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Tuesday, January 24, 2012

Supreme Court Ruling Could Revive Health Care for 2012 Campaign

The White House’s decision to seek a quick ruling on President Obama‘s landmark health care law will inject the controversial issue back into the nation’s political bloodstream at the height of the 2012 presidential campaign.
On Wednesday, the administration acceded to what had become a legal inevitability and welcomed a swift and final review of the law by the Supreme Court. But the political impact of the court’s ruling next year may be just as significant.
“It returns the spotlight to an issue that really has faded,” said Matt Bennett, a senior vice president at Third Way, a research group that pursues centrist policies. “It is no longer a top-of-mind issue for most voters. This just brings it right back to the surface.”
The White House’s decision means that the court is now almost certain to take up one or more of the cases involving a challenge to the health care law. It would then probably announce its decision in June, just weeks before the two political parties gather for their national nominating conventions and at the beginning of a final, intense dash to Election Day.
In practical terms, the court’s decision — whichever way the justices decide — will set the stage for health care to once again become a dominant political issue in the presidential campaign and in the many Congressional contests around the country.
What is less obvious is how the two political parties would benefit or lose from a Supreme Court ruling.
* The court could decide to uphold the law completely, rejecting the claims by conservatives that the mandate requiring individuals to buy health insurance is unconstitutional.
Such a flat-out victory for Mr. Obama and his team would almost certainly become a new and angry rallying cry for Tea Party groups and other conservatives, who would argue that the only way to assure an end to what they call ObamaCare would be at the ballot box.
But Tea Party advocates are not lacking in enthusiasm, and so it is hard to see how much more motivated they could get. And there would be important public relations benefits for the president to be affirmed on his most ambitious agenda item by a decidedly conservative court.
Essentially, the court — led by conservatives like Chief Justice John G. Roberts Jr. — would be giving a kind of legal “Good Housekeeping” stamp of approval to the administration’s entire health care approach.
A victory for Mr. Obama would make him look strong, rather than weak. And it could help the president make the argument that it is time to move on to other pressing issues, like jobs and the economy.
* The court could strike down the health care law, in part, or — as requested by some business and conservative groups in legal briefs this week — in total.
Such a ruling would no doubt fire up Mr. Obama’s liberal base, which could use the ruling as motivation to push even harder for victory in the election. Given what is generally recognized as the lackluster energy among liberals, that would be a clear positive for the president.
Democratic activists and candidates could use the conservative court as their own rallying cry to keep Mr. Obama in office and to retake the House from Republicans.
But it would also make the president look like he was wrong all along about his approach to solving the nation’s health care crisis. And it would lend credence to the president’s most vocal critics who accuse him of pursuing an unconstitutional agenda.
It would also mean that the president and his Democratic rivals would be pressured to come up with an alternative solution to the dilemmas of spiraling health care costs and how to cover the uninsured.
Those are discussions that some Democrats, including the president, might not welcome as they prepare to face the voters.
* The court could also punt, using legal technicalities to defer a substantive decision on the merits of the case to a later time.
If that happens, the health care law could recede a bit, becoming just one more in a series of important issues that will be debated by the candidates.
In a conference call with reporters, a senior Justice Department official said the decision by the administration to seek a rapid conclusion to the case was not influenced by political timing.
Rather, the official, who spoke to reporters on a background basis with no direct attribution, said Mr. Obama’s advisers had concluded that the country needed the closure that would come by an end to the many legal cases and the uncertainty surrounding the huge health care law.
That may be. But as the president begins to ramp up his re-election campaign, his strategists — and those of his rivals — no doubt have June 2012 circled on their calendars.
Depending how the nine justices rule, it could be a very interesting month.

5 money moves Mark Mobius is making now Emerging markets veteran is bullish on consumers, commodities, energy

By Jonathan Burton, MarketWatch
SAN FRANCISCO (MarketWatch) — Mark Mobius may be the only mutual fund manager ever to be the subject of a comic book, and certainly the only one to earn the title of “Father of Emerging Markets Funds.”
Mark Mobius.
The Thai edition is sold out, but of the Japanese manga comic is available in Chinese, Korean, Japanese, Indonesian, and English.
Such is the mystique of Mobius, a pioneer investor in emerging markets, builder of the BRICs, and an early believer in the power of globalization and the potential for developing Asia, Latin America, the Middle East and Africa, as well as Russia, to compete on the world stage.
As Executive Chairman of Templeton Emerging Markets Group, a unit of mutual-fund giant Franklin Resources Inc. BEN -0.04% , Mobius oversees around $40 billion in assets, including his Templeton Frontier Markets Fund TFMAX +0.30% , Templeton BRIC Fund TABRX +0.33% and Templeton Developing Markets Fund TEDMX +0.31% .  
Emerging markets investors were hammered in 2011. The uncertainty and volatility that swept the U.S. and the euro zone hit emerging countries harder, reflecting concern that these regions’ growth would decline sharply. Yet emerging markets have rebounded nicely so far this year as investors have become more optimistic that the worst of the euro-zone debt crisis has been priced in — a position Mobius took in a late 2011 telephone interview, as well as later emailed remarks.
“It’s not the end of the world; this will be worked out,” Mobius said. “Europe will not disappear; the euro will not disappear. There will be a solution. Of course, people will have to pay for that solution.”
Indeed, Mobius is a confirmed euro bull. “There are challenges, such as member countries’ need to control government spending, but once these are sorted out, I believe the euro should be very successful and, in fact, it could possibly play a greater role in the global economy in 2020,” Mobius said.
A robust European currency would be a plus for emerging nations that are major exporters to Europe. Even without this tailwind, Mobius points out, many emerging economies sport impressive growth rates of three or four times that of developed markets. In addition, these countries have little to no debt and high levels of foreign reserves.
“These fundamental strengths are likely to continue in the months and years ahead, and eventually be reflected in the earnings and share prices of emerging-market companies, over time,” Mobius said.
Moreover, developed-market growth is expected to remain anemic, which shifts attention to the growing consumer class in emerging markets. It remains to be seen whether domestic demand can offset the economic pinch from the developed-market slowdown, but Mobius is confident that it will have an impact.
“With emerging markets,” he said, “growth in domestic consumption should be driven by, and hopefully sustained, in two ways: rising per capita income and, more importantly, the maturing of the young, working population who will be reaching the most productive years of their lives.”
Yet a smooth transition is by no means guaranteed, Mobius cautioned: “If governments fail to keep up with this new and rising middle-consumer class, through a lack of employment and high unproductive government spending that could in turn lead to inflation, this could lead to political instability, a persistent poverty trap and a widening gap between the rich and the poor.”
Sustained high inflation is in fact the main risk to the emerging-market growth story, Mobius said.
“In an environment of slowing global growth and easing inflationary pressures, emerging markets tend to revert their attention to stimulating economic growth,” he said. “Inflation is a big challenge, and I believe it will probably be a very important consideration going forward.”
So Mobius has positioned his funds’ portfolios for any possibility. He’s invested in cyclical areas such as energy, commodities and materials, as well as having large investments in food and other staples that wealthier consumers can now afford.
And as someone who has seen emerging markets boom, bubble and bust, Mobius is also realistic about the need for investors in these parts of the world to show tremendous patience — which, he said, will be rewarded.
“There of course will be leads and lags in the movement of markets but it is clear that over the longer term emerging markets will outperform developed countries,” Mobius said.
With that in mind, here are five areas where Mobius is investing now:

1. Stick with the energy sector

Economic development and urbanization in emerging countries means that energy demand is increasing rapidly. Mobius noted. At the same time, he added, suppliers of gas and oil have become much more sophisticated about pricing. Accordingly, prices can be maintained at high levels, and as an investor Mobius looks to energy companies with a dominant share of this favorable dynamic.
For instance, he said, “we like to go into diversified oil companies that have the whole gamut: production,exploration, refining, distribution, gas stations.” 
Mobius is also sanguine about Russia, which, he said, “is now in a strong fiscal position with very high foreign reserves and a continuing good market for their oil, gas and mineral exports.”
As an example, he points to Gazprom OGZPY +1.96% , which is a major supplier of gas to Europe and also sells to China and other parts of Asia.
Electric power is also a big focus. “It’s all about electric energy,” Mobius said. From cellular towers to office towers, “everybody needs electricity,” he added.
Investors have to be careful about electric utilities, which can be subject to excessive regulation, he cautioned. Brazil has a model system, Mobius said, that balances government regulation against shareholders’ need for return on capital and investment.

2. Software delivers hard profits

Information technology and software is a growth story — particularly for India, Mobius said.
“Some terrific software companies in India do global software and outsourcing work,” he said, citing Infosys Ltd. INFY -0.02%  and Tata Consultancy Services Ltd. IN:532540 +1.46%  as examples.
“They’re a beneficiary of the global outsourcing trend,” Mobius added. “They have tremendous experience. Their ability is quite remarkable. Every day they are hiring and training thousands of workers in the software business, and their ability to do this is quite exceptional and unique. A lot of people complain about software companies taking American jobs — they are hiring in America.”

3. Financial services can pay off

Banking is a risky play, but Mobius said he sees opportunities in emerging-market financial services firms with strong balance sheets and a focus on consumers.
Brazil offers some attractive candidates, he said. Institutions including Itau Unibanco Holding ITUB +0.48%  and Banco Bradesco BBD -0.65%  haven’t had to expand beyond their own sizeable home market, Mobius noted; plus Brazil’s banking community is no stranger to sovereign debt troubles and challenging economic environments.
Mobius is generally bullish about Brazil, but as an investor he is watching for signs that the government is managing spending and keeping a lid on inflation. Long term, he said, “Brazil should be focused on increasing productivity, especially in light of such a strong currency. There should be structural reforms in areas such as education, tax, pension, the political system, privatizations and efforts to attract infrastructure investments.”

4. Have confidence in consumers

Mobius travels constantly, intent on seeing potential investments up close. For example, in China, he said, shopping malls are full with customers, and that spurs Mobius to think about the implications for consumer companies, electricity providers, material suppliers and other industries that support and benefit from consumer demand.
“Middle class expansion and the deceleration of population growth has triggered rising per capita income and increasing demand for consumer products,” Mobius said. “This in turn has led to a positive earnings growth outlook for consumer-related companies. We look for opportunities not only in areas related to consumer products, such as automobiles and retailing, but also consider services such as finance, banking and telecommunications.
“People want these things and there’s no inhibitions,” he added.
Yet being an astute social observer is one thing; investing in societal trends is another.
“I may like a certain sector, but if the companies are not cheap I’m not interested,” Mobius said. “I’d love to buy consumer companies in China, but many of them are very expensive.”
So Mobius looks elsewhere for similar plays. “I may go to Brazil and buy a food company that’s cheaper and still has the growth characteristics,” he said.
As an example, he pointed to South American beverage leader Companhia de Bebidas das Americas, or Ambev, ABV -0.87%   BR:AMBV4 -0.49% . The company is a unit of Anheuser-Busch InBev N.V. BUD +0.06%   BE:ABI -1.03% , the global brewery giant. 

5. Commodities and materials are building blocks

The consumer has always been a main driver of demand for commodities and materials. But the sea change in the economic fortune of people in emerging economies — China and India together represent more than one-third of the world’s population — has created an unprecedented need for food and raw materials.
Companies that extract, grow, produce, refine and transport these goods — and do so cheaper and better than others — have enjoyed strong earnings growth. Mobius sees nothing fundamentally that would break this flow. He looks for higher commodity prices due to unbroken demand and spotty supply.
“I am very positive on all the commodities,” he said. “Commodity stocks continue to look good because we expect the global demand for commodities to continue its long-term growth.
“We generally look for companies that are strong producers of commodities such as oil, iron ore, aluminum, copper, nickel and platinum,” he added. In areas of agriculture and ranching, he points to sugar, meat, corn, soybeans, cocoa and select grains.
The difficulty, Mobius said, is that while demand appears infinite, supply and production is not. Raising an animal for meat, he said, requires more grain, more land and more water than growing soybeans, for example. At some point the cost will outweigh the benefit, he noted, and people’s wants and expectations will have to change.
“There has to be a new paradigm where people just use less,” Mobius said. “We’re going to have to get to that, sooner or later.”
MarketWatch reporter Phani Kumar in Hong Kong contributed to this report.
Jonathan Burton is MarketWatch's money and investing editor, based in San Francisco.

Monday, January 23, 2012

U.S. stocks sink on Greece, cash-outs; S&P 500 up Blue-chips, Nasdaq Composite lower as investors take a breather

By Laura Mandaro, MarketWatch
SAN FRANCISCO (MarketWatch) — U.S. stocks slipped Monday, though the S&P 500 eked out its fifth day of gains, as negotiations between Greece and its creditors gave investors an excuse to take profits after a double-digit advance from October lows.
The Dow Jones Industrial Average DJIA -0.09%  ended down 11.66 points, or 0.1%, at 12,708.82, breaking four days of gains. It had risen as much as 44 points to 12,764.49, its highest intraday since May 10, and fallen as much as 55 points.

Did U.S. start China bubble?

At the start of China's Year of the Dragon, JL Warren Capital founder Junheng Li says China stock bubble's roots can be traced back to the U.S. Photo: PETER PARKS/AFP/Getty Images.
The Nasdaq Composite COMP -0.09%  lost 2.53 points, or 0.1%, to 2,784.17. The S&P 500 SPX +0.05%  reclaimed gains in the last hour of trading, closing up 0.62 point, or 0.1%, at 1,316, its highest close since July 26.
Trading was moderate, though choppy. Volume on the New York Stock Exchange was about 723 million, while NYSE composite volume was 3.7 billion — under last year’s average of 4.3 billion.
“Our concern here is that we’ve had a lot of good news over the last few months,” said Ken Tower, senior analyst at Quantitative Analysis Service. Read blog on whether U.S. stocks are overvalued.
“When the S&P was at 1,200, it was a more compelling valuation case than today. Let’s face it — the world economic outlook is still very mixed. We’re still faced with all these fiscal problems, slowing growth in China, as well as Europe,” he said.
The three major U.S. stock indexes gained more than 2% last week, rising for the third straight week and extending an advance that’s added about 20% to the benchmarks from their 52-week lows touched in early October.

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“Simple profit taking may be the answer,” said Michael Gibbs, director of equity strategy for Morgan Keegan.
With little U.S. data on the calendar, the focus was on Europe and U.S. earnings, which have contributed to stocks’ recent run.
The Greek government was reportedly close to a deal with private creditors after the managing director of the Institute of International Finance, which is representing international banks that own Greek debt, said Sunday that bondholders have made the “maximum offer” on losses they are willing to bear.
But on Monday, investors received a dose of more unsettling headlines. Euro-zone finance ministers, who were meeting Monday in Brussels, have said Athens shouldn’t expect an increase in a planned bailout loan, said Dow Jones Newswires, citing people familiar with the matter.
Also, a Greek Finance Ministry official said Greece planned to make a formal offer to private-sector creditors on a bond swap deal by Feb. 13, according to Dow Jones.
Greece “is hurting sentiment today,” said Tower. However, much of the worries about Greece’s debt problems have already been priced in, he noted.
“They’ve already agreed to write down so much of those bonds, even if they agreed to write down more, it’s just not that big of a number,” he said. 
Stocks rose in early trading, supported by hope for those negotiations and Europe’s prospects in general.
European stocks closed higher, pushing the Stoxx Europe 600 index XX:SXXP +0.45%  up 0.5% to 257, near a five-month high. Read more on Europe Markets.
The euro EURUSD +0.10%  topped $1.30, while the U.S. dollar index DXY +0.00% , which gauges the greenback’s performance against a basket of six other currencies, fell to 79.725 from 80.148 in late North American trade on Friday. Read more on currencies.
Investors have taken heart from recent European Central Bank actions to provide cheap loans to European banks in exchange for a wider pool of collateral, said John Derrick, director of research at U.S. Global Investors.
The central bank’s longer-term refinancing operations, which began in December, have eased concerns about “really negative outlier events,” said Derrick.
“If there’s a default in Greece or some other bad outcome, it minimizes the chance you have a run on the banks,” he said.

Movers: RIM, Bank of America, PetMed

Travelers Cos. TRV +0.44%  and Procter & Gamble PG +1.89% , off 2.1% and 1.9% each, fell the most on the Dow, with 18 of the benchmark’s 30 stocks in the red. Bank of America Corp. BAC -0.55%  led gainers, up 2.5%.
Energy stocks gained the most among the S&P 500’s ten sectors, highlighted by advances in natural-gas plays Southwestern Energy Co. SWN +0.03% , Range Resources Corp.   RRC -0.17%  and Cabot Oil & Gas Corp. COG +6.48% . Read more on Energy Stocks.
Netflix Inc. NFLX +0.63%  fell 6.3%, leading index decliners.
U.S.-listed shares of Research In Motion Ltd. RIMM -0.13%   CA:RIM -9.11%  fell 8.5% after the company its co-chief executives had resigned. Read more on RIM
Among smaller-cap stocks, PetMed Express Inc. PETS +11.00%  rallied 11% after third-quarter profit fell but beat expectations. Read more on PetMed.
Stocks in Japan finished flat on Monday, with the absence of Hong Kong and other Asian markets, closed for Lunar New Year holidays. Read Asia Markets.
In commodities, crude-oil futures for March delivery CL2H +0.23%  rose 1.3% to $99.58 a barrel. The 27-nation European Union on Monday agreed on an oil embargo against Iran as part of sanctions linked to the country’s nuclear program. Read more on oil futures.
Futures for February gold GC2G -0.14%  rose $14.30 to $1,678.30 an ounce. Read more in Metals Stocks.
Laura Mandaro is a MarketWatch editor, based in San Francisco.

New route for Alberta oil: Northward? Commentary: Oil, unlike water, sometime flows upward

By Bill Mann, MarketWatch
PORT TOWNSEND, Wash. (MarketWatch) — The latest possible route to get Alberta oil to overseas markets will have many scrambling for an atlas or Google Maps. Where pelts once travelled south, petroleum may soon travel north.
With the Keystone-XL TRP +1.40%  pipeline from Alberta to Texas now stalled by U.S. President Barack Obama, and Enbridge’s Northern gateway pipeline to the seaport of Kitimat, B.C., now mired in months of public hearings just begun, Canadian and U.S. oil companies are taking a hard look at shipping the oil north, using a mighty inland river system navigable by large tankers and once used by the Hudson Bay Company to ship beaver pelts south to market.
The Mackenzie, Slave and Athabasca Rivers could bring oil and pipeline equipment from the Arctic or Hudson Bay right into the heart of Alberta, where the oil sands are. There’s only one hitch — a series of four Slave River rapids up by the border of Alberta and the Northwest Territories.
That’s where an existing 24-mile-long portage road at Fort Simpson, Alberta (current population: 8) could come into play. The U.S. Army used it to truck oil north to a short-lived, expensive pipeline for a year near the end of World War II.
Tiny Fort Fitzgerald was once a bustling seaport, handling goods from the Hudson Bay Company, and it could boom again soon with Alberta’s oilsands production slated to increase over the next three years to three million barrels a day from about 1.7 million. Alberta needs to diversify its market for bitumen beyond the U.S. Midwest, and using a trusty old fur-trading river system may be the best way, given the current political climate, to reach Asian markets. Fur-trading routes, which once built western Canada, may soon help sustain it.

Those pesky rapids

Were it not for the 12 miles of rapids near remote Fort Fitzgerald, large ocean vessels could ascend the Mackenzie River, cross Great Slave Lake, continue up the Slave and Athabasca rivers to the geographical centre of Alberta — the town of Athabasca.
Oil, unlike water, can sometimes flow upward, towards markets — in this case, up a mighty river system that drains into the now-navigable Arctic and Hudson Bay.
Using the Slave River system and the portage near the port may also be the way for Imperial Oil to get its heavy drilling equipment now stranded in an Idaho port up to Fort McMurray, Alberta, the epicenter of the booming oilfields. Local opposition in Montana has kept much of that huge, Asian-made equipment off two-lane surface roads leading up to Fort McMurray.
“Imperial continuously assesses a variety of transportation routes to serve its operations and opportunities in the oilsands,” said Pius Rolheiser, Imperial’s public and government affairs spokesman. “We assess the viability of transportation routes on the basis of safety, reliability and cost-effectiveness.”
It may seem strange to someday see large ships sailing past Alberta wheat fields heading north from Fort McMurray (another Hudson Bay fur-trading post in pre-oil times) up the Athabasca River to Fort Fitzgerald and the mighty Slave River, but it’s no stranger than seeing ocean-bound ships sailing past California farm fields into the interior port of Sacramento, many miles inland from the Pacific.
“We need to look at as many options as possible,” says Travis Davies of the Canadian Association of Petroleum Producers, “mostly in terms of moving equipment and components.”
As the producers of oil from the bituminous sands continue to expand their operations, Davies notes, “We’ve got an amazing resource here and we need to continue to explore all kinds of ways to get it to market.”
Even to the point of re-invigorating a defunct seaport in the far-north Canadian hinterlands. Press reports in Canada are hyping tiny Fort Fitzgerald — where, as the old joke goes, both city-limits signs are on the same post — as a possible oil-boom town.
The need to get oil to markets has produced some interesting scenarios, and shipping it north, portaging it by truck, and then shipping it even further north is only the latest one.
Oil tankers — in landlocked Alberta? Don’t laugh...it could happen.
Bill Mann is a MarketWatch columnist, based in Port Townsend, Wash.

How to save Research in Motion Commentary: An open letter to Thorsten Heins, new CEO

By Brett Arends, MarketWatch
BOSTON (MarketWatch) — An open letter:
Dear Thorsten Heins,
Congratulations! You’ve just become the new chief executive of Research In Motion, the BlackBerry maker.
In your first 24 hours on the job you’ve managed to wipe another $600 million off the company’s dwindling value. In case you hadn’t noticed, the stock RIMM -0.13%  fell another 7% on your first day.

Will RIM's new strategy pay off?

Research in Motion has gone to a single CEO, but will the rest of the rest of its corporate strategy evolve with it? Spencer Ante discusses on digits.
Thorsten, this is embarrassing.
On Wall Street, news of a big management shakeup should have sent your stock leaping. The short sellers would have rushed to cover, and analysts would have started penciling in all sorts of bullish possibilities. A company with a new CEO has a lot of “optionality.”
Instead Wall Street is already giving you a big thumbs-down.
Your first conference call, Monday morning, was a disaster. Apparently, you think everything was pretty much OK before you took over.
You expressed confidence in the company’s existing strategic direction, and vowed no “seismic change.”
On the call an analyst pointed out that you’d been part of the senior management team for the past few years, and asked what you weren’t able to do then that you are able to do now. Your response, according to a live blog from Engadget:
“I don’t think that there is a drastic change needed. We are evolving our tactics and processes. I don’t feel that I was held back in any way to do what I needed to do.“
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This defies belief. RIMM stock was about $110 when you joined the company, in December 2007.
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This is like someone being appointed as the new captain of the Titanic, and saying, “Well, I wouldn’t really have done anything differently.”
Full steam ahead?
You also said you were looking for a new marketing honcho, and that you’d be open to “licensing” your operating system to other companies.
Oh, brother.
It would be ominous indeed if you thought your biggest problem was with marketing. As for licensing your software — don’t flatter yourself. Your company is giving off the stench of death. Meanwhile, there are already three operating systems out there that are better than yours — Apple’s AAPL -0.28%  iOs, Google’s GOOG +0.03%  Android, and Microsoft’s MSFT +0.20%  Windows Phone 7.
Thorsten: It’s not all bad.
Yes, you can save this company. But to do that you need to do three things. Three radical things.
1. Go with the hurry-up offense.
Anyone counseling patience and “steady as she goes” is a fool. The crisis is much worse than it seems from your new executive office.
You have one shot at fixing this company. One.
No, RIMM isn’t going to run out of money — not yet, anyway. As of November, you still had about $7.2 billion in cash, receivables and other liquid assets, compared to just $3.8 billion in liabilities.
But so what? Your biggest problem isn’t money, it’s time. And you are running out of that, fast.

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Your brand name is fading. Your market share is slumping. You’re actually below 10% of smartphones in the U.S., according to reports. And this industry moves fast. Just as with Nokia, RIMM is already yesterday’s news. If you hang around much longer you’ll be finished for good.
Don’t believe me? Try this. Stop listening to people inside the company. Stop listening to advisers, colleagues and friends. Instead, go out to Best Buy incognito, on your own, and have a look at what’s on offer and how your competitors stack up. Look at the products people are buying and what they’re talking about.

Market as undervalued today as in 1990 Commentary: Norm Fosback is as bullish today as 20 years ago

CHAPEL HILL, N.C. (MarketWatch) — The stock market represents better value today than at any time in the last 20 years?
That certainly is not something you’ve been reading recently in this column. For example, I’ve argued that, from a very short-term point of view, there is too much complacency out there — which is bearish from a contrarian point of view. ( Read my Jan. 18 column, entitled “Worrisome complacency.” )
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And I’ve also pointed out that some longer-term valuation measures with good track records — such as the Cyclically-Adjusted Price Earnings Ratio, or CAPE, made famous by Yale University Professor Robert Shiller — show the market to be closer to the overvalued end of the spectrum than undervalued. ( Read my Jan 6 column, entitled “What if the 2009 bull market is still alive?” )
But it’s important for everyone, and especially contrarians, to consider contrary points of view. And this is particularly the case when the point of view is being advanced by someone with as long and eminent a record as Norm Fosback.
Fosback, for those of you who don’t know, has been a close and scientifically minded student of the stock market for nearly five decades. For three decades he was the head of the Institute for Econometric Research, during which he authored a widely followed investment textbook entitled Stock Market Logic and edited several investment advisory services. He currently publishes a service called Fosback’s Fund Forecaster.

Dow posts first loss in a week

Blue-chip stocks finish in the red for the first time in five sessions, while the broader market trades flat, as investors watch Europe for developments in its debt crisis. Photo: Reuters
In the latest issue of that service, published late last week, Fosback boldly states that “the market’s fundamental position has evolved to the most favorable alignment in 20 years.”
His econometric model is projecting that the stock market will rise by 19% over the next 12 months, and 89% over the next five years. That five-year rate is equivalent to nearly 14% per year on an annualized basis.
While Fosback’s model incorporates numerous different indicators that he has found to have predictive abilities, he says that the major underlying issues for the U.S. market right now are “domestic corporate profits, valuations of domestic stocks, and Federal Reserve policy.” This is what Fosback has to say about each:
  • Corporate profitability is an all-time high. “Not only have pretax profits soared to match their highest levels in history, but plunging effective corporate tax rates have sent after-tax corporate profits soaring to even greater heights compared with historical norms... With after-tax profits running at 10% of the nation’s $15-trillion GDP, net additions to business cash coffers are running at least 1-1/2 trillion on an annual basis, even after dividend payouts to stockholders. At the moment, that is effectively doubling cash holdings on an annualized basis. Liquidity, in other words is enormous.”
  • Despite these record profits, the P/E ratio on the S&P 500 index is back to where it stood in 1990 (when calculated on the basis of operating earnings). The decade of the 1990s, of course, was one of the most bullish in U.S. stock market history.
  • “Monetary policy [is] still in an aggressive easing mode.” Interest rates remain “at record lows” and the money supply is expanding.
What about Europe? Won’t slowing economic growth in that crucial region sabotage the U.S. market, even if it were otherwise poised for a major bull market?
Fosback thinks not, arguing that the media’s obsession with Europe is little more than a “sleight of hand: Look over there ... while the real action is right here.”
Are there any flies in the ointment?
Of course.
Ironically, though, the major such fly that Fosback acknowledges derives from how good things otherwise are right now for corporate America: “The only meaningful negative investors can take away from the current corporate profit and tax environments is that they are so favorable it is almost inconceivable they can get any better; in other words, the path of least resistance for corporate profits going forward may be down, simply because it is almost unimaginable it can get any better.”
But even if corporate profit growth slows to a standstill, which he thinks is most unlikely, the market is still likely to go up because of rising P/E ratios.
Needless to say, you might not agree with Fosback’s cheery assessment. But regardless, and especially if you don’t, you need to have good answers for why the factors he mentions aren’t as bullish as he believes them to be.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.

Health-care expenses to rise 8.5% in 2012: study Medical inflation accelerates as recovery gains momentum

LOS ANGELES (MarketWatch) — Employers can expect to see an acceleration in health-care cost increases in 2012, with expenses rising 8.5% next year, according to a study released Wednesday by PricewaterhouseCoopers.
The 30-page study says that the recession put a lid on health-care costs, which should keep the inflation rate to 8% for 2011, but those price hikes are getting steeper as the recovery gains momentum.
“Now, a few months into 2011, employers and health plans say utilization remains somewhat deflated, but they’re already worried about a rebound in 2012,” the study says. “Add to this recessionary effect the changes brought on by health reform, and the variables affecting cost trends in 2012 become an interesting blend of reactions.”

White House wants new IMF chief

The U.S. is pressuring the International Monetary Fund to name a managing director to replace Dominique Strauss-Kahn, who remains in a New York City jail on attempted-rape charges. (Photo: Reuters/Shannon Stapleton)
But an 8.5% medical inflation rate is a fairly moderate rate.
“These increases aren’t as great as some years,” said Mike Thompson, a principal at Pricewaterhouse. He noted that over the last decade, there have been several instances where medical inflation has exceeded the double-digit mark.
“We do see fluctuation from year to year,“ he said.
Pricewaterhouse surveyed 1,700 employers from 30 industries along with hospital executives and health-plan actuaries. It found that three main factors will drive up medical costs next year.
First, consolidation among hospitals and physicians is snowballing. While that should increase efficiency, payers worry about the impact of consolidation on rates. Second, inpatient costs for Medicare recipients will rise 3.3 percentage points more than hospital rates. And post-recession stress has taken a toll on worker health.
But the study says that employers are expected to try to keep a lid on costs between now and next year, and the actual medical inflation rate for employers should be closer to 7%.
It also says that a number of factors will deflate medical pricing, including cost-sharing by employees through such vehicles as higher deductibles, brand-name drugs losing their patents and adding costs to employees who venture out of the health network for care.
The study also says that spending by insurance companies has grown the most for outpatient and inpatient care over the last five years, along with miscellaneous spending. There was slower growth in drug costs and physician expenses. But inpatient care and physician costs still comprised the biggest chunk of health expenses, each at more than 30%.
The Patient Protection and Affordable Care Act, passed in 2010, is expected to have little impact on rates, though it is pressuring employers to be more cost conscious about health care.
Russ Britt is the Los Angeles bureau chief for MarketWatch.

Tuesday, January 10, 2012

The Crazy Sign Your Sperm Count Is Low

The Advert : 4checks.com-Free Shipping and Handling on All Personal Checks with code DWF008 Women are naturally drawn to men with deep voices because a macho tone reminds them of all things manly. And while talking like Barry White packs its fair share of benefits, it could also mean bad news for your sperm.
A new study from the University of Western Australia found that guys with a low-pitched voice had reduced concentrations of sperm in ejaculations. The possible connection: “Testosterone, which deepens a man’s voice, also suppresses sperm production when it’s at high levels,” says lead researcher Leigh Simmons, Ph.D., an evolutionary biology professor at Western Australia.
Meanwhile, the pitch of your voice isn’t the only health clue your body is sending you. Here are five other surprising body quirks that may be early signs of health problems.
Finger Length
As Men’s Health previously reported, size matters—when it comes to your fingers. A study published in the British Journal of Cancer found that men whose index fingers were longer than their ring fingers were 33 percent less likely to develop prostate cancer. As it turns out, people who have longer index fingers were exposed to less testosterone when they were a baby in their mother’s womb, researchers say. This may help protect against prostate cancer later on.
More from MensHealth.com: What Your Hand Says About Your Penis
Nail Color
Healthy nails are usually smooth and spotless, but “redness under your fingernails can be a sign of a collagen vascular disease like lupus,” says Neil Sadick, M.D., a clinical professor of dermatology at Weill Cornell Medical College. “It gives you inflammation of the blood vessels, and that can present as redness or blood vessels under the nail itself.” Research has also found that white nails are linked with liver issues, and unusual curvatures can even be a sign of lung cancer.
Earlobe Wrinkles
Diagonal creases on your earlobes may be a sign of potential cardiovascular problems, according to a study from the University of Chicago. Researchers found participants with a crease (and no prior coronary artery disease) were nearly eight times more likely to experience cardiac events as those without. Earlobes may give a reflective health warning because of the similarities between the blood vessels that supply the earlobes and the heart, researchers speculate. Or creases may just be a result of aging.
Sense of Smell
The inability to identify certain orders may be a warning sign of Parkinson’s Disease. A study led by the Institute for Neurodegenerative Disorders and the University of Pennsylvania found that when given a small test, patients with Parkinson’s could only correctly identify half of the smells presented. An additional study in the Annals of Neurology found that this impaired sense of smell can predate Parkinson’s by about 4 years.
More from MensHealth.com: A Man Without Taste
Hair
Although going bald is natural, it could also be a clue to more serious conditions. “Hair loss can be a sign of thyroid disease or thyroid cancer,” Sadick says. “If you have an overactive thyroid, or a thyroid that’s not functioning well, you can get hair loss as a presenting sign of it.” Hypothyroidism may also manifest itself in unusual thinning of the eyebrows. Plus, “sometimes men can have very fine hairs along their temples early in life, and that can be a sign of impending genetic hair loss,” says Sadick.
More from MensHealth.com: The Biggest Health Problems for Men

Additional reporting by Maria Masters