.com, Inc. (Baidu) is a Chinese-language Internet search provider. Baidu offers a Chinese-language search platform to both users and customers. Its platform consists of the Websites and Baidu Union, which is its network of third-party Websites and software applications. The Company's services are designed to enable Internet search users to find relevant information online, including Chinese-language Web pages, news, images and multimedia files, through links provided on its Websites. In February 2005, the Company acquired the distribution business of Shanghai Qilang Science and Technology Co. Ltd.

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Stock Review: Rentrak

Rentrak Corporation manages business operations that facilitate the delivery of home entertainment content products and related rental and sales information for that content to home video specialty stores and other retailers, including grocery stores and convenience stores (Retailers) by the way of Pay Per Transaction System (PPT System). The Company leases product from various suppliers. Under its PPT System, Retailers that rent digital videodiscs (DVDs), videocassettes (VHSs) and video games (collectively, Units) to consumers generally sublease Units and other media from the Company, usually for a low initial fee and share a portion of each retail rental transaction with the Company. Effective April 1, 2005, the Company has two operating divisions: the Pay-Per-Transaction (PPT) and Advanced Media and Information (AMI) divisions, as well as an Other Division

Gas Headed To $4 Gallon

Gas prices keep heading up. America's energy demand and stagnating supplies will keep prices high. Adam Lass forecasts $4 gas and picks his top stocks to ride the trend.

Introduction: Exchange Traded Funds

A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange, thus experiencing price changes throughout the day as it is bought and sold.

By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order.

One of the most widely known ETFs is called the SPDR (Spider), which tracks the S&P 500 index and trades under the symbol SPY.

(Source: Investopedia)

Investing In The Stock Market

Excellent video about your stock investment

Company Earnings: Centex Corp, Circuit City, MedImmune

Homebuilder Centex Swings to Q4 Loss
U.S. homebuilder Centex Corp (CTX) reported a Q4 loss as the housing downturn continues to hit revenue. The company posted a loss from continuing operations of $22.3 million versus its earlier forecast of break-even. Last year the company earned $369 million in Q4. The results do not reflect earnings from discontinued operations of $221.1 million related to the company's construction services business, sold off in March, and some home equity operations. Including those profits, the company posted net income of $198.9 million, down from $391.8 million a year earlier. Revenue dropped 11% in the quarter to $3.67 billion against analyst expectations of $3.34 billion. Shares dropped 2.7% yesterday and were down another 1% in AH trading to $44.77.

Circuit City Shares Fall
Circuit City (CC) restated earnings for the past 2 quarters and revised its guidance for 2008. Restatement of earnings along with poor sales of large flat panel and projection TV, will result in a loss from continuing operations before taxes of $80 million - $90m for Q1'08. Circuit City said if business trends improve and restructuring efforts are effective, then it expects 2008 earnings at the low end of its prior forecast of 1.4% to 1.8%. Shares of Circuit City lost 2.7% to $17.45 in normal trading and dropped 8% to $16.05 in the after-hours on volume of almost 1.07 million.


MedImmune Inc Beat Quarter
MedImmune Inc. (MEDI) reported that its 1Q 07 profit more than tripled on increased sales of its respiratory drug. MedImmune posted a net profit of $160 million. Sales were up $574.8 million, from $498 million last year. Analysts were looking for revenue of $553.5 million. Worldwide sales of their drug grew 9% to $507 million, up from $463 million last year. MedImmune agreed last month to be bought by AstraZeneca (AZN) for more than $15 billion. Shares climbed $0.82 to $57.50 after hours.

(Source: Seeking Alpha, MarketWatch, Reuters)

Company Earnings: Qualcomm, Akamai, NutriSystem, Anheuser-Busch

Qualcomm Shares Rise
Qualcomm QCOM reported Q2 net income rose 22% to $726 million. EPS totaled $0.50, ahead of analysts estimates of $0.47. Revenues increased 21% to $2.22b, again beating analysts' expectations. Qualcomm also raised its full-year EPS guidance on sales of $8.4b - $8.7b (from $8.1b - $8.6b). Shares of Qualcomm gained 2.2% to $45.34 during normal trading and added 0.90% to $45.75 in after-hours activity on volume near 2.6m.

Akamai Shares Tumble
Akamai AKAM reported Q1 net income climbed 67% to $19.2 million. Revenues grew 53% to $139.3m, compared to analysts' estimates of $138.8 - $139m. Akamai forecast Q2 sales of $149m - $153, compared to analysts' consensus estimate of $150.3m. In a conference call, Akamai reiterated its full-year revenue growth guidance of $610m - $625m. However its shares fell 10.3% to $48.97 during normal trading and last traded down 0.35% to $48.80 in the after-hours, having dropped as low as $46.46 (-5.1%), on volume of more than 1.1m. Analysts had very high expectations, especially with Akamai beating in the several quarters prior.

NutriSystem Beats Street
NutriSystem's NTRI revenues soared 62% to $238m in Q1'07 vs. $146m in Q1'06. Net income rose 70% to $38m in Q1'07, vs. $22m in Q1'06, beating analyst's expectations. Operating income almost doubled from $35m in Q1'06 to $60m in Q1'07. Despite a 92% rise in marketing costs, revenue per customer grew and returning customers should bring in $93m in 2007 compared to $38m in 2006. NutriSystem grew its online market and its men's market grew faster than the traditional woman's market increasing cash flow. Strong Q1 comes from New Year's weight loss program. NutriSystem forecasts Q2 revenues of $190-$200m, a 43% increase. Full year revenues are expected between $790-$805m, as NutriSystem continues to focus on the men, women and senior markets, returning customers and new products. Shares rose $7.41 to $65.65 after hours Wednesday.

Anheuser-Busch Shares Down
Anheuser-Busch BUD shares fell 2.8% yesterday, their biggest drop in almost two years, after the company posted a Q1 profit miss on advertising expenses for Bud Light and imported beers. Net earnings were $517.5 million in the quarter, up 3.7% from $499.2 million a year ago. Net revenue rose 2.7% to $3.86 billion from $3.76 billion in the year-ago quarter. Analysts were expecting revenue of $3.94 billion. Marketing and administration expenses were up 8.1% to $665.7 million in a bid to keep consumers away from rival Miller Lite. Advertising costs were also increased. Sales were up 2.7% to $3.86 billion for Q1 from $3.76 billion a year earlier. The company's U.S. market share dropped to 50.2% from 50.9% a year ago. Shipments to U.S. wholesalers rose 0.5% from a year ago, but international shipments to wholesalers were up 8.7% to 5.2 million barrels, primarily on sales to China and Canada.

(Source: Seeking Alpha)

Recent Earnings: Ups & Downs

Sun Shares Drop 6.5%

Sun Microsystems swung to a profit in its fiscal Q3, but a small sales gain fell short of analyst forecasts; shares fell over 6.5% in after-hours trading. Net income was $67 million vs. a loss off $217 million last year. Sales rose 3% to $3.28 billion, less than the $3.42 billion analysts expected.

Amazon.com Shares Up
Amazon.com reported strong first quarter earnings Tuesday after the bell, beating Wall Street's expectations and sending shares higher by nearly 13% in after-hours trading. Amazon also raised its full-year sales guidance. Q1 net income more than doubled on improved electronics and clothing sales, as well as a lower tax rate, to $111 million, good for EPS of $0.26; sales jumped 32% to $3.02 billion. Amazon issued guidance for the next quarter, with revenue in the range of $2.7-$2.85 billion, annual sales of $13.4-$14 billion, and an operating income projection for the year of between $463 and $593 million.

McClatchy Posts Steep Profit Drop
Shares of newspaper publisher McClatchy Company fell to a 7-year low yesterday after the company posted a sharp drop in Q1 net income on slumping classified print ads. Q1 net profit came in at $9 million, a 67% drop from $27.7 million in the year-ago quarter. Ad revenue dropped 5.3% from last year to $477 million in Q1. Three main categories of classifieds: automotive, real estate and employment suffered double-digit percentage declines. Internet revenue grew over 5% in the quarter, but was insufficient to compensate for poor print ad performance. McClatchy's shares lost 3% after the report to close at $30.55.

Reuters Posts Revenue Beat but Sales Drop on Weak U.S. Dollar
Reuters Group posted a forecast-beating 6.5% rise in Q1 revenue, but said actual revenue fell 1.1% after accounting for currency fluctuations including a weak U.S. dollar. Actual revenue fell to €626 million from €633 million a year ago, during which the dollar fell 12% against the pound. Nonetheless analysts were impressed with the underlying growth

Western Union Posts 12% Drop in Q1 Earnings
Shares of payment transfer company Western Union fell 4.5% in AH trading to $21.90 yesterday after the company posted a drop in Q1 profit on overhead and interest expenses. Q1 net income fell to $193.2 million from $219.8 million a year earlier. The EPS result met analyst expectations. Revenue was up 8% from a year ago to $1.13 billion. International transactions rose 21%, with India showing solid growth. However the results reflect $15 million of expenses to add staff and replace services. The company has lowered its 2007 revenue growth forecast to 10-11% from 11-13%.

IBM Shares Up 3.5%

IBM announced Tuesday it is expanding its stock-buyback program by $15 billion, potentially reducing outstanding shares by 10%, and increasing its dividend from $0.30 to $0.40 a share. IBM said that as a result of the share repurchase, 2007 EPS growth will be 12%-14%, 1%-3% higher than previously expected. Treasurer Jesse Greene said IBM has been "very underleveraged" with only $700 million in core debt, and $10.8 billion in cash. He would not disclose how much new debt the company would take on to fund the buyback. Moody's and Standard & Poor's said the plan would not affect IBM's debt ratings, but Fitch Ratings placed IBM on Rating Watch Negative following the announcement. CEO Samuel J. Palmisano said the moves "underscore the strength of IBM's business model and our strategy" saying its fiscal strength, "gives us significant financial flexibility to use our capital to drive growth through investments in acquisitions and capital expenditures, and to increase returns to shareholders through dividends and stock repurchase." The company said it may complete a substantial portion of the repurchases during the next several months. Shares rose $3.28 (3.5%) to close at $98.49.

Biggest Drop in 18 Years

The dollar fell and treasury yields declined on news that existing-home sales sank 8.4% in March, their steepest drop since January 1989, on poor demand hampered by bad weather. The National Association of Realtors reported that March sales came in at 6.12 million, shy of economists' expectations of 6.5 million. The decline follows a 3.7% rise in February. March sales were down 11.3% from the year-ago period. The median home price in March dropped 0.3% from a year ago to $217,000, while inventories rose to 7.3 months of supply from 6.8 months in February. The Conference Board's consumer confidence index declined to to 104, its lowest level in eight months, from 108.2. "The housing downturn is now weighing increasingly heavily on the U.S. economy," said Mark Zandi, chief economist at Moody's Economy.com. It is "starting to have an impact on consumers' psyche and also their spending. The second quarter is going to be no better than the first.'' The yield on the 10-year Treasury note fell to 4.61% from 4.64% yesterday, while the dollar fell 0.3% against the euro to $1.3621.

(Source: Seeking Alpha)