5 do-good ETFs that beat the market

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Business Week | By Aaron Levitt, InvestorPlace

Want to invest with a clear conscience? Socially responsible funds no longer have to sacrifice profits to take the moral high ground.

In a growing trend, many investors are now building portfolios based in part on their morals and values. Dubbed "socially responsible investing," or SRI, these investors essentially add several screens to shift through various stocks in order to comply with various environmental, social and governance (ESG) requirements.

The hope is that the underlying SRI portfolio will produce a strong financial return as well as a good social one. And those returns have been getting much, much better.

Socially responsible investing used to be considered the whipping boy in terms of total returns, often falling behind broad indexes and "sin" related industries like tobacco, booze and gambling. However, with major pensions and sovereign wealth funds now using their immense size to influence management on ESG policies, SRI returns have improved.

According to Goldman Sachs (GS), firms that are considered to be leaders in socially responsible investing have also been leaders in terms of stock performance as well -- averaging an extra 25 percent over the longer term. This echoes similar research conducted by Allianz. Between 2006 and 2010, the German insurance group found that investors could have added an additional 1.6 percent a year to their investment returns by allocating to portfolios that invest in companies with above-average ESG ratings.

The bottom line is that investors no longer have to sacrifice their morals when looking for investment returns. Here are five of the easiest ways to make your portfolio a little more socially responsible.

The iShares MSCI KLD 400 Social (DSI) ETF should be the first stop for any investor looking to add a dash of social responsibility to their portfolio.

The ETF's underlying index tracks 99 percent of all the stocks in the United States. That includes large- mid- and small-cap firms. First, index provider MSCI kicks out all tobacco, gambling, firearms/weapons, nuclear power, adult entertainment and GMO seed producers in the USA Investable Market Index. It then uses various socially responsible investing screens to weight DSI's holdings and create its underlying portfolio.

The SRI ETF currently tracks 400 different firms and charges just 0.50 percent -- or $50 per $10,000 -- in expenses.

And while the removal of those various "sin" industries may at first blush seem like a drag on DSI's performance, it has actually been the opposite. The socially responsible investment managed to post a 35.5 percent return in 2013 -- besting the venerable S&P 500 ($INX). Over the last five years, that outperformance continues.

For investors who want to eliminate the volatility of owning smaller firms from their portfolios, the iShares MSCI USA ESG Select ETF (KLD) is a solid choice.

The $250 million KLD tracks U.S. large- and mid-cap stocks screened for positive socially responsible investing characteristics and excludes tobacco companies. Index provider MSCI first looks at its broad MSCI USA index -- which contains about 250 stocks. The indexer then applies a standard set of criteria to weight each stock, and those with stronger weights get more prominent placement in the new SRI index. That produces a portfolio of 107 different stocks -- with top holdings in Apple (AAPL) and renewable energy-focused utility NextEra Energy (NEE).

Overall, technology and financial firms make up the bulk of KLD's holdings.

Returns for the socially responsible investing fund have been pretty strong. KLD managed to post a nearly 31 percent total return in 2013. While that slightly underperformed the broader S&P 500 ($INX), KLD has beaten the benchmark index over the past five years. Like its sister fund DSI, expenses for KLD run just 0.50 percent.

While most social responsible managers tend to focus on a variety of ESG screens, a common theme is environmental issues and how firms react to the concept of sustainability. The often ignored Huntington EcoLogical Strategy ETF (HECO) taps into the various firms making efforts on this front.

However, this is not an ETF of solar and wind power producers.

Sponsor Huntington Bancshares (HBAN) defines "ecologically focused companies" as firms that have positioned their businesses to respond to increased environmental legislation, cultural shifts toward environmentally conscious consumption and capital investments in environmentally oriented projects.

The actively managed fund picks out what the managers believe are the best targets in the previously mentioned MSCI KLD 400 Social Index. Currently, the fund holds 56 different firms including Starbucks (SBUX) and chipmaker Texas Instruments (TXN).

That active focus has produced some hefty returns as well. HECO managed to return nearly 30 percent in 2013 and is up nearly 4 percent year-to-date. Expenses for the ETF are bit on the high side, however, currently at 0.95 percent.

While the previous three SRI ETFs track big passive indexes, AdvisorShares Global Echo ETF (GIVE) is a little bit different.

The fund is actively managed as a "core" solution, meaning it holds both stocks as well as fixed income instruments and bonds. All of these holdings are scrutinized for various socially responsible investing and ESG requirements before being added to GIVE's underlying portfolio. However, since it is actively managed, these holdings can and do change on a daily basis. The ETF also holds a nearly 4.2 percent weighting in the previously mentioned DSI ETF.

Here's where GIVE gets interesting.

The ETF charges a monster 1.61 percent in expenses. However, 0.40 percent of that is donated to Philippe Cousteau Jr.'s -- Jacques Cousteau's grandson -- Global Echo Foundation. The foundation's mission is to provide funding solutions "to many of the challenges facing the world community from social issues impacting women and children to environmental conservation."

Unfortunately, that hasn't done much to bring investors to the fund, as GIVE has only attracted around $9 million in assets so far – possibly because investors in the ETF don't actually get to claim a tax deduction from the donation.

The newest entrant into the socially responsible investing world is the ALPS Workplace Equality ETF (EQLT).

The premise of EQLT is to focus on "America's leading equality-minded corporations," meaning EQLT will track those firms that provide support and benefits to their lesbian, gay, bisexual and transgender (LGBT) employees.

EQLT uses the Human Rights Campaign Corporate Equality Index and only selects stocks that score 100 percent in the metric. The metric basically looks at a company's hiring practices and whether or not it provides healthcare and other benefits to same-sex partners or spouses. Currently, EQLT has around 162 different holdings.

However, the kicker for EQLT is that many of its holdings -- like spirits maker Brown-Forman (BF.B) or casino operator Caesars (CZR) -- aren't necessarily typical ESG fair. That could turn off some investors looking at EQLT for socially responsible investing. Another potential problem for the new fund is its hefty 0.75 percent expense ratio.

The space is still pretty new, so the choices are a bit limited, but if you're interested in socially responsible investing, these funds are your best bets.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.

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My so-called market: Are stocks going totally '90s?

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Business Week | By Roben Farzad, Bloomberg Businessweek

Analysts see many similarities between then and now, such as persistently low inflation, partisan gridlock in Washington and a jobless recovery.

Early in 1992, Time magazine projected that the nascent economic recovery would be "one of the slowest in history and the next decade one of lowered expectations." That was the conventional wisdom and, at the time, seemed eminently reasonable.

It also turned out to be completely wrong. The Internet and huge productivity gains propelled above-average economic growth and a rip-roaring, "Cult of Equity" bull market that surged into the year 2000. We spent and borrowed like mad and eased into fluffy college majors.

Now, some on Wall Street are wondering if we're about to replay some version of that '90s mix tape. Liz Ann Sonders of Schwab (SCHW) and Ed Yardeni of Yardeni Research have been discussing this theme of late with clients.

"The global economic scene is increasingly reminiscent of the 1990s, when the U.S. economy and stocks outperformed relative to the rest of the world," wrote Yardeni last week. "Back then, emerging markets submerged when the Asian Tigers were hit by a currency crisis in 1997 and Russia defaulted on its debt in 1998."

"Today," he adds, "the high-tech revolution that started in the 1990s is spreading to lots of other industries that are using technology to innovate and to boost productivity. Once again, the U.S. seems to be leading the way. Emerging markets are submerging again. Europe's recovery is lackluster. . . . Commodity prices are flat-lining."

In her March 17 note, "Objects in the Rear View Mirror May Appear Closer Than They Are: A Look Back at the 1990s," Sonders tallies the many similarities between then and now, including extremely easy monetary policy transitioning to some semblance of normalcy; persistently low inflation; a major developing-market deleveraging (Japan then vs. the eurozone today); rising interest in stocks and partisan gridlock in Washington.

Sonders reminds us: "Partly due to the characteristics of a post-financial crisis era, the mid-1990s was considered the first 'jobless' recovery, although it followed a much less-severe recession than the current 'jobless' recovery."

The Federal Reserve under Alan Greenspan, she notes, was the first major global central bank to begin tightening monetary policy two decades ago, while Germany's Bundesbank and the Bank of Japan (JP) were still easing. Today, by comparison, with the Fed tapering quantitative easing, the U.S. is again out in front of most other global central banks (save for the Bank of England) -- all while inflation remains low with a muted risk of a spike-up from these levels, even if wage growth accelerates here (as it did in the mid-1990s).

As for markets: As in the 1990s, shares in the U.S. have wrested leadership from out-of-favor emerging markets such as Russia, Brazil and China. "Emerging markets," observes Sonders, "are now facing long-term structural problems amid rolling currency crises; not all that dissimilar to the Asian currency crisis/Russian default/LTCM [Long-Term Capital Management] failure era of the late-1990s."

The U.S. market, which bottomed five years ago, appears to be in the first few innings of another stretch of outperformance to developing economies -- in sharp contrast to the state of affairs during America's lost market decade, the 2000s.

The Schwab strategist further quotes a January report by the firm BCA Research to compare today's deflationary eurozone to 1990s Japan: "In the first half of the 1990s, Japan was struggling with debt deflation. Economic growth in Japan fell apart, profits collapsed and the economy was marching toward sustained price deflation. . . . Today's eurozone is yesterday's Japan: Excluding Germany, the rest of the euro zone economy remains mired in stagnation."

There are, of course, major differences between today's backdrop and that of the early-to-mid 1990s. Never has the Fed thrown so much stimulus at an economic slowdown, the 2008-09 likes of which was more painful than anything seen since the 1930s. Today's profit margins are unusually fat. Income inequality is worse.

The giddy 1990s, moreover, set us up for the triple trauma of the following decade: the tech crash, Sept. 11, and then the housing collapse and Wall Street's near-death experience. So, says Sonders, it stands to reason that a thrice-bitten skepticism stands in the way of a full 1990s redux.

Is it really different this time? It should be remembered that then-Fed Chairman Greenspan gnomically warned of irrational exuberance three-plus years before that bubble hit peak swell. With that kind of lead time in mind, current rookie chief Janet Yellen might want to start drafting something equivalently indecipherable soonish.

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5 lessons from this bull market

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Business Week | By Carolyn Bigda, Kiplinger

Five years in, here's what we've learned from the market's astonishing rise from the ashes of the financial crisis.

For some milestones, you want to break out the champagne. But the end of the great bear market, which finally occurred five years ago in March, may be one you'd rather forget.

By the time the market hit bottom on March 9, 2009, the Standard & Poor's 500 Index ($INX) had fallen 57 percent from its 2007 peak, the biggest drop since the Great Depression. And there was no telling when the free fall would end. "Dow 5,000? There's a case for it," said a headline in The Wall Street Journal on March 9. "Investors throw in the towel," online magazine Slate proclaimed less than a week before.

Despite the pessimism, though, stocks did turn around -- and they have gone on to stage one of the most powerful rallies in recent history. From the bottom through the end of 2013, the S&P 500 returned 203 percent. Looking back, you could glean many lessons from the stock market's plunge and subsequent recovery.

"It's the painful experiences that are the most valuable," says Jim Stack, who publishes the InvesTech Research newsletter. We've identified five takeaways from the bear market and the years that followed.

Early in 2009, with the S&P 500 down 25 percent in the year's first ten weeks, few investors would have guessed that the index would finish '09 with a 27 percent gain.

Overall, the news was grim. The unemployment rate was on its way to hitting 10 percent. Two of the country's three major automakers, Chrysler and General Motors (GM), filed for bankruptcy reorganization that spring. Congress passed a $789 billion stimulus package to try to revive the economy. Based on the headlines, it didn't look as though things would get better anytime soon.

"There was a belief that the good things that happened in the past would never happen again," says John Rekenthaler, vice-president of research at Morningstar.

Stocks, however, did make a comeback, and the mood-defying reversal was a reminder that trying to call a market's bottom is something few investors can do.

Big market moves can wreak havoc on the balance of stocks and bonds in your portfolio. Let's say you had 60 percent in U.S. stocks (as measured by the S&P 500) and 40 percent in bonds (as measured by Barclay's U.S. Aggregate Bond index) before the bear market started in October 2007. By the end of the bear market, the ratio would have flipped to 38 percent stocks and 62 percent bonds, just because of changes in market values. The timing could hardly have been worse because your portfolio would have been light on stocks just as they were poised to take off.

Rebalancing -- a system of selling and buying investments to maintain your portfolio's asset allocation -- helps you avoid such unintentional shifts. And it forces you to buy assets that have grown cheaper and sell ones that are expensive -- in other words, to buy low and sell high, one of the cardinal rules of investing.

On paper, rebalancing looks simple enough. But from an emotional standpoint, it can be tough to execute. Few people wanted to buy stocks in March 2009. "Rebalancing goes against our strongest investing behavior," says Fran Kinniry, a principal at the Vanguard funds. "We don't want to buy assets that have had negative returns."

Worried you won't have the discipline to rebalance? One solution is to set a fixed schedule -- say, at the start of every year or after your portfolio mix has shifted by five to ten percentage points. Another option: Consider a balanced mutual fund, which will maintain a steady ratio of stocks and bonds for you. Dodge & Cox Balanced (DODBX) is a solid choice. Over the past five years, the Balanced fund returned an annualized 17 percent, nearly as much as the S&P 500's annualized return of 18 percent but with less risk.

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3 reasons the market isn't overvalued

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| By Anne Kates Smith, Kiplinger's

We're overdue for a correction. But for investors with a long-term view, share prices, while hardly in bargain territory, are still reasonable.

If opinions about the direction of stocks didn't differ, there wouldn't be a market. But as market indexes continue to climb to record highs, the dichotomy seems greater than usual. Is the stock market a bubble or a bargain?

As usual on Wall Street, the answer depends on a number of variables, the most important of which is your investing time frame. For investors with a long-term view, share prices, while hardly in bargain territory, are reasonable. Stocks may not be as cheap as they once were, but they are not yet overvalued, let alone in bubble territory. Here's why:

No argument, investors have bid up the amount they're willing to pay for each share of corporate earnings. A year ago, the Standard & Poor's 500 Index ($INX) commanded a price that was just over 13 times the average estimated per-share earnings of its constituents for the year ahead. Now, the S&P trades at 15 times estimated 2014 profits. But that's just about the average, going back 30 years, and it's less than the average of 16.5 of the past 15 years. Since 1996, P/Es have ranged from 10.5 to more than 25.

Given accelerating economic growth, low inflation, rock-solid corporate balance sheets and improving sentiment among stock investors, the current average P/E is reasonable, say the bulls. It could even go higher. It's only normal that we would have a period of expansion after earnings multiples compressed throughout the first decade of this century. A P/E of 18, however, should give you pause; 20 would be a waving red flag.

Stock prices bottomed on March 9, 2009, in the aftermath of the financial crisis. From that day through Nov. 12, stocks soared 161 percent (189 percent, including dividends).

In terms of both longevity -- the advance is approaching its fifth anniversary -- and the rise in stock prices, this bull market is above average. But what if you were to date the bottom of the market a different way -- not based on when prices hit their lows, but when other market yardsticks did, such as price-earnings ratios or price-to-book-value (assets minus liabilities) ratios?

Using those yardsticks, says market strategist Jeffrey Saut, of Raymond James Wealth Management, the market didn't reach bottom until November 2011. That would make the bull just two years old. There is precedent for Saut's market-dating mechanism. Recall the period from 1966 to 1982, when the market traded in a relatively narrow range. The low in prices came in 1974, but the valuation low didn't arrive until August 1982 -- and that marked the beginning of a five-year bull market.

Parts of the market do indeed qualify as overpriced, while others are still reasonably priced. Shares of companies that cater to consumers -- both those that sell the stuff we use every day (from soap to soda) and those that sell non-necessities (think retailers and restaurants) -- are expensive. So are the stocks of utilities and the like that serve as high-yielding bond surrogates, which have attracted investors in droves since the financial crisis ended.

"I'm staying away from defensive stocks and pure yield -- consumer staples, telecom and utilities," says Mike Wilson, chief investment officer at Morgan Stanley Wealth Management. "You won't lose your shirt, but they're expensive if you believe interest rates will grind higher."

You'll find better values in health care, as well as in stocks that swing with the economy, such as energy, manufacturing, industrial and technology companies. Large-company stocks are better deals than stretched small-company shares; choose shares of globally diversified companies over U.S.-focused firms. Globally diversified firms, which normally command higher P/Es than their U.S.-focused counterparts, are selling at their lowest valuations in a decade, according to BofA Merrill Lynch Global Research.

We're overdue for a correction. The last breather that the bull took ended in October 2011, and stock prices are up some 60 percent since then. If history is a guide, it looks like the market will sail through the December holidays on a high note, says Sam Stovall, the chief market strategist at Standard & Poor's. The market's fundamental underpinnings are strong. The economy is expanding, inflation is low and corporate earnings are growing.

But there are some signs of froth in share prices. Chief among them is the recent, rapid acceleration of money flowing into stock mutual funds and exchange-traded funds. In October, those funds took in $53 billion more than came out, according to market research firm TrimTabs. That's the fourth-highest monthly net inflow on record.

The market for initial stock offerings is also heating up, paced by the much-ballyhooed debut of Twitter (TWTR), which soared nearly 75 percent its first day out of the gate. Investor sentiment, often a contrarian indicator, is increasingly bullish, with 46 percent of investors polled by the American Association of Individual Investors in the bullish camp, compared with a long-term average of 39 percent.

Those may be signs that the bull market has gotten a little ahead of itself. A pullback (losses of 5 to 10 percent) or a correction (up to 20 percent) would not be surprising. But longer-term, this bull has room to run.

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Welcome to the 'Dirty Harry' market

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| By Jim Jubak

The Fed is no more out of ammo than Clint Eastwood in his prime. And with the economy looking shaky, don't bet that it will pull back on stimulus anytime soon.

As I look at the U.S. and global financial markets right now, I keep thinking of that iconic scene in “Dirty Harry.”

Clint Eastwood is facing a piece of urban pond scum whose own gun is on the ground but within reach. Eastwood has got him dead in his sights, but after a running gun battle, he could be out of ammunition.

“I know what you're thinking,” says Eastwood’s detective Harry Callahan. "‘Did he fire six shots or only five?’ Well, to tell you the truth, in all this excitement I kind of lost track myself. But being as this is a .44 Magnum, the most powerful handgun in the world, and would blow your head clean off, you've got to ask yourself one question: ‘Do I feel lucky?’ Well, do ya, punk?”

Investors face a similar situation now as we try to decide if the Fed is out of the ammunition it has used to prop up the economy.

You recall the scene. The punk decides Harry’s gun is empty, reaches for his own and winds up floating face down in the midst of a spreading patch of bloody water.

While not wanting to suggest that either you or I are equivalent to Dirty Harry’s punk, I do think Eastwood’s question is appropriate for us now.

The Federal Reserve, the People’s Bank, the European Central Bank, the Bank of Japan and other of the world’s central banks have fired a lot of ammunition -- first, to head off banking system meltdowns, and second, to try to stimulate their economies into sustainable growth. Global financial markets rallied on that action with some stock markets -- the U.S. and German markets, for example -- moving up to all-time highs and already low bond yields falling even lower as bond prices moved up.

Now, with global growth rates nothing to write Sister Sara about, with politicians in Washington D.C. about to begin another round of budget negotiations that may make “Riot in Cell Block 11” look like a shining beacon of good faith, and with some economies showing all the emotional bounce of the pod people in “Invasion of the Body Snatchers” (to continue and conclude this post’s Don Siegel homage), financial markets are rallying again on hope that the central banks have more bullets left in their gun.

Jim Jubak

Well, do you feel lucky? And if you do, for how long?

Let’s be clear, I hate investing when it resembles gambling. I like markets with clear macro trends behind them, such as the falling yields that characterized the bond markets since the early 1980s. (That trend is over now.) And I like markets without trends and where the fundamentals drive individual stocks.

But I really dislike markets where the direction of macro trends is up for grabs; where traders and investors are trying to bet that that they can guess the results of an essentially binary decision; and where the results of that binary decision -- in the latest case, a taper/no taper decision by the Federal Reserve -- will drive most drive stock prices in one direction or another, overwhelming the fundamentals of the vast majority of individual stocks.

That’s exactly where we are right now.

Which is almost certainly good news through November and into December. After that, though, I’ve got to wonder how lucky we’ll be and for how long.

The consensus opinion on Wall Street at the moment is that the Federal Reserve’s Open Market Committee, the group that will decide when the central bank will start to cut back on its current $85 billion in monthly purchases of Treasurys and mortgage-backed securities, won’t start the taper at its Oct. 30 meeting. The thinking is that the Fed won’t have enough data on the economy to decide if U.S. growth is strong enough to stand up to a withdrawal of some of those purchases. It’s not the direct effect on the economy of cutting purchases to $70 billion or $75 billion a month that concerns the Fed, but the effect of any follow-on increase in interest rates and the potential that higher rates might slow sales in sectors of the economy, such as housing and autos, that rely on financing.

Since there is no Fed meeting in November, the earliest that the Open Market Committee could begin a taper of the Fed’s purchases would then be the Dec. 18 meeting. But the Wall Street consensus is that the Fed won’t act at that meeting, either. That consensus is based on the belief that the government shutdown and the debt-ceiling crisis whacked something like 0.6 percentage points out of annualized GDP growth for 2013. That translates into a drop in annualized growth in the fourth quarter from a projected 3%, according to estimates by Standard & Poor’s, to 2%.

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10 stocks for a difficult market

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| By Jim Jubak

Strike a balance between the downside risks of bad news and the upside possibilities if trends break in a favorable direction.

Let me suggest 10 stocks that offer a "solution" -- or at least part of one -- to this very difficult financial market. They're not perfect. They don't capture all of the upside potential and avoid all of the downside risks. But they offer the best trade-off of risk and reward that I can find today.

So how difficult is this market, and why?

First, there is the short-term difficult. This is the difficult that financial markets seem most focused on right now. In the short term, this is a difficult market because we don't know how the news will break in the next few weeks.

Will the Federal Reserve decide at its Sept. 18 meeting to begin tapering its $85 billion in monthly purchases of Treasurys and mortgage-backed assets? Will a bailout for Portugal roil the euro and the eurozone after the German elections on Sept. 22? Will the U.S. government shut down Sept. 30 when the current budget and its spending authority expire? Will the recent rally in the Indian rupee break down when the honeymoon for Raghuram Rajan, the new governor of India's central bank, ends after the government demonstrates it has no intention of tackling significant reforms before the 2014 elections? Will street protests in Brazil, which now appear to be moderating, hit a new flash point?

I've suggested that the short term looks so difficult that the best strategy for September and October is to raise some cash and wait for the possibility of excessive volatility to recede.

But short-term difficulties aren't the only ones investors face. In many ways the medium term -- the next six to nine months -- is likely to be even more difficult.

Why? Because the risks include not just the downside from bad news on current trends, but also the possibility of missing out on the upside if trends break in a more favorable direction.

In the medium term, the difficulty is deciding how long the current trends will last and when they will turn.

Those current trends? There are several: A strong dollar versus just about all of the world's trading currencies; falling Treasury prices and rising yields; a rally in emerging markets and currencies that seems to have stabilized the Indian rupee and that has actually produced a bull market in Brazilian stocks; and a seeming bottom to China's growth recession, with better-than-expected numbers for manufacturing activity and exports.

Jim Jubak

And, the strongest trend of all is the consensus, backed by recently revised forecasts from the International Monetary Fund and the Organisation for Economic Cooperation and Development that the world's developed economies will show stronger growth in the remainder of 2013 and 2014, and that the world's developing economies will show growth weaker than previously predicted.

This consensus is based on a belief that the withdrawal of Fed monetary stimulus will slow economic growth in the United States -- but slow economic growth in the world's developing economies even more.

The OECD last week forecast that the U.S. economy would grow by 1.7% in 2013, down from an April estimate of 1.9%, but that the dip would be more than made up for by faster growth from the world's other developed economies. According to the OECD, the United Kingdom is expected to grow at a 1.5% rate, rather than the 0.8% rate forecast in April; Germany will grow at a 0.7% rate and not 0.4%; and France will grow at a 0.3% rate, rather than contract by 0.3%. (The OECD left its forecast for Japan unchanged at 1.6%)

On the other hand, the OECD forecast for growth in developing economies has come down since April. To take one example, it now sees China growing by 7.4% in 2013, rather than 7.8%. Downward revisions for India, Brazil and Russia joined that for China in pushing growth projections lower for the world's developing economies.

This has led to some very strong recent trends:

U.S. pension funds and other institutions have put $65 billion into European equities in the first six months of 2013, according to Goldman Sachs.The Standard & Poor's 500 Index ($INX), which fell 4.6% from the record high on Aug. 2 to an Aug. 27 low, climbed 1.4% last week, even though we've moved into September, historically the worst performing month of the year. The index is now up 2.3% from that Aug 27 low.After dipping in early August, the U.S. dollar has resumed its upward trend against global currencies. The trend has been particularly strong for the dollar against emerging market currencies, with the U.S. currency climbing for four straight months relative to them.
My worry, of course, is how long these trends will stay strong.

For example, despite the recovery in Brazilian and Chinese stocks, emerging market analysts maintain that these markets haven't bottomed yet. Yes, the Shanghai Composite Index has moved up strongly in August and September, but at 2,213 on Sept. 9, it still was significantly below the 2013 high of 2,432 on Feb. 4.

In earlier posts I've said that I don't think we'll see growth forecasts for developing economies start to move up until 2014. So it's certainly legitimate to wonder if emerging markets have another leg down before investors can safely begin to anticipate improving economic growth.

Or, for another example, consider the U.S. market. A stock like Cummins (CMI) (a member of my long-term Jubak Picks 50 Portfolio), has been on a tear on strength in the U.S. manufacturing sector. The shares are up 22.2% from their June 24 low through Sept. 9. But Cummins is closing in on its all-time high of $129.50, set in 2012. Will current trends take the stock an additional 20% higher, or is Cummins (along with the rest of the U.S. market) vulnerable to factors like rising interest rates?

I don't think there's any way to definitively answer the question of how long current trends will last. But I think you can find stocks that give you the best exposure to profiting from current trends if they last, and that give you the best protection on the downside if current trends turn out to be vulnerable.

In essence, what I suggest you do in a difficult market like this is to identify stocks that have as many trends running in their favor as you can, so if one fails, your portfolio will still have some support from other trends.

I like European stocks that have seen their domestic revenue pounded by the slowdown in European economies -- giving them substantial upside if European economies recover -- and that have been hurt by slowing emerging market sales, but that have strong emerging market businesses.

In this category I'd put Dutch -- but also Asian, Latin American and African -- brewer Heineken (HEIA.NA in Amsterdam, or thinly traded as HEINY in New York), French and Chinese yogurt and dairy company Danone (BN.FP in Paris, or DANOY in New York), Finnish, Chinese and Latin American elevator maker Kone (KNEBV.FH in Helsinki) and U.K., French and Polish do-it-yourself retailer Kingfisher (KGF.LN in London, or thinly traded KGFHY in New York.)

I also like raw materials stocks -- if they pay a significant dividend. These shares should move up with a growth in demand from developed economies, with stabilization of growth in developing economies and any moderation of the dollar's strength.

I'd like a decent dividend for extra protection so I at least get paid something if I have to wait to see a growth recovery in developing economies. Suggestions here include Brazilian iron miner Vale (VALE), with a 2.4% dividend; Potash of Saskatchewan (POT), with a 4.4% dividend; and Norwegian fertilizer maker Yara International (YAR.NO in Oslo, or YARIY in New York), with a 5.4% dividend. (Vale and Potash of Saskatchewan are members of my long-term Jubak Picks 50 Portfolio.)

Finally, I like to get my U.S. exposure with a big chunk of insurance in the form of potential revenue growth from Europe and developing markets. This would include stocks such as Cummins, with its big exposure to China and Brazil and the upside potential for an improved heavy-duty truck market in North America; Schlumberger (SLB), which gets about 66% of its oil service revenue from outside North America and which has been hurt recently by slow growth in Brazil and Mexico; and Citigroup (C), which will continue to benefit as improved growth in United States allows the company to reduce reserves and which has big banking operations in Asia and Mexico. (Schlumberger is a member of my long-term Jubak Picks 50 portfolio and Citigroup is a member of my Jubak's Picks Portfolio, which focuses on a 12- to 18-month window.)

I'm inclined to be very cautious about market volatility in September and October. I wouldn't so much hold off on all buying -- if I see a good price I'd be willing to risk the volatility -- as buy with an eye on making sure that I have a pile of cash on the sidelines for picking up any big bargains that might pop up on a drop in the Fed taper, on yields on the 10-year Treasury rate rising above 3% or on a currency crisis in India -- to name just a few possibilities.

When in 2010, Jim Jubak started the mutual fund he manages, Jubak Global Equity (JUBAX), he liquidated all his individual stock holdings and put the money into the fund. The fund did own shares of Cummins, Danone and Yara International as of the end of March. Find a full list of the stocks in the fund as of the end of June here.

Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.

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Why Generation Y fears the stock market

9:00 AM Fears, Generation, market, stock No Comments

| By J,J. Zhang, MarketWatch

For Millennials, financial security is a fragile hope amid high educational debts, stagnant upward mobility and poor employment prospects.

One of the largest transfers of wealth between generations is starting to occur in the U.S. As baby boomers enter the retirement phase, the next generation of workers, Gen Y or the Millennials (those born in the 1980s and 1990s), are now entering the workforce and beginning their prime earnings phase.

According to research firm Iconoculture, Gen Y comprises over 76 million people with almost $900 billion in spending power. In contrast the baby boomers, also numbering 76 million, have $2.5 trillion in spending power.

However, for this new generation, it's a very different world than the one seen by their parents. The baby boomers saw the rise of the U.S. into the world's only superpower and all the accompanying economic growth and rewards that came with it.

They reaped the rewards of the chemical revolution, the golden age of manufacturing, the computer revolution, the information age, energy abundance and globalization. They also juiced growth via the use of debt which turned the U.S. into today's debtor nation.

In contrast, the future outlook for Gen Y is that of a nearly bankrupt nation, rising global competition from emerging countries, crumbling infrastructure and insolvent retirement and welfare programs, among other ills. For this generation, financial security is a fragile hope due to high educational debts, stagnant upward social mobility and poor employment prospects.

For Gen Y, it becomes even more important to start retirement planning early as government Social Security guarantees, employment security and wage-growth prospects will not be what their parents experienced.

However, this generation has also suffered through several financially traumatic experiences that have and are continuing to shape its investing views.

Baby boomers saw a relatively stable and strong growth period during the '50-'70s which influenced their long-term belief in market returns. In contrast, Gen Y adults experienced two major bubbles and recessions and high volatility, which have led to one lost decade already.

Indeed, the early vanguard of the Gen Y'ers joined the real world only to experience the dot-com crash. They subsequently started investing in their mid 20s only to find the housing bubble and the subsequent great recession. The first impression is the most important and so far it doesn't look promising.

This lack of tangible gains, roller-coaster volatility and recent scandals such as the bank bailouts, mortgage shenanigans, Ponzi schemes and scandals like Goldman's designed-to-fail securities have all made them cynical and distrusting of the stock market and investing in general.

This isn't hypothetical. In a recent MFS Survey, 40% of Gen Y agreed with the statement "I will never feel comfortable investing in the stock market." Among Gen Y investors, 54% feel overwhelmed by available choices and 47% tended to put off investment decisions.

Due to fear of risk, 30% said their primary investing objective is protecting principal and have allocated an average of 30% to cash, more than other age groups, and nearly equal to the 33% allocated to stocks. T. Rowe Price noted in 2010 that almost one in five self-directed participants age 25-35 had over 80% of plan assets in cash.

While protecting principal is no doubt important, excessive risk aversion does not lend well to long-term investing: after all, no pain, no gain. With 54% of Gen Y concerned about when they would be able to retire and 44% lowering their retirement expectations, they need to put aside their fears and tiptoe back into the markets.

Though these psychological traumas have already influenced Gen Y actions, luckily time and youth is on their side. With the first wave still in their early 30s, there's still plenty of time to start and let compound investing work for them.

The important first step is learning to let go of their fear of the market, or at least reduce it to a healthy level. Yes, the stock market can be a scary place sometimes, but there are precious few ways to generate returns significantly above inflation -- a necessity in a Social Security-less future.

Notably, high volatility and risk averseness have caused Gen Y to make more use of financial advisers and other experts. Especially for those concerned about market volatility and risk, seeking a financial adviser to help them tiptoe into investing is a good idea.

However, it's particularly important that one find a good and trustworthy adviser -- those with fiduciary duty is a must. While advisers do charge fees that can undermine returns, in this case it's still a net positive over the high cash many Gen Y'ers are holding.

And keep in mind; advisers are not a lifetime commitment. There's nothing wrong with learning from them and then striking out for yourself.

One trait of Millennials is their considerable sophistication in finding information and learning for themselves. The widespread availability of financial products and services such as ETFs, online discount brokerages, instant financial info like real time quotes and new tools such as computer-aided rebalancing have given then all the help needed to create a well-rounded and diversified portfolio ready for the long term.

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Market turmoil has not yet reached.

1:29 AM market, reached, turmoil No Comments

| By Jim Jubak

It may be tempting to try to get out front of the rally that would surely come when recent turmoil simmers down. Problem is, trouble is often followed by more trouble.

Do you buy amid the selling or hang on until the worst is over? Let’s look for advice from warriors of the past.

"Buy on the sound of cannons; sell on the sound of trumpets" is attributed to Nathan Rothschild, who, the story goes, made a fortune on early knowledge of the result of the Battle of Waterloo.

Rothschild supposedly bought when everyone in England thought the battle was lost and prices were deeply depressed, and then sold in the euphoria that followed the Duke of Wellington's victory over the armies of the emperor.

Good advice -- even if the quotation and speaker are in historical dispute. (Rothschild is also credited with the advice to "Buy when there's blood in the streets.")

If you can buy at the moment of maximum doubt or turmoil and when prices have been depressed by the certainty of further chaos, and then sell at the moment of maximum joy, when disaster has been averted and all everyone wants to see is victory, then, yes, without a doubt, you can make a lot of money.

The problem is that the sound of cannons can be followed by the sound of even more cannons. And blood in the streets by even more blood in the streets. It's hard to pick the climax of doubt and turmoil.

In the same way, it's hard to pick the moment when the trumpets are to be trusted. Many the flourish has turned out to be maddeningly premature.

I bring this up because I think we're at one of those moments when we can hear the sound of cannons and when blood (and tear gas) is indeed running in the streets, but when it's hard to tell if we've reached the climax of the barrage.

Jim Jubak

In my opinion, it's still early in the turmoil in global financial markets. The cannons are indeed still increasing their rate of fire.

If your goal is to buy when prices are near their lows because chaos and turmoil have reached a peak, I think it's still early. The trend in many of the world's markets -- yes, probably even in emerging markets, though they have clearly broken downward -- is toward more turmoil.

Let me try to run quickly through the arguments for increasing turmoil in several significant markets. You can decide what the picture is for the global market as a whole.

The United States: I think Ben Bernanke's performance on Wednesday, June 19, has left the markets deeply worried. The Federal Reserve chairman said that the Fed would begin to taper off its $85 billion in monthly purchases of Treasurys and mortgage-backed securities later in 2013. And that it would then gradually reduce its monthly purchases month by month until the Fed ended the buying program completely by mid-2014.

IF, and this is the crucial IF, the strength of the U.S. economy is consistent with projections by the Federal Reserve that put GDP growth at 3% to 3.5% in 2014 and forecast unemployment to drop to as low as 6.5% to 7%.

The market, if I can judge by the selling pressure on June 19 and 20, has taken this as a clear statement that the Fed will begin to taper on that schedule. The problem with that belief -- and with the Fed's policy statement -- is that very few economists working outside the Fed believe in anything like that rate of growth for the economy and jobs in 2014.

The median estimate among economists surveyed by Bloomberg calls for 1.9% growth in 2013 and 2.7% growth in 2014. The U.S. economy hasn't grown by an annual rate above 3% since the four quarters that ended in June 2006. Either the Fed has got this right and just about everyone else has got this wrong, or the Fed is deluded in its optimism.

But anybody who thinks the Fed's June 19 statement puts to rest the debate over when the central bank will taper and by how much is mistaken.

The Fed has left traders and investors in the U.S. wondering whether the Fed's optimistic economic projections are a reflection of the Fed's desire to end quantitative easing as soon as possible or represent an honest appraisal of the U.S. economy.

The Chicago Board of Options Exchange Volatility Index (VIX) has spiked in the last two days, and is now up 53% since May 17. And the market has been set up for further turmoil if economic data in the next quarter or two don't back up the Fed's optimism.

Forecast: More cannon fire likely as the market tries to figure out the data and Fed policy. Hopes that the Fed will be right about growth make U.S. growth stocks a better bet than income stocks and interest-rate-sensitive stocks in the financial and housing sectors.

I'd particularly look for growth stories that aren't dependent on an increase in the rate of growth in the U.S. economy. Companies positioned to benefit from the boom in U.S. energy production come to mind. I'll have some picks on that theme next week in a post on best stocks for the second half.

Brazil: It's tempting to think of the mass protests now rocking Brazil as the sound of cannons -- and therefore a signal to buy -- and the end of the protests as the blare of trumpets -- and a signal to sell.

I think that's a misreading of the extent of troubles in the Brazilian economy. The mass protests in the streets of Brazil's cities were initially touched off by demonstrations against an increase in bus fares in Sao Paulo. But they've now grown into a protest against inflation -- officially 6.5% but far more punishing in crucial categories as food and healthcare -- against bad schools, economic inequality and government corruption.

There would be less anger to fuel these protests if Brazil's economy were growing at the 7.5% rate of 2010, but growth fell to 2.7% in 2011 and then to 0.7% in 2012. The forecast for 2013 has been falling this year and is now down to 2.77% among private economists -- and no one believes the Banco Central do Brasil's official forecast of 3.1% growth.

At the same time as growth has lagged, inflation has kicked up to an annual rate of 6.5% in May. That's at the top of the central bank's inflation range of 4.5% plus or minus two percentage points. Raising interest rates to fight inflation would reduce economic growth, but the central bank doesn't seem to have a choice.

Forecast: The cannon fire gets louder as we move deeper into 2013 and I don't anticipate a drop in volume until we've seen a couple of further interest rate increase from the central bank. I'd look to Brazil's domestic consumer sector after those rate cuts. As tempting as the price of shares of Brazil's banks and exporters are at current levels, I'd still look for further drops in those sectors.

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12 Reasons not to fear, market bubble

12:30 PM bubble, market, Reasons No Comments

| By Richard Satran, US News & world report

Investing is never without risk, of course, but memories of the last crash cause investors to miss, the biggest gains in years.

The idea of the financial markets in a another free fall as it will go, which has taken in 2008 never fully by many investors left behind have been. It is one of the reasons, the current has missed rally many of them and stuck with bonds.

Now loans are interest rates, even as risky to spoken bubble, pop is, as soon as the Federal Reserve hikes. Meanwhile, stocks see in 2013, the biggest gains in years.

What is an investor to do? It's not exactly "don't worry, be happy" time. But too much anxiety can be counterproductive.

Investors should start by checking all these dire warnings. You may not all apply. It's never stupid to keep a dose of healthy skepticism. But it's the perception that financial assets completely crazy from the 'Real economy' are hard to.

Here are a dozen reasons why stocks and bonds are not bubbles, bursting wait (along with some reasons why analysts and fund managers say it could still Trouble, even if it not bubble).

Already in August 2008 not much there talk of stocks at risk. Google trends shows that the search terms "bubble has" and "stock crash" fell to the lowest level in nearly five years in the month before the crash. You have increased steadily this year.

But one thing is search queries. Reviews are another. And that could be high. The yields on bonds are close to all-time lows, not even for the costs of inflation. Based on underlying earnings, stocks are close to their average. "The case for a bubble in the bond market is strong. The case for a bubble in the stock market is not a strong", says Hugh Johnson of Hugh Johnson advisors. "The real question: can the Fed let the air out of the bond market in a way that bond market remains orderly trading?"

From the crash of 2008 Rose bonds prices, markets stabilize help. The chance of a "double bubble" is highly unlikely. Unless, of course, this time is different. The threat is that the stocks just get the investor attention because there are no other good option.

"Bullish on, people have shares compared with Treasury bonds with their low historical views. If the upwards, that the story falls apart..., "says James C. Roumell, President and portfolio manager at Roumell asset management.

The most important 10-year Treasury Note fell 25% in price last month its yield jumped 50 basis points (half a percentage point). Prices move to do inverse. But bond investors, nimble bunch, can not simply out of necessity or hold out of habit. "Many people still have their own bonds, because they still think that they are safe.

Sometimes due to investment policy for a fund or an institution, not get,"says Mark Germain, Chief Executive Officer of beacon wealth management.

Shares not steadily, but won in jumps. The first day of trading this year saw a 300-point Dow rally of 2.3%-top winning year, but nowhere in the top 50-day share gains. But just because it is not happening does not mean that investors become more rational.

"If the people on the sidelines suddenly jumped into the market, it could be much damage. Panic buying would, that a bad thing with a market around 10% overvalued", says David Edwards, President of the Heron financial group.

(5) The fear of a "bubble" is partly based on a misconception that people hold huge amounts of interest rate sensitive long bonds

But Treasury data show that the average debt maturity is less than five years. In the last few years the Fed has been to clean up long bonds, and only a few were issued.

This is not to say that higher prices is not that hard to navigate. Price rises would hit major sectors of the economy, including mortgages. "Fixed-rate bonds, the returns have been low for so long... the mentality is still in, will be burned", Brian Levitt, Chief Economist says the Oppenheimer funds. If the Fed raises after all short-term interest rates, it will affect a wide range of borrowing costs.

Housing is a key to stability, since it was the cause of the latest crash and his jump created a perfect storm, froze credit markets and consumer confidence hammered. The bad news is that vulnerabilities in real estate remain. "The recovery of the real estate market is not closed," said David Blitzer, Chairman of S & P index Dow Jones indices as the latest home data was announced. Foreclosures remain high, and rising mortgage interest rates.

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Your guide to this summer's market

6:00 PM guide, market, summers No Comments

| By Jim Jubak

The trend in US stocks appears downward because of expectations of what the Fed will do. But the consensus view is volatile. Here’s how to navigate the turmoil.

Think of the current market this way: It's a puzzle where the solution shifts depending on whether you take a long-, medium- or short-term view, and where the importance investors afford to the long-, medium- and short-term views shifts from hour to hour and day to day.

Then add in that you have to solve that puzzle with significantly different time horizons depending on which of the three drivers of global financial markets -- the United States, Japan and China -- is gathering attention at the moment.

Together, this makes the market very difficult to read, very volatile and rather scary.

Here’s my guide to what’s going on, what to pay attention to and what to ignore in the next few weeks.

Consider the May 31 market action as a good example of what we can expect in June and probably into July.

That morning, a medium-term view held the court. A strong report on Midwest manufacturing activity led traders and investors to focus on the possibility that the U.S. Federal Reserve would start reducing its $85 billion a month in purchases of Treasurys and mortgage-backed assets sooner rather than later and perhaps as early as this summer or in September. That led bond prices to retreat, while the yield on a 10-year Treasury climbed 0.15 percentage points, to 2.21%. One month ago, the yield on the 10-year Treasury was just 1.65%.

That afternoon, perspective shifted back to the short-term. Bond prices had fallen so far so fast on the day and yields on the 10-year bond were now above the 2.08% yield on the Standard & Poor’s 500 Index ($INX) that short-term traders were willing to bet that bond prices would stage a modest rally.

Jim Jubak

Their willingness to take that bet increased as the weekend approached. It’s typical for traders to take profits and square positions before the weekend. Taking the end of a trade predicated on rising bond prices and falling yields had a good risk/reward ratio in the short term. And traders on that end of the trade did make a good profit, as bond prices rose and yields fell back to 2.13% at the market close.

And what about stock prices? They moved in exactly the opposite direction to bonds, rallying in the morning and then falling sharply in the afternoon, largely, I think, in reaction to the move in bonds rather than to any significant news for equities themselves.

In the background for all this sits the long-term view. The consensus there is that the Federal Reserve will have to taper off (the medium-term view) and then end (the long-term view) its program of buying Treasurys and mortgage-backed assets. At best, the end to the Fed’s buying program will push interest rates higher. In an even longer long-term view, interest rates will rise as the Fed sells Treasurys to reduce the size of its balance sheet.

A lot of this consensus view is speculative. No one knows if the Fed will actually sell Treasurys -- Chairman Ben Bernanke has hinted that the Fed will simply hold them to maturity and reduce its balance sheet very gradually. No one even knows if the Fed will start to taper off its buying program in the summer or fall. The Fed has said that its actions will depend on the data, and no one yet knows what the economic data will look like in, say, September.

But 1) this consensus view seems logical and 2) this consensus view is the consensus, and that gives it influence over the U.S. financial markets, even if it ultimately turns out to be wrong.

Until we get data that say the Fed will stay on the sidelines or get growth numbers so strong that investors are willing to buy stocks no matter what the Federal Reserve may be planning, or see some statement from the Fed that recasts its policy, I think the long-term consensus will provide a bearish cast to the short- and medium-term views of the market.

But remember that this relatively long-term negative view doesn’t have the stage to itself. Just as on May 31, when the bond market was able to rally because the short-term view said there were profits to be made by reversing the morning's slide, so too could a sufficient drop in U.S. stocks lead to a calculation that, in the short-term, reversing any drop would be profitable to traders who had gone long.

In other words, if U.S. stocks drop far enough, say 5% to 10% (the S&P 500 was down 2.3% from its May 21 high at the close on May 31), then I think we’ll see short-term buying pick up no matter the pessimistic long-term view.

I know this is complicated, so let me try to boil it down.

I think the trend in the U.S. financial markets is downward right now, because of the long-term consensus view that the Fed will begin tapering off its monthly purchases of Treasurys and mortgage-backed assets by September or October -- and perhaps even earlier. We could get a temporary bounce out of a disappointing jobs report on Friday -- the consensus among economists is for a weak 165,000 net new jobs -- but I think it will be hard for any disappointment to shake the consensus. I think the downward trend could easily produce another bad month for Treasurys like the 1.8% drop in the Bank of America Merrill Lynch index in May.

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Is the market about to go bust?

8:00 AM about, market No Comments

Are we in bubble territory again?

The talk that financial markets have created or are creating another bubble has gotten louder with every upswing of the Dow Jones Industrial Average ($INDU) and the Standard & Poor's 500 Index ($INX). We're in uncharted, all-time-high territory, and that has increased worries that we're about to see a replay of the busts of 2000 and 2007.

How worried should we be?

I think worries about the stock market, in particular the U.S. stock market, are overstated at this point.

That doesn't mean, however, that we shouldn't worry about certain parts of the financial market. In particular, I'm worried about the parts of the fixed-income market where traders and investors seem willing to overlook risk if they can just pick up a bit of yield.

Growth is indeed anemic in the much of the world, and China doesn't appear to be willing to step up its economic-stimulus program to return to the days of 10% annual GDP growth. (That's a good thing, by the way.)

But as long as the world's central banks keep pumping money into financial markets, I think equity prices have decent support at recent levels.

I wouldn't call anything cheap here; some individual stocks are overvalued, and I think that some technical measures are close to calling this market overbought. But I don't see anything like the mania of 1999, when analysts fell all over themselves to see who could raise the target price for Amazon.com (AMZN) the most for any given day.

Jim Jubak

As far as hype goes, this is still a relatively subdued market. For example, at $26.68, the May 10 closing price, Facebook (FB) is still more than $11 below its initial public offering price of $38.

To get a 2000- or 2007-style bust, we'd need to see central banks go from net providers of cash -- rally enablers -- to net withdrawers of cash -- rally killers. And I just don't see that yet, even in the United States.

However, saying that we're not likely to see another stock-market bust of the 25%-or-more variety doesn't mean I think we won't get a more modest pullback. The U.S. stock market is on the verge of moving into overbought territory and looks increasingly vulnerable to a mild 3% to 7% retreat.

The European stock market seems to be on shakier footing. European stock markets have rallied recently, even though many of Europe's biggest companies have reported disappointing first-quarter earnings and have guided investors to expect lower revenue for the rest of 2013. Expectations were low going into the first quarter, and yet 59% of the companies that have reported so far have missed consensus projections.

Looking ahead, Siemens (SI) and Alstom (ALO.FP in Paris) have cut forecasts for 2013. Alstom, for example, cut its forecast for three-year sales growth to 5% from an earlier 8%. This week, data from eurozone economies are expected to show that gross domestic product for the group dropped in the first quarter. That would mark a sixth consecutive quarter of contraction.

On the equity side, though, I think the risk profile is highest for stocks in emerging markets. That's not because these economies are showing particularly lackluster growth (well, Brazil is) but because, on recent form, when investors get nervous about risk, they sell emerging-market equities first.

In any stumble in the U.S. or European markets or economies, the biggest damage to stocks is likely to be not in those markets -- in fact, U.S. stocks could climb on a rise in worries about global growth because the U.S. markets and the dollar are the safe havens of the moment -- but in such markets as Brazil, China, the Philippines, Indonesia and Turkey.

As perverse as it may seem, if you're worried about a dip in U.S. markets, you should probably start your thinking about what to sell among your emerging-market holdings. (And given that these stocks are likely to fall hardest in any U.S. dip, emerging markets should be at the top of your buy list once fear has taken its toll.)

As I said, though, my biggest worries aren't on the equity side.

If you're looking to make an argument for a bust (and not just a dip), I think you have to look at the fixed-income side.

I'm not worried about such deep, plain-vanilla markets as that for U.S. Treasurys. In fact, recent news suggests that Treasury prices at the short-end of maturities might be set to rise over the summer months.

Forecasts from the Congressional Budget Office say that-- thanks to spending cuts, tax increases and a recovering U.S. economy -- the 2013 budget deficit, at $845 billion, will be the smallest since 2008. That's likely to lead to a reduction in the number of notes with maturities of five years or less that the Treasury offers for sale. The reduction, if there is one, could come as soon as the July auctions. Fewer Treasurys for sale at a time when global investors are looking to buy dollar-denominated assets would likely result in higher prices (and lower yields) on Treasurys.

I'm not even especially worried about eurozone bond markets, where yields for Italian and Spanish debt have held steady in recent auctions. A few more editorials by German Finance Minister Wolfgang Schauble like that in Monday's Financial Times (registration required) might change that. (In the piece, Schauble argues that the treaties governing the eurozone are not sufficient to support current plans for creating a eurozone-wide authority to rescue or shut down weak banks.) However, as long as the financial markets believe that the European Central Bank guarantees the euro, I don't think these markets are likely to see a spike in yields and a collapse in prices.

If you're looking for danger in the fixed-income markets, I think you need to look at far-less-liquid markets, where prices are far more volatile and are near historic highs.

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Class of 2013 to face tough start in job market

9:30 AM class, market, start, tough No Comments

High school and college graduates are still being hobbled by years of weak economic growth and an extremely tight job market, and that difficult start in the job market could impact the class of 2013 for years to come, a new analysis finds.

“Graduating in a bad economy has long-lasting economic consequences,” said Heidi Shierholz, economist with the Economic Policy Institute, which prepared the report on young workers released Wednesday.

The liberal-leaning think tank looked at high school graduates between ages 17 and 20 who aren’t enrolled in further schooling, as well as college graduates between ages 21 and 24 who have a bachelor’s degree and aren’t seeking further education.

The analysis found that the unemployment rate for the high school grads who aren’t going to college has improved somewhat since hitting a high of 32.7 percent in 2010, but not enough to give young workers (and their parents) much comfort.

An average of 29.9 percent of high school grads between ages 17 and 20 who weren’t enrolled in further schooling were unemployed and actively looking for work between March 2012 and February of 2013, according to their analysis. That’s up from an average of 17.5 percent in 2007, when the job market was much stronger because the recession had not yet begun.

Getting a college degree still greatly improves people’s job prospects, but many young college graduates also continue to struggle to find a job after many years of high unemployment and dim job prospects.

The unemployment rate for young, recent college graduates who weren’t furthering their education stood at an average of 8.8 percent between March of 2012 and February of 2013, according to the EPI analysis. That’s down from an average of 10.4 percent in 2010, but still much higher than 5.7 percent in 2007.

The EPI report noted that more than half of young high school graduates were enrolled in a college or university, following a long-term trend toward more young Americans heading to college. Still, many are finding it difficult to finance the increasing cost of education, and the weak job market could make it hard for those young people to pay off their student loan debt.

That's especially true if they can’t land a well-paying job. The EPI analysis found that young high school grads were making an average of $9.48 an hour in 2012, while young college grads were earning an average of $16.60 an hour.

Both groups have seen wages fall in the past decade as the economy has weakened, according to EPI’s analysis. That could turn out to be a big problem for young workers because when you start out your career at a lower wage, it can take years and years to catch up.

According to EPI’s analysis, the class of 2013 could be earning less than they might have in a stronger economy for as long as 10 or 15 years.

Shierholz noted that the unemployment rate for young workers is always higher than average, and that’s especially true in times of economic distress. Now, she said, young workers are in a particularly tough place mainly because the overall job market has been so tough for so long.

“The unemployment rate of young workers is exactly what we would expect it to be just given the broader weakness in the labor market,” Shierholz said.

The overall unemployment rate fell to 7.6 percent in March, according to the Bureau of Labor Statistics. But economists weren’t cheered by the drop because it came as many Americans stopped looking for work and therefore were no longer counted in the tally. The unemployment rate only includes people who have actively looked for a job in the past four weeks.

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Skepticism high amid the market rally

10:00 AM market, rally, skepticism No Comments

The confidence of investors in shares despite market remains shaky relentless prevailing trend records.

Investors lack confidence in the stock market during this four-year rally to record highs can be found in two data points: to finance flows and volumes.

From 2008 to 2012 crack private investors around 153 billion $ US equity funds and exchange traded funds, according to data from investment Fund Tracker Lipper, while much, put that cash in the bond market to work. Recently have MOM and pop started diving her toes back into shares.

Meanwhile, the equity has been trading in decline for years. It reached in the spring of 2009, right, as the market of its financial crisis lows hit was. Despite a few blips higher here and there (i.e., summer 2011) the trading volume has been low running.

Both developments show crumbling confidence in stocks despite the market's relentless prevailing trend records. The volatile swings attached to the housing and the tech booms and busts translated in the past 12 years in a broader loss of confidence in the stock market. Recently crash, Facebook (FB) IPO debacle and the trade null and void, which should sharply brokerage firm Knight Capital Group have made the May 2010 skeptical flash people compared to the way, the markets work.

Only recently private investors back to stocks, the little guy has started "buy high." Although the concern with the market is record highs, could potentially

Investors poured $34.2 billion to equities funds and ETFs in the four weeks through Jan. 30, its biggest four-week inflow of cash since 1996, according to Lipper. The net is more than the pick-up for all 2012.

For the week end February 27 was about 800 million $ injected into old fashion US of equity fund, a proxy for individual investor relations activities. Tagged an eighth straight week of inflows, the longest routes since March 2011, according to Lipper.

But as money constantly was moving into mutual funds this year, inflows into Exchange traded funds have initially after a strong year of beginning of show.

That could may be explained by the fact that ETFs will often attract a high dose of "hot" money, a - and flows of traders and hedge funds. However, mutual funds, receive more of MOM and pop.

Investors $3.4 billion from domestic ETFs last week data withdrew, Lipper says.

Meanwhile, the volume of trade remains still anemic. This year New York Stock Exchange, average daily trading volume is approximately 3.6 billion shares, according to the WSJ market data group. Only 3.4 billion shares hand changed in NYSE Composite volume on Monday.

Indications are that the little guy is coming back to stocks pick up. With the Dow to new highs is the question of whether MOM and pop too late to the party arrived.

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Sandy washed away job market gains

3:30 PM gains, market, Sandy, washed No Comments

It takes a lot to knock the U.S. economy off course.

One month after being clobbered by the largest storm ever recorded in the North Atlantic, it’s becoming a little clearer just how big an economic impact Superstorm Sandy is having.

As the cleanup of visible damage continues around his office in lower Manhattan, Brian Drum is tallying up the damage to the job market.

“Hiring has slowed down tremendously – it’s almost like it’s come to a halt,” said Brian Drum, CEO of Drum Associates, an executive recruiting firm. “The jobs seem to be open, and the inventory seems to be available in terms of competent people. But companies are not making decisions.”

Those hiring decisions will have to wait for many potential employers – still without power, communications or a place to issue paychecks. In New York City alone, about a third of the 100 million square feet of downtown office space was still out of operation a week after the storm, according to brokerage Jones Lang LaSalle. That’s roughly the total office space available in downtown Houston.

Sandy hit the East Coast on Oct. 29 and disrupted businesses from North Carolina to Maine. The nearly 1,000-mile-wide storm cut a wide path of death and destruction, killing 113 people, through a region that represents about a quarter of the U.S. economy.

Heavy rainfall combined with a storm surge, high winds, inland flooding and fires to leave millions without power and tens of thousands homeless. Thousands of retailers and restaurants were closed, many for good. Some 20,000 airline flights were canceled. Miles of roads and railways were destroyed or damaged. The storm forced shutdowns of financial markets and several nuclear power reactors.

With so many businesses closed, many of the roughly 10 million workers in coastal counties were tossed out of work. On Wednesday, the government reported that more than 75,000 workers filed a new unemployment claim last week in New York, New Jersey and Connecticut, mostly in the construction, food service and transportation industries.

After a healthy pickup in hiring in the second half of the year, some analysts expect Sandy to wash away a big chunk of employment in the monthly jobs data for November, due out Dec. 7.

“We are concerned there may be an acute hurricane impact on November payrolls,” Deutsche Bank economist Joseph LaVorgna warned earlier this week in a note to clients.

LaVorgna noted that, following Hurricane Katrina in August 2005, the pace of new hires saw a downward swing of 127,000. He estimates the November report will show that hiring slowed to just 25,000 new jobs from a gain of 171,000 in October.

To be sure, there are other reasons for the pause in hiring decisions. Even before the storm hit, the ongoing recession in Europe and slower growth in China has brought a coordinated slowdown in the global economy. The November election did little to break the political gridlock over the federal budget and tax policy.

“I think people are still waiting to see whether there’s going to be compromise between the two factions in Washington,” said Drum. “But the situation was certainly exacerbated by the storm. “

A month later, thousands of families are still homeless and tens of millions of dollars of repairs have yet to be made. Despite lingering shortages of gasoline and isolated power outages, the region’s economy is back up and running.

“It wasn’t the massive disruption in the supply chain that might have been thought, given the severity of the storm,” said Andrew Tananbaum, executive chairman at Capital Business Credit, a lender that services the retail sector.

With the insurance claims process just getting underway, industry estimates – of as much as $50 billion in property damage – are still preliminary.

“This is the fourth loss we’ve had of significance in the last couple of years which is outside the models we might use to ascertain the cost of such extreme losses,” said Stephen Catlin, CEO at Catlin Group, a Bermuda-based insurer. “There are still people without houses to live in and still people without electricity. It’s going to take a few more weeks before we’re really clear as to how much damage and how much insured loss has been incurred.”

Apart from the visible destruction, the economic impact has been widespread. The chaos unleashed by the storm has already begun showing up in the monthly data from industrial production and retail sales.

The Federal Reserve reported that the nation’s total industrial output shrank by 0.4 percent in October, largely because of storm-related production shutdowns at utilities and makers of chemicals, food, transportation equipment and computers and electronic products.

Airlines sustained hundreds of millions of dollars in losses from more than 20,000 canceled flights. United and Delta reported last week the two carriers lost a combined $135 million in revenues from the storm. The shutdown of New York City’s subway and commuter train network cost the city about $50 million in lost revenues, according to estimates from IBISWorld. The market research firm also figures the financial services industry lost $150 million in revenues after the storm knocked the NASDAQ and New York Stock Exchanges offline for two days – the first such weather-related outage in more than a century.

Mortgage applications fell by almost 40 percent in Connecticut, 50 percent in New York and more than 60 percent in New Jersey in the week after the storm, according to the Mortgage Bankers Association.

Retailers were among the hardest hit. A surge in sales of critical supplies and equipment before the storm was more than offset by a week of closed stores. Just a few days of lost business in October put a dent in the government’s monthly retail sales tally.

November sales data will show an even bigger impact. Retail spending (not including cars) dropped in the Northeast by about 20 percent in the week following the storm, according to data collected by MasterCard. But that drop in spending will be offset as households hit by the storm spend to repair and replace damaged items, including waterlogged cars and trucks.

“A large number of dealers are back up and running, but there are still dealerships facing difficulties – just as there are neighborhoods still facing significant problems,” said Paul Taylor, chief economist at the National Automobile Dealers Association.


Taylor said it’s too soon to know how many cars will have to be replaced, but initial estimates put the figure at between 100,000 and 250,000. He also estimates that the increased demand for used cars will push up prices up by about 1.5 percent nationally – with bigger increases in states like New York and New Jersey, where demand is strongest.

Increased spending on repairs and shopping trips delayed by Sandy could help boost sales in December. But it may also cut into savings that were intended for holiday shopping.

That means nervous store managers may have to slash prices to avoid getting stuck with unsold goods, according to Jack Kleinhenz, chief economist for the National Retail Federation.

“I would imagine that those retailers in the area that were affected by the storm are going to be more prone to try and move their promotions and incentives out there,” he said.

The wider economic outlook is harder to assess, as the stimulus effect of rebuilding is spread over many months. But Sandy’s economic headwind at the end of 2012 could provide a boost to the first half of next year.

“With housing strong and vehicle sales likely to rebound as people replace Sandy-destroyed autos, the economy is on the rise,” said economist Joel Naroff. “The only thing we have to fear is Washington itself.”

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Fiscal cliff blues may lead to market correction

10:30 AM blues, cliff, correction, fiscal, market No Comments

Reuters

Wall Street's post-election sell-off may gather steam in the coming weeks as worries mount about the looming fiscal cliff and technical weakness suggests a possible correction ahead.


The benchmark Standard & Poor's 500 closed below its 200-day moving average - a measure of the market's long-term trend - on Thursday for the first time in five months, and ended below it again on Friday. More than half of the Dow components are trading below key technical levels.

"I don't think you have to panic here, but I think you really want to be looking for the market to move lower for the next couple of months," said Frank Gretz, market analyst and technician for Wellington Shields & Co., a brokerage in New York. "I think the next rally is the rally you want to sell."

At the heart of the market's worry is whether U.S. leaders can come to agreement on some $600 billion in spending cuts and tax increases that are due to kick in early next year. Some fear dramatic cutbacks could send the U.S. economy into another recession.

The prospect of higher tax rates in 2013 is driving investors to sell shares as they seek to decrease the tax impact from their positions this year and next.

"You would have thought the fiscal cliff scenarios would have been already mulled over and priced in, but they weren't. It's almost like the market has ADD and can only focus on one thing at a time," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, whose firm manages about $13 billion in assets.

The S&P 500 fell 2.4 percent for the week, its worst weekly percentage drop since June. The index is now down 6.4 percent from its intraday high for the year of 1,474.51 reached on September 14. That drop puts the benchmark index below its 50-day moving average, but not yet into correction territory, defined as a 10 percent drop from a peak.

Reading the technical signs
The S&P 500 has been trading in a range between the 50-day moving average of 1,433.50 and the 200-day moving average of 1,380.98 for about two weeks. A significant break below that lower level could be a precursor to further weakness, analysts said.


"There's a technical breakdown in the market that indicates further losses," said Adam Sarhan, chief executive of Sarhan Capital in New York. "A 10 percent drop is the next big line in the sand."

The primary driver of stock prices in coming weeks looks likely to be investor concern about the U.S. fiscal situation.

In a sign of the risks involved, comments by President Barack Obama on Friday about the upcoming negotiations caused stocks to sharply cut their gains.

The president, who defeated Republican candidate Mitt Romney in Tuesday's U.S. election, outlined a position for the fiscal issues on Friday that is far apart from that of his political opponents, suggesting a long battle is to come.

"If the market anticipates a resolution to the fiscal cliff or Europe or any of the other bricks in the wall of worry, we could easily take off," Sarhan said.

Seventeen of the Dow's 30 components are trading below both their 50-day and 200-day moving averages, while another eight are under their 50-day levels, but not their 200. Only five components - Bank of America, JPMorgan Chase, Home Depot, Johnson & Johnson and Travelers - are above both support levels.

Another big negative for the market has been heavy selling of Apple shares. The stock of the world's biggest company, ranked by market capitalization, lost 5.2 percent this week, weighing heavily on both the S&P 500 and the Nasdaq. The stock is down 22.4 percent from its September 21 all-time intraday high of $705.07.

Big retailers' report cards
The election and fiscal cliff concerns, which came on the heels of Superstorm Sandy and its devastating effects on many parts of the U.S. Northeast, have captured so much attention that they've overshadowed weakness coming from third-quarter earnings.

With results in from 449 of the S&P 500 companies, third-quarter earnings now are estimated to have declined 0.3 percent from a year ago, which is slightly better than the forecast at the start of the reporting period. Results have been especially weak on the revenue side, however, with just 38 percent of companies beating on sales, Thomson Reuters data showed.

But recent stronger economic data, including a report on Friday showing consumer sentiment at more than a five-year high in early November, suggests that retailers, many of which have yet to report, could be among the stronger performers this earnings period.

Next week, results are expected from such big names as Target, Wal-Mart and Home Depot.

Consumer discretionary companies have outperformed the broader S&P 500 in earnings, with 72 percent of the companies in that sector beating analysts' expectations, compared with 63 percent for the S&P 500 as a whole.

Investors will be paying close attention to those results with the holiday shopping period around the corner, said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey, which oversees about $1 billion in assets.

"It's really the beginning of the Christmas sell season, and I think there's going to be a lot of interest with the outlook for that season and how promotional companies are going to be," Meckler said.

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Claims increase unemployment drops, hope for the labour market

6:30 AM claims, drops, increase, labour, market, unemployment No Comments

By NBC News staff and wire reports
Americans filed fewer applications for unemployment last week, insurance, delete the increase in unemployment claims last week and a glimmer of hope for the struggling labor market.

Seasonally-adjusted claims reported the Labor Department Thursday of 35,000 on 353.000 left. The four week moving average, a better gauge of the work seen market conditions, because it folds in the data smoothes deleted 8,750 to 367.250.

Unemployed demands strengthening ensure that the U.S. job market succumbing to worries about Europe's debt crisis and deadlock in Washington was recently been on the rise. The unemployment rate was 8.2 per cent in June, if company a lukewarm 80,000 new jobs created.

But the jobless claims data were volatile, because in this year car manufacturers perform less temporary plant shutdowns, from the model, the Department used to smooth the data for the typical seasonal patterns.

A Labor Department official said that they still have experienced volatility related to the auto layoffs happen in this time of year. Otherwise, the data had some points of light. Only numbers for Utah were estimated.

The labour market has suffered three months private sub 100,000 jobs, as the economy slowed down in the midst of a cloud of uncertainty by fears of strong contraction fiscal policy and debt problems in Europe brought forth.

Federal Reserve Chairman Ben Bernanke told lawmakers last week that additional measures would take the Fed last month expanded its efforts to advance the economy, when officials came to the conclusion that no progress towards higher employment was.

Benefits after regular State programs after a first week of the number of people still receiving aid 30,000 to 3,2870 million in the week fell ended on July 14.

Reuters contributed to this report.

By Rick Santelli CNBC takes a look at the 35,000 decline per unemployed demands and boost the durable goods with CNBC from Steve Liesman in June.

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Jobless claims jump as job market struggles

8:00 AM claims, jobless, market, struggles No Comments

New claims for unemployment aid rose unexpectedly in the latest week, signaling that the labor market remained on the defensive and the recovery was stumbling along.

The Labor Department reported Thursday that claims rose a seasonally-adjusted 6,000 to 386,000 in the week ended June 9. Even the four-week moving average, considered a more accurate gauge of the labor market, jumped, gaining 3,500 to 382,000. It was the measure's third straight week of gains.

Economists had been expecting new claims to drop to 375,000.

"We've been on the higher side for the past two months on average. You cannot explain this away with normal random volatility. It has not been a marked deterioration, but there has been some slippage in the strength in the labor market," Michael Moran, chief economist for Daiwa Securities, told Reuters.

The report was another in a series of setbacks for those seeking an improvement in the job market. Among them: President Barack Obama who is running for reelection and needs the economy's cooperation in his battle against his GOP rival Mitt Romney.

The rise in jobless claims over the past few weeks suggests that hiring has slowed and the pace of layoffs has quickened as U.S. businesses react warily to a sluggish recovery at home and the financial crisis in Europe.

CNBC's Rick Santelli breaks down the latest numbers on jobless claims & Consumer Price Index, and a look at the impact on the market, with CNBC's Steve Liesman.

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China overtakes us as top food market

8:07 PM China, market, overtakes No Comments

Carlos Barria / Reuters

A man shops at a supermarket in downtown Shanghai in this photo file.

By John W. Schoen, senior producer

The Chinese economy may have slowed from its blistering growth pace, but still no bite of consumer demand for food taken.

China overtakes the United States as the world's largest food and food retail, according to a report by research firm IGD and is expected to continue growing at a fast clip.

IGD said that the Chinese grocery sector for the United States 607 billion pounds ($964 billion) 2011 compared to 908 billion $ hit

Until 2015 Chinese households about $1.6 trillion on food, IGD spend the amount of spent in 2006 predicted three times. The U.S. market is taken probably about $1 trillion by 2015.

"This rapid expansion (in China) were operated three main factors: rapid economic growth, population, and rising inflation in food," said Joanne Denney-Finch, IGD of the Chief Executive.

China's appetite for food is the persistent increase in the wages under a growing middle class, fed is part of the Government plan 30-year-old a hrige to transform the country's economy.

Although the economy strongly came back after the global recession in 2007, growth has somewhat slowed down. After a peak in 2010 at 10.4 percent annual growth, China GDP is expected to expand 8.6 percent this year according to estimates by Goldman Sachs.

This is always fast enough still to increase the purchasing power of Chinese households at a healthy clip.

"Sustained, strong wage increases should consumption, support the Government of one of its most important objectives - the restructuring of the economy from dependence on exports and capital spending, reach according to capital economics Asia Economist Gareth leather and Mark Williams support".

Much of the increased consumption is the result of rapid inflation, as strong demand pushes a variety of food and other commodities higher.

This has still expects. Between 2011 and 2015, the growth of China's food market grows to 10.9 percent, double the growth rate for the United States

Although early-stage economic growth largely limiting China's coastal cities, the demand for consumer goods such as food rapidly spreading inland. By the year 2025 it about 200 Chinese cities with a population of over a million people is according to IGS.

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New graduates see an improving job market

10:49 AM graduates, improving, market No Comments

NEW YORK — Sean Chua expected the hunt for his first job after college to be tough. After all, he watched his brother struggle to find a position when he graduated back in 2008.

But his fears were unwarranted. The 21-year-old justice major at American University sent out only seven resumes before getting an offer earlier this month from IBM for an IT consulting job, making him a beneficiary of a turnaround in the labor market for U.S. graduates. "My mom's first position was with IBM so she is particularly proud," says Chua.

Hiring is back in a big way on many college campuses, one of several signs a recovery in the U.S. jobs market is gaining traction. After four years during which many students graduated to find no job and had only their loans to show for their studies, most college campuses are teeming with companies eager to hire.

A survey by the National Association of Colleges and Employers (NACE) found 2012 hiring is expected to climb 10.2 percent, above a previous estimate of 9.5 percent.

Companies such as General Electric, Amazon, Apple and Barclays Global are looking for new staff, even if some firms remain below the pre-recession levels of new hiring. In another sign of the recovery, some first-time job seekers are receiving multiple offers.

At University of North Carolina-Chapel Hill, the career service office has seen up to now a 7.4 percent increase in the number of interviews of students by potential employers from last year and the number of companies seeking to recruit for full-time jobs is up 9.2 percent.

Undergraduate business majors reporting full-time job offers is up about 10 percent.

Career experts at a dozen of U.S. schools said they have seen an increase of 15 to 30 percent in the number of companies attending campus career fairs. At University of Florida, the fall career fair garnered 15 percent more companies in attendance than in 2010.

And 150 companies asked to conduct interviews versus about 100 in recent years, said Ja'Net Glover, associate director of employer relations at the school.

The increase in demand was so significant that it was the first time in years the school had to use both the first and second floors of the school's basketball facility for interviews.

"It's kind of like a no-brainer," says Kathy Sims. Director of Career Services at UCLA. "The economy is better and the college recruitment market is improving."

While the U.S. jobless rate fell to 8.3 percent in February, unemployment among college graduates over the age of 25 stood at 4.2 percent. Historically, their jobless rate is half that of Americans with only a high school education. Over the recession, unemployment among graduates climbed as high as 5 percent, sparking protests over the rising tuition cost of some U.S. colleges.

U.S. unemployment data for March, due for release on April 6, is expected to show a total of just over 200,000 jobs were created in the month, keeping the overall unemployment rate at 8.3 percent.

College graduates' earnings are also on the rebound. NACE says the median wage for first-time job seekers after college for 2012 is up 4.5 percent higher than a year ago to $42,569.

That initial pay level can resonate over the span of a career. Several studies show that the life-time earnings for workers who enter the labor force at time of economic recession are lower than lifetime earnings of those who are hired amid an economic recovery.

Given the tepid recovery of the economy, some caution is required.

In 2008, many college graduates who had already accepted job offers were later away. After the run of lean years, many graduates are stuck in low-paying jobs and professions that never intended to follow, meaning there could be a backlog of well-educated workers who need to get their careers on track as well as new graduates.

However, with a wide range of employers -- from automakers to investment banks -- back on campus offering internships and full-time jobs, and not just to engineering, computer science and math majors, the outlook for the Class of 2012 looks rosy.

General Electric wants to hire 5,000 interns this year, up from its usual 3,000 to 4,000. Since 70 percent of its full-time hires come from the interns pool, Steve Canale, head of global recruiting, said that uptick will also translate into more full-time jobs after graduation.

"(Companies) are saying, 'we have an aging workforce, and we have to replenish the pipeline.' GE has always done it, but this year a lot of other companies are also reloading their talent pool," Canale said.

Chrysler said it plans to hire 400 interns this year compared to 256 in 2011. The automaker has also hired almost 4,000 salaried employees since June 2009, about a quarter of which are new college graduates.

The pick-up in hiring extends to industries that were among the hardest hit during the financial crisis. Schools report that banking and financial services companies have returned to campus for the Class of 2012.

It's a stark contrast from just a few years ago when smaller firms appeared on campuses to replace the corporations no longer showing up.

"Even students with lower grades are finding opportunities," says Notre Dame's Svete, who believes job placement at the school is up about 7 percent. In 2009, only 75 percent of students had jobs or plans for graduate school at graduation. This year, the school expects that to climb to 85 to 88 percent, closer to the 90 percent level of 2007.

Nathan Pace, a senior at American University, hasn't yet found a job, but is confident for his future job. He started the college four years ago and he has since seen each class of graduating seniors have better luck finding jobs.

Many of his friends recently secured job offers. "The vibe on campus is that people are excited," says Pace.

Copyright 2012 Thomson Reuters.

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