| Fellow Investor, For the first time in 11 years, the G7 has agreed to stage a joint currency intervention to keep the Japanese yen weak and support Japanese export prices. This action could be the start of a strong rally for the dollar. Futures were up sharply in reaction. But what this action will mean for oil and precious metals remains to be seen. Eventually, balance will be restored and the U.S. dollar will trade in its own merits. In the meantime, we could see an extension to the rally for stocks and a drop for gold and silver. At least, that's what the playbook calls for... *****U.S. stocks put in a decent rebound yesterday. Pretty much everything rallied: tech stocks, basic materials, commodities, oil and precious metals. Even the 30-year bond ticked slightly higher. Energy was the leader. Demand is expected to rise in Japan as it rebuilds and goes without nuclear power. The increasingly tense situation in the Middle East helped, as did a slew of economic data that was largely positive. The Philadelphia Fed manufacturing survey crushed estimates, hitting a 25-year high. Weekly jobless claims were down. And FedEx (NYSE:FDX) offered a strong earnings forecast. Nowhere was the negative effect of high oil prices a factor. In fact, as I've said before, oil and energy prices are a good measure of economic growth. More demand equals higher prices. And while the Middle East fear premium is still affecting oil prices, recall that oil declined sharply earlier in the week when the extent of damage in Japan was less well known. *****Of course, much hinges on a reasonable successful outcome to Japan's nuclear reactor problems. If meltdown of spent fuel rods can be avoided, we should see gains extend. But that's a pretty big if. I'm not sure I'd want to just wade into stocks while there is still so much uncertainty in Japan. Especially not when the S&P 500 is bumping up against resistance at 1,280 like it was this morning. The S&P 500 needs to move back above 1,280 soon (today would be good) or we'll probably see a drop right back to 1,250. | Special opportunity, article continues below.
| | An unbelievable 8.2% yield from a Manhattan Bank
Most banks yield less than 1%. But one small, unadvertised Manhattan bank has been paying yields of more than 5% for the past decade.
This bank has nothing to do with Wall Street - and they didn't take a dime in bailout funds. They didn't need to. They borrow low and lend high. And they pay their members the difference.
Click here if you're interested in this old-fashioned bank... |
| *****Banks are supposed to hear from the Fed on dividends today. The companies most likely to be allowed to make a significant boost to their dividend are JP Morgan (NYSE:JPM), US Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC) and PNC (NYSE:PNC). You'll notice both Bank of America (NYSE:BAC) and Citi (NYSE:C) are not on my list. I frankly don't see any way Citi can boost its dividend. And I can only imagine a scenario for BofA where it is allowed to add a penny or two. Quite frankly, I'm a little appalled that the banks will be allowed to pay dividends at all, considering the state of lending these days. It's no secret that banks have tightened lending standards significantly. The stories I hear of perfectly qualified borrowers being turned down are absurd. And I fail to see how paying out earnings as dividends -- rather than retain the earnings and improve the capital base against which loans are made -- will help the situation. But once again, the Fed appears ready (as the Treasury has done) to give the banks an advantage that they simply haven't earned. *****Bloomberg is reporting that some kind of tax break for repatriated corporate funds may be in the works. U.S. corporations reportedly have around $1 trillion in cash in foreign accounts just sitting there because the companies don't want to pay the taxes to bring it home. But a reduced rate, or tax holiday, could raise billions by encouraging these companies to bring that money back. At this point, every bit of extra tax money is helpful. Until next week,  | Ian Wyatt
Editor
Daily Profit |  |
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