Chicago, IL – July 13, 2009 – Zacks.com announces the latest Industry Outlook. Today’s outlook from Zacks Equity Research analyst Steven Ralston discusses the Consumer Staples sector. Highlighted stocks include: Altria (MO) and Reynolds American (RAI).

Additional regulation of tobacco products by the U.S. Federal Government is now expected. On June 8, 2009, the U.S. Senate again passed legislation, empowering the U.S. Food and Drug Administration (FDA) to regulate cigarettes and other tobacco products. Over the last several years, the House had not passed a similar bill, but in April, the House finally passed a comparable measure, indicating a more stringent regulatory framework for all domestic tobacco companies in the future.

The tobacco companies are losing product liability law suits. In late March 2006, the U.S. Supreme Court refused to hear an appeal in the Boeken case; therefore, Altria (MO) paid the $50 million judgment, despite claiming the judgment was excessive. Altria also lost the Bullock case; however, a new trial is scheduled to revise the amount of initial punitive damages of $28 million.

Lastly, in March 2009, Altria lost the Williams case when the U.S Supreme Court dismissed the Altria’s appeal of a 1999 punitive damages award of $79.5 million. However, the company is delaying payment by disputing an Oregon state law that requires 60% of any punitive damages should be paid to the state.

As a result of these negative developments, the ratings on both domestic tobacco companies, Altria and Reynolds American (RAI), are rated Sells.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5510.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5511.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/ZacksInvestment

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

OPPORTUNITIES

Since product demand is relatively stable, the companies should report earnings in line with expectations and, hence, the stocks have outperformed. Generally speaking, food companies generate earnings growth at a mid-to-high single-digit rate.

Beverage companies, however, are structurally able to grow faster at the high single-digit to low double-digit rate. But, cosmetics companies can grow earnings a percentage point or two above beverage companies.

At year-end of 2008, Consumer Staples sector has outperformed the market on a total return basis for five consecutive years; therefore, the positive performance disparity is long-in-the-tooth. In addition, the relative performance has seasonal attributes with almost all the relative gain coming in the fourth quarter as investors flee more cyclical investments, which tend to disappoint near the end of the year.

In 2009, it is highly probable that Consumer Staples will underperform as stocks begin to discount the recovery out of the current economic abyss. During the second quarter of 2009, Consumer Staples stocks were only up 11.7% versus the 15% gain for the S&P 500.

WEAKNESSES

The outlook for the tobacco industry is negative due to the impact of a 150%+ increase in the federal excise tax, the high probability of additional federal regulation, and the recent losses in product liability lawsuits. In February, President Obama signed the congressional SCHIP (State Children's Health Insurance Program) bill that included a $0.6166 per pack increase in the federal tobacco tax. Hence, the federal excise tax per pack of 20 cigarettes was increased from $0.39 to $1.01 per pack.

When federal excise taxes are increased, it is estimated that industry volume will decline by at least 8%, but the magnitude of the decline could be much greater, especially considering the backdrop of the weak economy. During the first quarter, industry cigarette volume declined 10.4% due to wholesale inventory reductions associated with the federal tax increase. A tobacco tax increase of this magnitude is unprecedented.

Additional regulation of tobacco products by the U.S. Federal Government is now expected. On June 8, 2009, the U.S. Senate again passed legislation, empowering the U.S. Food and Drug Administration (FDA) to regulate cigarettes and other tobacco products. Over the last several years, the House had not passed a similar bill, but in April, the House finally passed a comparable measure, indicating a more stringent regulatory framework for all domestic tobacco companies in the future.

The tobacco companies are losing product liability law suits. In late March 2006, the U.S. Supreme Court refused to hear an appeal in the Boeken case; therefore, Altria (MO) paid the $50 million judgment, despite claiming the judgment was excessive. Altria also lost the Bullock case; however, a new trial is scheduled to revise the amount of initial punitive damages of $28 million.

Lastly, in March 2009, Altria lost the Williams case when the U.S Supreme Court dismissed the AltriaÕs appeal of a 1999 punitive damages award of $79.5 million. However, the company is delaying payment by disputing an Oregon state law that requires 60% of any punitive damages should be paid to the state.

As a result of these negative developments, the ratings on both domestic tobacco companies, Altria and Reynolds American (RAI), are rated Sells.Zacks Investment Research

OPPORTUNITIES

Since product demand is relatively stable, the companies should report earnings in line with expectations and, hence, the stocks have outperformed. Generally speaking, food companies generate earnings growth at a mid-to-high single-digit rate.

Beverage companies, however, are structurally able to grow faster at the high single-digit to low double-digit rate. But, cosmetics companies can grow earnings a percentage point or two above beverage companies.

At year-end of 2008, Consumer Staples sector has outperformed the market on a total return basis for five consecutive years; therefore, the positive performance disparity is long-in-the-tooth. In addition, the relative performance has seasonal attributes with almost all the relative gain coming in the fourth quarter as investors flee more cyclical investments, which tend to disappoint near the end of the year.

In 2009, it is highly probable that Consumer Staples will underperform as stocks begin to discount the recovery out of the current economic abyss. During the second quarter of 2009, Consumer Staples stocks were only up 11.7% versus the 15% gain for the S&P 500.

WEAKNESSES

The outlook for the tobacco industry is negative due to the impact of a 150%+ increase in the federal excise tax, the high probability of additional federal regulation, and the recent losses in product liability lawsuits. In February, President Obama signed the congressional SCHIP (State Children's Health Insurance Program) bill that included a $0.6166 per pack increase in the federal tobacco tax. Hence, the federal excise tax per pack of 20 cigarettes was increased from $0.39 to $1.01 per pack.

When federal excise taxes are increased, it is estimated that industry volume will decline by at least 8%, but the magnitude of the decline could be much greater, especially considering the backdrop of the weak economy. During the first quarter, industry cigarette volume declined 10.4% due to wholesale inventory reductions associated with the federal tax increase. A tobacco tax increase of this magnitude is unprecedented.

Additional regulation of tobacco products by the U.S. Federal Government is now expected. On June 8, 2009, the U.S. Senate again passed legislation, empowering the U.S. Food and Drug Administration (FDA) to regulate cigarettes and other tobacco products. Over the last several years, the House had not passed a similar bill, but in April, the House finally passed a comparable measure, indicating a more stringent regulatory framework for all domestic tobacco companies in the future.

The tobacco companies are losing product liability law suits. In late March 2006, the U.S. Supreme Court refused to hear an appeal in the Boeken case; therefore, Altria (MO) paid the $50 million judgment, despite claiming the judgment was excessive. Altria also lost the Bullock case; however, a new trial is scheduled to revise the amount of initial punitive damages of $28 million.

Lastly, in March 2009, Altria lost the Williams case when the U.S Supreme Court dismissed the AltriaÕs appeal of a 1999 punitive damages award of $79.5 million. However, the company is delaying payment by disputing an Oregon state law that requires 60% of any punitive damages should be paid to the state.

As a result of these negative developments, the ratings on both domestic tobacco companies, Altria and Reynolds American (RAI), are rated Sells.Zacks Investment Research

A synopsis of today's Industry Outlook is presented below. The full article can be read at http://at.zacks.com/?id=2678.

Additional regulation of tobacco products by the U.S. Federal Government is now expected. On June 8, 2009, the U.S. Senate again passed legislation, empowering the U.S. Food and Drug Administration (FDA) to regulate cigarettes and other tobacco products. In the last several years, the House had not passed a similar bill, but in April, the House finally passed a comparable measure, indicating a more stringent regulatory framework for all domestic tobacco companies in the future.

The tobacco companies are losing product liability law suits. In late March 2006, the U.S. Supreme Court refused to hear an appeal in the Boeken case; therefore, Altria (MO) paid the $50 million judgment, despite claiming the judgment was excessive. Altria also lost the Bullock case; however, a new trial is scheduled to revise the amount of initial punitive damages of $28 million.

Lastly, in March 2009, Altria lost the Williams case when the U.S Supreme Court dismissed the Altria's appeal of a 1999 punitive damages award of $79.5 million. However, the company is delaying payment by disputing an Oregon state law that requires 60% of any punitive damages should be paid to the state.

As a result of these negative developments, the ratings on both domestic tobacco companies, Altria and Reynolds American (RAI), were lowered to a Sell.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting: http://at.zacks.com/?id=2679.

About Zacks 

The performance of the Zacks Rank portfolios shown above for annual and year-to-date periods are the linked monthly total returns (price changes + dividends) of equal weighted hypothetical portfolios, consisting of those stocks with the indicated Zacks Rank, assuming monthly rebalancing and zero transaction costs. These are not the returns of actual portfolios. The hypothetical portfolios were created at the beginning of each month from Jan 1988 forward based on the values of the Zacks Rank available to Zacks' clients before the beginning of each month.

The portfolios created monthly from 1988 through September 2006 exclude ADRS and are comprised of stocks that have the indicated Zacks Rank and were covered by at least two analysts at the time of the stocks inclusion in the portfolio. Starting in October 2006 and going forward, the portfolios are comprised of all stocks with the indicated Zacks Rank and do not exclude ADRs, which is more reflective of the list of stocks that customers will find on the Zacks web sites. 2007 returns are for the period of Jan 1 - Jun 30, 2007. These performance numbers have been audited from 1995 through 2003 by Autschuler Melovan, a division of American Express Financial.

During market declines, stocks in the Consumer Staples sector have traditionally performed better than the stock market, and especially cyclical companies. The fundamental explanation is that food, beverage, household products and cosmetics companies manufacture and market brand-name consumable products, most of which are considered essential to daily life, such as food, drink, toothpaste, deodorants, toilet paper, etc.

Since product demand is relatively stable, the companies should report earnings in line with expectations and, hence, the stocks have outperformed. Generally speaking, food companies generate earnings growth at a mid-to-high single-digit rate. Beverage companies, however, are structurally able to grow faster at the high single-digit to low double-digit rate. But cosmetics companies can grow earnings a percentage point or two above beverage companies.

At year-end 2008, the Consumer Staples sector had outperformed the market on a total return basis for five consecutive years; therefore, the positive performance disparity is long-in-the-tooth. In addition, the relative performance has seasonal attributes, with almost all the relative gain coming in the fourth quarter as investors flee more cyclical investments, which tend to disappoint near the end of the year. In 2009, it is highly probable that Consumer Staples will underperform as stocks begin to discount the recovery out of the current economic abyss.

WEAKNESSES

The outlook for the tobacco industry is negative due to the impact of a 150%+ increase in the federal excise tax, the high probability of additional federal regulation, and the recent losses in product liability lawsuits. In February, President Obama signed the congressional SCHIP (State Children's Health Insurance Program) bill that included a $0.6166 per pack increase in the federal tobacco tax. Hence, the federal excise tax per pack of 20 cigarettes was increased from $0.39 to $1.01 per pack.

When federal excise taxes are increased, it is estimated that industry volume will decline by at least 6%, but the magnitude of the decline could be much greater, especially considering the backdrop of the weak economy. During the first quarter, industry cigarette volume declined 10.4% due to wholesale inventory reductions associated with the federal tax increase. A tobacco tax increase of this magnitude is unprecedented.

Additional regulation of tobacco products by the U.S. Federal Government is now expected. On June 8, 2009, the U.S. Senate again passed legislation, empowering the U.S. Food and Drug Administration (FDA) to regulate cigarettes and other tobacco products. In the last several years, the House had not passed a similar bill, but in April, the House finally passed a comparable measure, indicating a more stringent regulatory framework for all domestic tobacco companies in the future.

The tobacco companies are losing product liability law suits. In late March 2006, the U.S. Supreme Court refused to hear an appeal in the Boeken case; therefore, Altria (MO) paid the $50 million judgment, despite claiming the judgment was excessive. Altria also lost the Bullock case; however, a new trial is scheduled to revise the amount of initial punitive damages of $28 million.

Lastly, in March 2009, Altria lost the Williams case when the U.S Supreme Court dismissed the Altria's appeal of a 1999 punitive damages award of $79.5 million. However, the company is delaying payment by disputing an Oregon state law that requires 60% of any punitive damages should be paid to the state.

As a result of these negative developments, the ratings on both domestic tobacco companies, Altria and Reynolds American (RAI), were lowered to a Sell.Zacks Investment Research

During market declines, stocks in the Consumer Staples sector have traditionally performed better than the stock market, and especially cyclical companies. The fundamental explanation is that food, beverage, household products and cosmetics companies manufacture and market brand-name consumable products, most of which are considered essential to daily life, such as food, drink, toothpaste, deodorants, toilet paper, etc.

Since product demand is relatively stable, the companies should report earnings in line with expectations and, hence, the stocks have outperformed. Generally speaking, food companies generate earnings growth at a mid-to-high single-digit rate. Beverage companies, however, are structurally able to grow faster at the high single-digit to low double-digit rate. But cosmetics companies can grow earnings a percentage point or two above beverage companies.

At year-end 2008, the Consumer Staples sector had outperformed the market on a total return basis for five consecutive years; therefore, the positive performance disparity is long-in-the-tooth. In addition, the relative performance has seasonal attributes, with almost all the relative gain coming in the fourth quarter as investors flee more cyclical investments, which tend to disappoint near the end of the year. In 2009, it is highly probable that Consumer Staples will underperform as stocks begin to discount the recovery out of the current economic abyss.

WEAKNESSES

The outlook for the tobacco industry is negative due to the impact of a 150%+ increase in the federal excise tax, the high probability of additional federal regulation, and the recent losses in product liability lawsuits. In February, President Obama signed the congressional SCHIP (State Children's Health Insurance Program) bill that included a $0.6166 per pack increase in the federal tobacco tax. Hence, the federal excise tax per pack of 20 cigarettes was increased from $0.39 to $1.01 per pack.

When federal excise taxes are increased, it is estimated that industry volume will decline by at least 6%, but the magnitude of the decline could be much greater, especially considering the backdrop of the weak economy. During the first quarter, industry cigarette volume declined 10.4% due to wholesale inventory reductions associated with the federal tax increase. A tobacco tax increase of this magnitude is unprecedented.

Additional regulation of tobacco products by the U.S. Federal Government is now expected. On June 8, 2009, the U.S. Senate again passed legislation, empowering the U.S. Food and Drug Administration (FDA) to regulate cigarettes and other tobacco products. In the last several years, the House had not passed a similar bill, but in April, the House finally passed a comparable measure, indicating a more stringent regulatory framework for all domestic tobacco companies in the future.

The tobacco companies are losing product liability law suits. In late March 2006, the U.S. Supreme Court refused to hear an appeal in the Boeken case; therefore, Altria (MO) paid the $50 million judgment, despite claiming the judgment was excessive. Altria also lost the Bullock case; however, a new trial is scheduled to revise the amount of initial punitive damages of $28 million.

Lastly, in March 2009, Altria lost the Williams case when the U.S Supreme Court dismissed the Altria's appeal of a 1999 punitive damages award of $79.5 million. However, the company is delaying payment by disputing an Oregon state law that requires 60% of any punitive damages should be paid to the state.

As a result of these negative developments, the ratings on both domestic tobacco companies, Altria and Reynolds American (RAI), were lowered to a Sell.Zacks Investment Research

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579.

Here are highlights from Friday's Analyst Blog:

On Bankruptcy & Banking

With the bankruptcy of Chrysler, and the potential bankruptcy of General Motors Corp. (GM) the bankruptcy code is very much in the news. Imagine for a minute, though, what would happen if the biggest single liability for these firms -- say, their legacy Pension and Health Care liabilities -- were by law not allowed to be touched by the courts. How much good could it really do?

Well that is the way it should be according to every single Republican and twelve Democrats in the U.S. Senate. No, not for big firms like GM, but for individuals.

The same day that Chrysler went "Tango Uniform," the U.S. Senate bowed to the pressure of the bankers' lobbyists and refused to allow mortgage cram-downs is bankruptcy courts. As Sen. Richard Durbin (D- IL) put it, referring to the bank lobbyists, "They own this place."

Evergreen Solar's Wider Loss

Evergreen Solar, Inc. (ESLR) announced financial results for its 1st quarter ended April 4, 2009.

Revenue for the reported 1st quarter of 2009 was $55.8 million, up 26% from $44.2 million in the sequential 4th quarter of 2008, and up 144% from $22.9 million in the year-ago 1st quarter of 2008.

AMAG Drug Nears Approval

AMAG Pharmaceuticals, Inc. (AMAG) reported first quarter 2009 financial resorts and recent accomplishments Thursday after market close.

Apparently, investors are not interested in its financial results; instead, they are more focused on the approval status of the company's lead anti-anemia drug Feraheme. In the news release and the conference call, the company disclosed that all outstanding issues pertaining to the manufacturing of Feraheme have been settled to the satisfaction of the FDA, and that a re-inspection of its manufacturing facility will not be required as a condition to approval of Feraheme.

Boeing Suffers Rating Cut

Fitch Ratings lowered to negative its long-term credit ratings outlook on The Boeing Company (BA) and its financial unit, Boeing Capital Corp.

Fitch said the long-term issuer default rating of A+ on Boeing and Boeing Capital Corp., along with other ratings, were supported by financial flexibility, large order backlog, and the company's balanced portfolio approximately equally split between defense and commercial.

Micros Beats on Lower Revenues

Micros Inc. (MCRS, Hold) released its fiscal Q3 results yesterday. Revenues were sharply lower at $205.7 million, versus our and consensus expectation of $227 million and $222 million, respectively. Non-GAAP EPS was impressively higher at $0.32, compared to our estimate of $0.27 (consensus was at $0.28).

EPS upside was largely a result of cost-cutting measures, while the revenue shortfall was attributed to weak restaurant business. The stock is up around 10% in trading today.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=2649.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=2677

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Mike Englund is chief economist at Action Economics LLC. He is a specialist in Federal Reserve policies and the U.S. economy. Before joining the Boulder, Colo.-based research firm, Englund was the chief economist for MMS International. His background also includes serving as Standard & Poor's chief market economist.

On Monday, IndexUniverse.com's Murray Coleman caught up with Englund as he was assessing the latest U.S. Treasury and Federal Reserve moves to buy so-called "toxic" assets and strengthen credit flows in U.S. markets.

IndexUniverse.com (IU): Is the current stock market rally sustainable?

Mike Englund, chief economic, Action Economics LLC (Englund): In the past two months, we've seen evidence that the rate of collapse in the U.S. economy seems to be slowing. Essentially, it's coming primarily [from an uptick] on the retail side. Whether or not that translates into moderation is something we're going to have to wait to see.

IU: How does the Fed's movement toward quantitative easing figure into all of this?

Englund: If they're going to buy fixed income, that's going to drive prices higher. It's not clear whether that's a good thing for the economy as a whole. But if you're an investor trying to sell Treasuries, it's definitely a good thing.

IU: Isn't the point to try to establish a pricing floor for mortgage-backed securities?

Englund: That's part of the plan. But the Fed is also going to be buying MBS and agency debt. There is concern at the Fed that since their debt is essentially owned by taxpayers, eventually their liabilities would be the taxpayers' if these securities wound up posting a loss in value.

So they don't want to just use quantitative easing on MBS. They're hoping that by purchasing Treasuries, that should in turn raise the value of MBS and related securities.

IU: What are the other issues facing the economy?

Englund: We're waiting to see how far consumers have pulled back. The retail sales data for March, April and May are going to be important to see if the bounce we saw in January and February is sustainable or just seasonal. We're also watching to what degree employment statistics, which are a lagging indicator, keep going [down]. We're expecting unemployment to keep rising through the fourth quarter or so. But we're hoping the rate of decline in the number of jobs outstanding will slow in the second quarter.

IU: How realistic is that?

Englund: At this stage it's hard to judge. We're hoping people quit panicking. People don't run forever. But it's hard to know when the stampede will end. Right now, everyone's running with the herd. Whether those last few retail sales numbers suggest there's a let-up is anyone's guess. Our assumption is that the sales numbers will turn out to be a helpful sign going forward.

IU: Is the government's stimulus plan helping?

Englund: It's unlikely to be helping so far. The stimulus plan had a remarkably low level of stimulus in it. Much of the spending is back-loaded over a 10-year period. Even smaller still is the collection of benefits to provide more incentives for individual business owners to hire more people.

In theory, jobs will be created. But it's not going to be a short-term shot in the arm. At the same time, consumer confidence measures fell through February, which is an ominous sign. Presumably, a mass-cash giveaway by Congress should give people some level of confidence.

IU: So what does the U.S. economy have going for it?

Englund: The one big plus is that the private sector seems to be working out its problems on its own. Given enough time, the markets are going to right themselves naturally. We're assuming somewhere around midyear this recession will end. But even if that happens, it would still represent the longest post-WWII recession on record.

IU: How does the Treasury's new toxic asset plan look?

Englund: That's clearly going to be a positive for the market. The government is going to essentially round up private capital and toss some public money into the pot as well. And officials are promising that there won't be any compensation limits on executives like they've imposed on TARP. But they said the same thing at the beginning of that program as well.

IU: Do you see the new plan working then?

Englund: It's going to be a question of what type of dialogue the government has with private investors. And we'll also have to see where legislation goes that was enacted last week in the U.S. House to limit executive compensation. Those proposals have to be reconciled with the U.S. Senate. If Congress imposes a 90% tax on bonus income on those involved with the TARP program, why would participants in this new toxic asset plan believe that they wouldn't be included in the same sort of disincentive plans?

IU: What sectors do you have the most optimism about going forward?

Englund: The Auto sector's contracted pretty sharply. There may be no further room to fall from here. And if we see further agreement between policymakers in Washington, D.C., and major automakers, some stability might come to that market. The vehicle sales numbers are quite low, but at some point, people will start buying more cars.

There are probably some people with older cars looking to buy once they've got some confidence in which automakers are going to survive. We dropped in January to a 3.8-million assembly rate—which is the rate at which we assemble cars. That's a third of the normal pace. Even if we were to double that rate by the end of the year, we'd still see a relatively poor year. But there is clearly room for a nice bounce.

IU: What other sectors could bounce back in 2009?

Englund: In general, we've seen a substantial pullback in global trade. We believe export growth fell at about a 37% clip in the first quarter. If you look at imports, they fell at about a 31% rate in the first quarter. So we've seen a sharp cutback in global trade. Economies with the most exposure to global trade, particularly those in the Pacific Rim, have been hit the hardest. Many of the Asian economies fell at a 20% clip in terms of GDP growth in the fourth quarter, and might show similar declines in the first quarter of this year. But there's a limit on how much global trade can be sustainable at this point. The rate of decline has to diminish.

IU: What sectors can benefit from that?

Englund: About a fifth of our economy has some exposure to importing and/or exporting. So this could provide a widespread boost to the U.S. economy if global trade picks up. While Automakers and Real Estate are sectors we watch closely, they represent a smaller portion of the overall economy.

For example, automakers only make up between 3-4% of GDP. Meanwhile, residential construction is about 3%. Foreign trade is clearly going to be a bigger driver of economic growth in the future.

We're assuming the rate of contraction in U.S. imports and exports will decline in the second and third quarters, and perhaps resume growth in the fourth quarter. Tourism, airlines, hotels, shipping and transportation could all benefit a great deal from a resumption of more-normalized global growth patterns.

This from The Daily Reckoning Australia:

Global share markets don't look very convinced the U.S. Senate's passage of a bailout bill will purge the financial sector of the bad debts which are killing it. Perhaps it's because the Senate bill was such a joke.

If you haven't had a chance to go through the bailout bill the Senate passed, don't cheat yourself. You can find it here.

Those with advanced knowledge of American government will know that the spending bills cannot originate in the Senate. Article 1, Section Seven of that useless piece of paper (the U.S. Constitution) says: "All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills."

This is why the Senate lobotomized a bill already passed by the House. The Senate took a spending bill which had already cleared the House, gutted it as clean as you'd like, and stuffed it full of new spending and tax provisions which the house will vote on tomorrow.

One of the funnier provisions of the Senate bailout bill is Section 503, an "Exemption from excise tax for certain wooden arrows designed for use by children."

Hooray! Everyone gets the shaft! And it's tax free!

According to Bloomberg, "Senators attached a provision repealing a 39-cent excise tax on wooden arrows designed for children..The provision...will save manufacturers such as Rose City Archery in Myrtle Point, Oregon, about $200,000 a year."

And we're supposed to take the Congress seriously? These are the people in charge of America? They're the same people who also just lifted the Statutory Debt limit to US$11.3 trillion.

The Law as a concept is worthy of respect. But when bad lawmakers make bad laws, they undermine the whole institution of the Law. That's what Congress and the President are doing.

It would be funny if it weren't so serious. The plan, or FrankenTARP as we are now calling it includes restriction on judicial review, a suspension of the normal rules for drafting and debating legislation in front of Congress, and allows for the President and Treasury Secretary to come back as many times as they'd like to get up to US$700 billion "at any one time."

It's effectively a down payment on the recapitalisation of the banking system. Once you've committed nearly a trillion dollars to a project, it's a little hard to walk away from isn't it? And with the other provisions about increasing deposit insurance, renegotiating mortgages, and providing relief to renters, you can see many version of this plan being resubmitted to Congress by President Obama and passing (without debate).

So what do you say? Are you ready for some massive, State-sponsored inflation? It will be very different from what Treasury Secretary Andrew Mellon told Herbert Hoover in 1931. Mellon told Hoover:

Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.

The response of the Paulson Treasury Department on the Bernanke Fed is not "liquidate" but "monetize." They won't say that of, course. The expansion in Fed credit and the Treasury plan are supposed to be "loans." We'll see how that goes. Meanwhile, take a look at the Fed's latest statistical release.

Source: Federal Reserve

Source: Bailout Bill Leaves Markets in Deep Freeze

But Smart Commodities UK editor Garry White says a number of nuclear power projects are already underway in other parts of the world. India plans to build between 18 to 20 new nuclear plants over the next 15 years. Even the Middle East is shifting to the atom for its future energy needs.

Nuclear plants are also proven to be effective at water desalination. This will be vital in emerging markets, where populations are rising rapidly.

This is from Fleet Street Daily:

He [Bodman] made the comments on the same day as the US senate signed off the nuclear co-operation deal with India. It was also a few days after Russia agreed to help Hugo Chavez with a nuclear programme. But if you want to feel assured about the prospect for nuclear power, just have a look at what is going on in the Middle East. A place awash with petrodollars.

There are two main reasons for the rush to nuclear power in Iran and Saudi Arabia. And neither of them is the pursuit of nuclear weapons.

The first of these is the fact that they don’t have as much oil as everybody thinks. The second is water.

Let’s take a look at Iran’s reserve situation.

The simple fact is that Iran HAS to develop nuclear power because the country is running out of oil. Iran’s “massive” oil reserves are a big, fat lie.

One of the people who made that reality crystal clear to Iran's leaders a few years ago was Dr Ali Morteza Samsam Bakhtiari.

Dr Bakhtiari started working for the National Iranian Oil Company back when the Shah was in power. For 36 years he worked for the company in a variety of senior positions until he retired.

This is what he told President Mahmoud Ahmadinejad:

"As for Iran, the usually accepted official 132 billion barrels is almost 100 billion barrels over any realistic assay."

The current estimate of Iran's reserves is 136 billion barrels. That's the second highest oil reserves in the Middle East after Saudi Arabia. Dr Bakhtiari thinks this should be closer to 36 billion barrels.

I believe that Ahmadinejad needs to go nuclear because his country's oil industry is struggling to keep its oil production at close to 4 million barrels per day. And it’s only going to get worse.

That’s why Iran needs nuclear – and that’s why Ahmadinejad will never give up his nuclear programme.

The second reason is water.

The population in the Middle East is set to soar in the next 15 years. In Saudi Arabia, almost 40% of the population is under the age of 14. It has a fertility rate of 5 children per woman. The country is set for a massive population explosion at a time when its infrastructure is creaking.

The Kingdom is already the world's largest producer of desalinated water. It currently has 27 desalination plants which provide 70% of its drinking water requirement. But it will need more. Much more.

That’s where nuclear power comes in.

Desalination is an extremely energy-intensive process, but nuclear plants can be used for the duel purpose of producing electricity and desalinating water.

Nuclear desalination is a proven technology. Kazakhstan produced water by nuclear desalination for almost 30 years until its reactor was decommissioned in 1999.

The country’s BN-350 fast reactor at Aktau successfully produced up to 135 MW of electricity and 80,000 m3/day of potable water over 27 years. Around 60% of its power was used for desalination.

Then there’s Japan...

It has ten desalination facilities linked to pressurised water reactors operating for electricity production. They have yielded 1000-3000 m3/day each of potable water.

India has also got in on the act. In 2002 it set up a demonstration plant coupled to twin 170 MWe nuclear power reactors at its Madras Atomic Power Station.

So, Mr Bodman needs to be a little less US-centric when talking about the future of nuclear power. The world’s going nuclear whether the US does or not. There’s plenty of money in the Middle East, in Venezuela, in India and in China.

Source: Iran Needs Nuclear because it’s Running Out of Oil

Russia's economic growth is obviously slowing quite quickly - and evidently far more rapidly than the government anticipated - largely due to the impact of the global credit crunch, the downward movement in oil prices and investor reaction to Russia's "go it alone" attitude in international disputes.

In the present environment inflation is likely to slow quite rapidly, and in September this easing in infaltion was noted in the prices that manufacturers pay and charge, as highlighted in the VTB report: "The rate of increase in prices charged by Russian manufacturers eased for the fifth straight month to its weakest' since at least January 2003".



Oil Output Down


And just to cap it all, Russia's oil production also fell in September as companies struggled with costs and maturing fields, effectively bringing the world's second-largest crude exporter closer to its first annual drop in output since 1998. Production fell to 9.83 million barrels of crude a day (40.2 million metric tons a month), 0.4 percent less than a year earlier, according to figures released by the Energy Ministry's CDU-TEK unit.

So What Can We Expect?

Well, in broad outline I don't think the outlook has changed that much from when I wrote my last analysis two weeks ago.

As I said at that point, Russia is hardly the Baltics, so we should not expect the economy to go into a complete nosedive. A lot depends on the view you take about the future of energy prices. While the global economy is now evidently set to slow considerably - in addition to the reduction in growth rates already seen so far this year -and especially in the aftermath of the most recent bout of financial turmoil. Cleary oil prices are set to drop even further - and this will only keep pushing Russian growth down - but at some point the market will find a floor, possibly in the region of $80 a barrel. More importantly when it comes to the future of oil prices, I would not be banking on some kind of long and deep global recession. Many of those developed economies who are significantly affected by the bursting of their construction booms (and the banking issues which have gone with it) will probably have weak domestic consumer demand for some time to come, but a solid core of emerging economies may well take off again quite rapidly as we move into 2009 -and especially if energy prices drop back, and the current near panic in the financial markets settles down (people do, after all, have to put their money somewhere). So the emergent (and numerous in population terms) emerging economies should give another strong shove to what may have become a rather listless global economy. As a knock on effect this should also serve to put some life back into export dependent economies like Germany and Japan (who by and large are not reeling under the impact of the construction bust, although their banks may have been lending to people who are).

So the bottom line here, I think, is be ready for a sharp slowdown in headline Russian GDP, but don't expect to see any imminent meltdown in the Russian financial system, one way or another they have the wherewithall at this point to keep limping forward. Of course, in the longer term, well, you know......

Russia's economic growth is obviously slowing quite quickly - and evidently far more rapidly than the government anticipated - largely due to the impact of the global credit crunch, the downward movement in oil prices and investor reaction to Russia's "go it alone" attitude in international disputes.

In the present environment inflation is likely to slow quite rapidly, and in September this easing in infaltion was noted in the prices that manufacturers pay and charge, as highlighted in the VTB report: "The rate of increase in prices charged by Russian manufacturers eased for the fifth straight month to its weakest' since at least January 2003".



Oil Output Down


And just to cap it all, Russia's oil production also fell in September as companies struggled with costs and maturing fields, effectively bringing the world's second-largest crude exporter closer to its first annual drop in output since 1998. Production fell to 9.83 million barrels of crude a day (40.2 million metric tons a month), 0.4 percent less than a year earlier, according to figures released by the Energy Ministry's CDU-TEK unit.

So What Can We Expect?

Well, in broad outline I don't think the outlook has changed that much from when I wrote my last analysis two weeks ago.

As I said at that point, Russia is hardly the Baltics, so we should not expect the economy to go into a complete nosedive. A lot depends on the view you take about the future of energy prices. While the global economy is now evidently set to slow considerably - in addition to the reduction in growth rates already seen so far this year -and especially in the aftermath of the most recent bout of financial turmoil. Cleary oil prices are set to drop even further - and this will only keep pushing Russian growth down - but at some point the market will find a floor, possibly in the region of $80 a barrel. More importantly when it comes to the future of oil prices, I would not be banking on some kind of long and deep global recession. Many of those developed economies who are significantly affected by the bursting of their construction booms (and the banking issues which have gone with it) will probably have weak domestic consumer demand for some time to come, but a solid core of emerging economies may well take off again quite rapidly as we move into 2009 -and especially if energy prices drop back, and the current near panic in the financial markets settles down (people do, after all, have to put their money somewhere). So the emergent (and numerous in population terms) emerging economies should give another strong shove to what may have become a rather listless global economy. As a knock on effect this should also serve to put some life back into export dependent economies like Germany and Japan (who by and large are not reeling under the impact of the construction bust, although their banks may have been lending to people who are).

So the bottom line here, I think, is be ready for a sharp slowdown in headline Russian GDP, but don't expect to see any imminent meltdown in the Russian financial system, one way or another they have the wherewithall at this point to keep limping forward. Of course, in the longer term, well, you know......

The Dow gained back more than half its record Monday loss, climbing 485.21 points, or 4.68%, to close at 10,850.66. The broad Standard & Poor’s 500 Index gained 58.35 points (5.27%), to hit 1,164.74. And the tech-heavy Nasdaq Composite Index zoomed 98.60 points (4.97%), to close at 2,082.33.

"There are at least some hints of optimism that something will still happen soon with regards to the [bailout] bill," Jim Dunigan, managing executive of investments at PNC Wealth Management (PNC) in Philadelphia, told Reuters. "It’s not surprising with the washout [Monday] that you’d get some bounce-back [yesterday], both due to bargain hunters and some prospects of a resolution. All eyes are still on Washington."

In related developments yesterday:

• U.S. Senate leaders announced late Tuesday that their chamber plans to vote on a Wall Street bailout package tonight (Wednesday).  Any plan will include souped-up deposit coverage, which is already being sought by the Federal Deposit Insurance Corp. (FDIC).
• Earlier in the day, President George W. Bush and Senate leaders of both parties publicly vowed to push for a quick approval of a new financial bailout plan, despite the surprise Monday move by the House of Representatives to reject the pact that the Bush administration had negotiated with both parties in Congress. In a speech broadcast from the White House, President Bush urged lawmakers to avoid a potential economic crash, stating that "we are at a critical moment for our economy. Congress must act," the International Herald Tribune reported.
• Indeed, the Federal Deposit Insurance Corp. (FDIC) said it will ask Congress for permission to at least temporarily insure greater amounts of deposits for each depositor at member banks. The FDIC right now insurances individuals’ deposits of up to $100,000 and retirement accounts up to $250,000.
• The U.S. Securities and Exchange Commission probably will resist calls to suspend the fair-value accounting rules that some members of Congress blame for exacerbating the global financial crisis, sources familiar with the issue reported. Although the SEC and the Financial Accounting Standards Board (FASB) yesterday issued “clarifications” on how banks should interpret existing rules requiring them to review assets each quarter and report losses if values decline, an actual moratorium isn’t being considered.
• Presidential candidates John McCain and Barack Obama called upon Congress to keep working on a financial-markets rescue plan and also pushed for an increase in FDIC deposit insurance as a short-term step to restore consumer confidence in the U.S. financial markets.

Foreign Market Reaction

Although the House rejection of the bailout legislation led to the crash-like 777-point drop in the blue-chip Dow index on Monday, reactions in the global markets were mixed yesterday.

In Asia, Japan’s Nikkei 225 Index plunged more than 4% to a new three-year closing low after shedding 483.75 points to close at 11,259.90. But Hong Kong’s blue-chip Hang Seng Index inched up 0.8% as it gained 135.53 points, to close at 18,016.20. Even with the slight gain, yesterday marked the end of the worst quarter for Hong Kong shares since 2001.

"It looks like Congress is going to be up in arms about this for a while but there are hopes that there may be other moves from authorities such as a rate cut from the Fed," Yutaka Miura, deputy manager at Shinko Securities, told Reuters.

In Europe, bourses gained on the revived U.S. markets and government interventions into failing banks. The FTSEurofirst 300 index gained 1.6%, fueled by the strong early-morning gains in the United States. The Paris-based CAC40, London’s FTSE 100, Madrid’s IBEX 35 and the Frankfurt-based DAX all posted gains on hopes of a new bailout plan.

The London Interbank Offered Rate, or LIBOR, surged to a record high of 6.88% yesterday, the British Bankers’ Association said. LIBOR is the rate banks charge each other for overnight lending. Such a high rate - well above the Federal Funds rate of 2.0% - demonstrates the high level of risk-aversion currently in the market.

Central banks flooded the markets with short-term liquidity yesterday, but could do little to restore financial firms’ faith in lending.

"Come Thursday, when the package is presented again to the U.S. House, many of the same people who voted against it earlier today will change their minds because of the pressure coming from the markets," Stephen Roach, chairman of Morgan Stanley Asia Ltd. (MS) said at a seminar in Hong Kong Monday, Bloomberg News reported.

Continued Bailout Hopes

Both the U.S. House and Senate were adjourned yesterday for the Jewish New Year holiday. The Senate will reconvene today - with members intending to actually vote on a new package tonight - while the House will gather again tomorrow (Thursday).

Despite the legislative holiday break, the executive branch continued its full-court press to get the bailout legislation passed.

"I realize this is a difficult vote for members of Congress," President Bush said the White House address yesterday. "But the reality is that we’re in an urgent situation and the consequences will grow worse each day if we do not act."

U.S. Treasury Secretary Henry M. "Hank" Paulson Jr. also tried to underscore the benefit to the average American, and not just Wall Street bankers, as he lobbied politicians to move forward with the proposed bailout, Bloomberg reported.

"Markets around the world are under stress, and that reduces the availability of credit that businesses across America use to meet payroll and to purchase inventories," Paulson said to reporters gathered outside the White House. "Families, too, feel the credit crunch as it becomes more difficult to get car loans or student loans."

More Bank Bailouts

European governments stepped in again to aid more ailing financial institutions yesterday. In a united effort, Belgium, France and Luxemburg earmarked $9.2 billion (6.4 billion euros) in emergency cash for Dexia SA (PINK: DXBGF).

"Due to the significant deterioration in the business and market environment and the financial distress of a number of financial services companies, Dexia made a careful assessment of its situation and decided to take decisive action," the bank said in a statement, MarketWatch reported.

In Ireland yesterday, in a bid to stabilize sinking bank shares, the Irish Finance Ministry pledged to back deposits for two years with taxpayer funds if necessary. The move pushed Irish financial stocks higher.

Iceland nationalized its third-largest bank, Glitnir, on Monday, which sent the Icelandic crown diving to a new low against the euro. Also on Monday, banks in Belgium, Germany and Britain received government aid.

In the United States, Citigroup Inc. (C) purchased the retail banking assets of Wachovia Corp. (WB). The shares of both domestic banks enjoyed major gains yesterday, with Citi’s stock climbing 15.6% to close at $20.51, and Wachovia’s shares advancing 90.22% to close at $3.50.

Source: Credit Crisis Update: U.S. Stocks Notch Record Gains on Investor Hopes for a New Bailout Plan

Breitbart reports:

The US Senate Saturday approved 25 billion dollars in loan guarantees for the financially strapped US auto industry, intended to spark a wave of automotive innovation. The loan guarantees were included in a continuing resolution that included funding for the US government and the wars in Iraq and Afghanistan. President George W. Bush has indicated that he intends to sign the bill....

The bill, which was approved by the House of Representatives on Wednesday, are the first loan guarantees for U.S. carmakers since Congress approved a similar 675 million dollar measure for Chrysler Corp. in 1980. Chrysler Chairman Robert Nardelli, however, said this week the loan guarantees should not be considered a rescue package for struggling carmakers. "This is not a bailout," he said.

Well, if the loans are repaid, you might argue that it's not a bailout because no federal outlays were involved. And you might argue the same for the $1.7 trillion in Fannie and Freddie's debt that the U.S. Treasury now seems to be guaranteeing, and for the $3.1 trillion in guarantees on agency MBS, and for the $600 billion or so in loans that the Federal Reserve seems to have extended. Not to mention the $700 billion Treasury plan still under debate.

Now, there may be a wee bit of a correlation among those sundry and staggeringly large exposures-- the state of the world in which the auto loans don't get repaid is likely the same state of the world in which significant chunks of the other items also turn in to a bill due for Uncle Sam.

On the other hand, what's another measly $25 billion among friends?

Technorati Tags: macroeconomics, autos, auto bailout

Breitbart reports:

The US Senate Saturday approved 25 billion dollars in loan guarantees for the financially strapped US auto industry, intended to spark a wave of automotive innovation. The loan guarantees were included in a continuing resolution that included funding for the US government and the wars in Iraq and Afghanistan. President George W. Bush has indicated that he intends to sign the bill....

The bill, which was approved by the House of Representatives on Wednesday, are the first loan guarantees for U.S. carmakers since Congress approved a similar 675 million dollar measure for Chrysler Corp. in 1980. Chrysler Chairman Robert Nardelli, however, said this week the loan guarantees should not be considered a rescue package for struggling carmakers. "This is not a bailout," he said.

Well, if the loans are repaid, you might argue that it's not a bailout because no federal outlays were involved. And you might argue the same for the $1.7 trillion in Fannie and Freddie's debt that the U.S. Treasury now seems to be guaranteeing, and for the $3.1 trillion in guarantees on agency MBS, and for the $600 billion or so in loans that the Federal Reserve seems to have extended. Not to mention the $700 billion Treasury plan still under debate.

Now, there may be a wee bit of a correlation among those sundry and staggeringly large exposures-- the state of the world in which the auto loans don't get repaid is likely the same state of the world in which significant chunks of the other items also turn in to a bill due for Uncle Sam.

On the other hand, what's another measly $25 billion among friends?

Technorati Tags: macroeconomics, autos, auto bailout

First Solar (FSLR), too, is fairly flat with a gain of 0.22%. However, other some of the gainers of the previous day, like ReneSola (SOL) and Trina Solar Ltd. (TSL) continue their march with gains of 3.03% and 2.52% respectively. WednesdayÂ’s other hot stock China Sunergy Co., Ltd. (CSUN) is up 0.91%, but is trading close to its 200-Day Moving Average.

The Wednesday boost came on the U.S. SenateÂ’s decision to extend $18 billion worth of solar tax incentives to producers and consumers of solar energy for eight years -- a news item that got buried in the hurly burly of the negotiations of the $700-billion finance industry bailout package.