8 reasons the market isn't worse
8 reasons the market isn't worse

Stocks should be crushed by global turmoil, Jim Cramer says. Instead, they're doing fine.

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The European Central Bank raises its benchmark interest rate ahead of the Fed for the first time in 4 decades.

By Jim J. Jubak Apr 8, 2011 12:53PM
JIm JubakNo surprises here: Thursday the European Central Bank raised its benchmark interest rate from 1% to 1.25%.

But there was something of a surprise in ECB President Jean-Claude Trichet's remarks to reporters. The central bank’s monetary policy is still accommodative, he said, and while "we did not decide it was the first in a series of interest-rate increases, you know from our own doctrine that we always do what is necessary to deliver price stability over the medium term."

The increase in the benchmark interest rate is the first since July 2008. It comes after inflation climbed to an annual rate of 2.6% in March. That’s well above the bank’s target of less than, but close to, 2% inflation.

The financial markets are now looking for another rate increase within a month or two, and two or more increases -- to reach 1.75% -- by the end of 2011.
 

See why this household name is worth a look.

By Motley Fool Pick of the Day Apr 8, 2011 11:30AM

By Jason Moser

 

It seems like everywhere I look in my house, I find some type of Clorox (CLX) product. From the kitchen to the bathroom and everywhere in between, life needs to be cleaned, and trash taken out. So like Peter Lynch, I'm buying what I know, and adding some earnings (and cleaning) power to my portfolio.

 

The company
Not long ago, I took a cursory glance at Clorox as a potential dividend play; it has a well-known catalog of products and brands. Ironically, though, I think its ubiquity causes many to simply overlook it. The company has been in business for close to 100 years, generates copious cash flow, and pays a 3.1% dividend to boot.

 

With brands such as Glad, Hidden Valley, and Kingsford charcoal -- not to mention its namesake bleach, and cleaning products including Formula 409, Liquid-Plumr, Pine-Sol, and Green Works -- Clorox has a tremendous reach.

 

If things close down temporarily, it might show we can do the same with less, a fund manager says. Plus: Video on the budget stalemate.

By TheStreet Staff Apr 8, 2011 10:09AM

By Robert Holmes, TheStreet

 

Eric Singer, the manager of the Congressional Effect Fund (CEFFX), laughs when he recalls the government shutdown in November 1995, during which he sat with a congressman on Capitol Hill.

 

During the very public battle between then-President Bill Clinton and Speaker of the House Newt Gingrich, expectations were that the stock market would be crushed as Americans lost confidence in the ability of the government. In addition, after threats Gingrich made about refusing to raise the debt ceiling for the Treasury Department, there were fears interest rates would head higher.

 

Singer says the major networks began scrambling to find video footage of a tangible change in function of the government to show U.S. viewers. The results, Singer says, were unintentionally hilarious.

 

The controversy over David Sokol's resignation from Berkshire Hathaway has overshadowed the Oracle's recent remarks on other topics.

By TheStreet Staff Apr 8, 2011 9:30AM

By Don Dion, TheStreet

 

The controversy swirling around David Sokol's questionable actions leading up to his resignation from Berkshire Hathaway (BRK.A) has continued to rage, making it easy to forget that the Oracle of Omaha had been making headlines with his comments regarding a number of hot-button topics.

 

In recent weeks, investors have been given strong insight into Buffett's mind as he has expressed his opinions on the future of the euro and the long-term prospects of online social networking. While controversial at times, his comments further aid investors, market commentators and Buffett fans as they work to better understand how the world's most famous investor thinks.

 

As nations such as Spain, Portugal, Greece and Ireland have struggled to rein in their looming debt crises, debate among many market commentators and analysts has focused on the long-term outlook for the euro.

 

As demand for coal, autos and lumber increases, this well-run rail company can add cars to each train without increasing labor or fuel costs.

By Jim Cramer Apr 8, 2011 8:06AM

the streetjim cramerThere's lots of dispute out there about whether margins have peaked. I know our own Doug Kass has argued mightily that the great margin expansion is over.

 

But then you talk to Michael Ward, the always-on CEO of the railroad company CSX (CSX), and you realize that the margins can still go higher and that it's even in the cards!

 

CSX is one of the best-run companies in America. The margins went from 25% to 29% last year. That's an incredible acceleration from previous years.

 

Yet there's Ward again talking about how margins have nowhere to go but up. He ticked off a bunch of factors: newer hubs that cure bottlenecks, including a brand-new operation in Northwest Ohio; more coal exports, which means many more train cars moving coal to the ports than the year before; and further efficiencies when it comes to intermodal traffic.

 

The magnifying glass of the media is focused on David Sokol, but should be directed at Buffett as well. Unfortunately, reputation is often destroyed by appearances.

By V.N. Katsenelson Apr 7, 2011 3:55PM

I was quoted in the Financial Times recently about David Sokol, chief executive of a Berkshire Hathaway (BRK.A) subsidiary who bought shares in a chemical company a few months before Berkshire acquired it at a significant premium. Sokol made $3 million on his $10 million purchase of Lubrizol stock.

 

"Any time you buy stock in a company which your employer then buys just does not smell right," I told the FT.

 

This quote slightly misstates my view, as the issue here is more complex.  Sokol was the chief executive of Berkshire subsidiaries MidAmerica and NetJets. It's not his job to look for companies for Berkshire to buy; Buffett and Munger are in charge of Berkshire’s capital allocation decisions. Sokol bought Lubrizol for his own account because he liked the business and thought it was attractively priced.


If Sokol had never mentioned Lubrizol to Buffett, there would be no controversy today. But he did, while disclosing that he owned the stock. Buffett reportedly expressed little interest in Lubrizol at the time.

 

Two, six, eight, who do we appreciate? A company that does complex things extremely well.

By Motley Fool Pick of the Day Apr 7, 2011 2:40PM

By Rex Moore


II-VI (IIVI) (pronounced "two-six") is really in the business of expertise -- expertise in dealing with incredibly complex materials and high-precision components. That right there should perk up your investing ears, because it suggests a core competence that competitors can't easily duplicate. I'm impressed enough to be adding shares to my real-money Rising Stars portfolio.

 

The company's products serve variety of industries, from medicine to the military. Many of them are laser-related, used for cutting, drilling, welding, and even detecting shoulder-launched missiles aimed at low-flying aircraft. II-VI also produces the compound semiconductor materials required for these components to operate, including selenium, tellurium, and silicon carbide. (In fact, the company took its name from columns II and VI of the Periodic Table of Elements, which combine for compounds such as cadmium telluride and zinc selenide.)

 

With Washington gridlocked over the budget and with a shutdown looming Friday, here's a look at the likely impact on stocks and the economy.

By Anthony Mirhaydari Apr 7, 2011 1:04PM

The politicos seem hellbent on repeating the 1995 experience and shutting down the federal government starting Friday. A series of frantic powwows at the White House between President Barack Obama and congressional leaders have failed to secure a deal. And with the budget debate shifting from fiscal 2011 to the 2012 budget -- where the discussion has shifted from billions to trillions in spending cuts -- the two parties are headed straight for a brutal, drawn-out fight.

 

With the economy and corporate profits looking increasingly fragile as inflationary pressures build and consumer confidence plummeting, now is just not a good time to furlough nonessential government workers and shutter national parks.

 

The good news is that history shows a government shutdown doesn't really have an impact on the stock market. The bad news is that it could have a meaningful effect on Q2 GDP growth (Q1 growth is already looking pretty weak). And, of course, the acrimony sets the stage for an epic fight over the Treasury's $14.3 trillion debt ceiling, which will be reached "no later than May 16" unless Congress acts to extend it. Here's what to expect.

 

A trend that began last year looks set to continue, according to the World Silver Survey.

By TheStreet Staff Apr 7, 2011 12:01PM

By Alix Steel, TheStreet

 

World investment demand drove silver prices higher in 2010 and the trend is on track to continue in 2011, according to the World Silver Survey by GFMS Research Group.

 

Silver investment jumped 40% to 279.3 million troy ounces in 2010, or $5.6 billion, while silver prices surged 80%. Net investment demand was led by a 24% increase in ETF holdings to 582.6 million ounces, followed by coin and metal demand, which rose 28% to 101.3 million ounces, and rounded out by 55.6 million ounces worth of bullion bars.

 

"The biggest news was the significant growth in investment demand," says Philip Klapwijk, the executive chairman of GFMS, "something that has continued, of course, in the first quarter of 2011."

 

Strategists share their views on where to invest when the Federal Reserve ends its $600 billion bond-purchase program.

By TheStreet Staff Apr 7, 2011 11:39AM

the streetBy Shanthi Bharatwaj, TheStreet

 

Quantitative easing, which has kept yields on bonds artificially low and has investors flocking to risky assets such as stocks and commodities, is widely expected to end in June.

 

But market analysts say investors should continue to bet on stocks and commodities even after the Federal Reserve ends its $600 billion bond-buying program -- known as QE2 -- as bonds will prove to be an unsafe alternative.

 

A combination of recovery expectations, inflation risks and worries about the massive federal deficit have been pressuring bonds and lifting yields -- bond prices and yields share an inverse relationship. But with the Fed stepping in to buy up Treasury notes, analysts say the rise in yields has been relatively modest. The intention of the Fed's purchases is to dampen interest rates so as not to threaten an economic rebound.

 

Enjoy the move into financial and tech stocks, but don't overstay your welcome.

By Jim Cramer Apr 7, 2011 9:26AM

jim cramerthestreetDid someone flick a switch? Sell industrials? Dump oils? Crush agriculture stocks, thanks to Monsanto (MON)? And buy the financials and the techs? Throw in a couple of health care companies?

 

Can I just say that this is one of the wackiest markets I have ever seen? Look, I get tech. Texas Instruments (TXN) tore the heart out of those who are betting against it. Oclaro's (OCLR) rally for some investors meant that the most punishing tech sell-off has to be over. Maybe someone actually does want to take a run at Finisar (FNSR).

 

Oh, and speaking of flicking a switch, we now are all happy with Cisco's (CSCO) John Chambers because he has realized what we all knew: The company's strategy was failing. The conviction the market has in this guy is amazing. They even took arch-rival Juniper Networks (JNPR) down on it!

 

I still respect the seasonality, the supply chain and the personal computer and potential tablet gluts as real issues. But the Texas Instruments-National Semiconductor (NSM) issue shows that these companies are loaded with cash and are doing something about it.

 

After a string of disappointing dry holes, Statoil finds a field that could keep production stable on the Norwegian continental shelf.

By Jim J. Jubak Apr 7, 2011 12:29AM
Jim JubakI guess this is as close to giddy as management at a Norwegian company gets.

On Monday, Statoil (STO) announced it had proven a gas and oil well on the Norwegian continental shelf in the Barents Sea.

"This opens a new oil province that can provide additional resource growth," said Tim Dodson, executive vice president for exploration. "The Barents Sea is large, and we can not say that we have cracked the code for the entire area yet. But we have confirmed that our exploration model is correct."

If I may interpret:

First, Statoil has identified a field with a potential total of 500 million recoverable barrels of oil equivalent.
 
Tags: oil

One analyst thinks the company has sold 100,000 Xoom tablets since late February. Is that good or bad? With video.

By Kim Peterson Apr 6, 2011 4:53PM
The Motorola Xoom tablet -- thought to be the first real competition to the iPad -- isn't selling anywhere near the rate of Apple's tablet. That's to be expected, of course.

But can it be called a flop? One analyst from Deutsche Bank estimates that Motorola Mobility (MMI) has sold about 100,000 Xoom units since it launched in late February. This is the first tablet to run the Android Honeycomb software from Google (GOOG), and debuted to great expectations.

So is 100,000 units sold a reason to predict Xoom doom, as CrunchGear does? "This whole thing just smells of failure from all angles," writes Matt Burns. Business Insider calls it a "flop."

Or maybe the Xoom's performance isn't that bad? The always-thoughtful Joe Wilcox says that 100,000 units is much better than he expected.

Post continues after this video comparing the Xoom and the iPad: 

The annual poll tracks the companies people trust and admire most. With video.

By Kim Peterson Apr 6, 2011 1:47PM
Which company do you trust, admire and generally feel the best about? Nearly 33,000 people were asked that question this year, and Amazon (AMZN) blew away all other contenders.

The survey, conducted by consulting firm Reputation Institute, tried to get at people's perceptions of companies and their products. Amazon scored the highest, with an 82.7, which was 1.3 points higher than second-place Kraft Foods (KFT). Amazon made it to the top by providing a good value, staying technologically savvy and responding quickly to scandals, Forbes reports.

"Amazon is the most reputable company in the U.S. in 2011 because consumers believe that it stands for more than what it sells," an executive at the Reputation Institute told Forbes. The company has a meaningful connection with its customers, the executive added.

The least-reputable company on the list won't be much of a surprise. People were holding their noses at mortgage financier Freddie Mac (FMCC), which scored 29.47. Fannie Mae (FNMA) was the third-least-reputable company. In between was AIG (AIG).

Post continues after this video about the problems with Fannie and Freddie: 

After months of impressive growth, Wall Street is busily rolling back estimates of first-quarter GDP growth and corporate profits. Here's why.

By Anthony Mirhaydari Apr 6, 2011 11:43AM

Since last summer, stocks have climbed higher on a reacceleration of all that's good in the economy. Profits grew. Hiring expanded. Industrial production increased.

 

But unfortunately, prices also climbed as inflationary pressures and geopolitical volatility forced food and fuel prices up. Now inflation is beginning to creep into the rest of the supply chain and is being passed on to consumers. That's beginning to slam the brakes both on economic growth and corporate profit margins.

 

And it's forcing rich world central banks to begin to tighten policy and raise interest rates. Shoppers aren't happy with wages stagnant and at-the-pump prices moving toward $4 a gallon. Confidence is down, and one-year inflation expectations stand at nearly 5%. All of this sets the stage for disappointment in the months ahead as Q1 GDP growth slows and earnings growth decelerates. Here's why.

 

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