Deficit to shrink by $80 billion to just $1.3 trillion: Now don’t you feel better?
This morning, January 26, the Congressional Budget Office (CBO) released new projections showing that–if current laws and policies remained unchanged–the federal budget would show a deficit of $1.3 trillion for fiscal year 2010.
That’s what passes for good budget news these days. The new estimate is down $80 billion from the budget office’s previous estimate.
Of course, as a percentage of the economy (as measured by GDP) the deficit would be the second largest since World War II.
And in the big debt picture an $80 billion swing is barely a drop in the bucket. The CBO projects that total (on budget) federal government debt will reach $8.8 trillion by the end of 2010.
But wait, the news gets better. (Well, maybe not better. How about ‘funnier if it weren’t so important?”)
Update du Pont (DD)
On January 26 E.I. du Pont de Nemours (DD), known as du Pont to its friends, announced fourth quarter earnings of 44 cents a share, beating Wall Street projections by 3 cents a share. Revenues climbed 10.3% year to year to $6.42 billion. Wall Street analysts had been expecting $6.16 billion.
Sales volumes for all regions of the world were up 10% and sales in the Asia/Pacific region climbed 34% by volume from the fourth quarter of 2008 on strong demand from China, Japan, Korea, and India. Asia/Pacific sales now exceed pre-recession volumes. For more on why this point in the economic cycle is so good for industrial stocks see my post http://jubakpicks.com/2010/01/26/for-after-the-correction-think-industrial-stocks-market-history-says-this-is-their-time/ )
Trouble in Japan and the U.K. add up to a stronger U.S. dollar
Expect the dollar to keep moving higher in the near term.
Credit rating worries in Japan and disappointing economic numbers in the United Kingdom pretty much guarantee that the U.S. dollar will continue to gain on the yen and the pound.
On January 25 Standard & Poor’s lowered its credit outlook on Japan’s AA-rated sovereign debt to “negative” from “stable.” Japan’s government doesn’t have a plan to cut its budget deficits, S&P said. The cost of protecting against a default on Japanese government debt within the next five years in the derivatives market rose by 0.05 percentage points to 0.9 percentage points.
The long-term worry is that Japan’s aging population and stagnating economy will eat into one of the world’s largest pools of savings. Domestic Japanese investors hold 90% of the country’s debt.
For after the correction, think industrial stocks: Market history says this is their time
Are you in the right sectors of the stock market for this point in the economic recovery? (Yes, despite the stock market correction, we are still in an economic recovery.)
Solid data stretching back to 1945 argues that certain industries and sectors outperform during specific stages of any economic recovery. (The best work on this subject comes from Sam Stovall, the chief investment strategist for Standard & Poor’s Equity Research Services. His 1996 book Sector Investing is still the best resource on the subject to my mind.)
My first rule of investing is “Put every trend you can on your side.” Neglecting what we know about what sectors thrive when is in my opinion wasting an asset that could help you make bigger profits.
Stovall divides the economic cycle into four stages.
Buy Impala Platinum (IMPUY.PK)
I’m going to take advantage of the selloff in emerging market stocks and global commodities on fears that China’s government might be about to slow China’s economic growth to buy shares of Impala Platinum (IMPUY) for Jubak’s Picks. (The stock is already a member of my long-term Jubak Picks 50 portfolio.)
