Category Archives: Economy

Once Hot Utilities Stocks Losing Popularity

Economy, Investments, , ,

Just like everything else powered by the whims of crowds, types of stocks also have their “five minutes of fame.” Take, for instance, the coolness surrounding Chinese Internet stocks one month, solar energy manufacturers another month, or daily-deal sites like Groupon a third month.

Dust Off Grandma's Stocks

But who would have ever thought the boring, safe, old-fashioned, faithful utility stock would become the darling of 2011? Well maybe you grandmother, but regular investors? Yes they sure were popular last year; in fact, utility sector stocks were the be-all and end-all best-performing stock sector, up 8.7% overall in 2011, says the fund-tracking firm Lipper. We don’t have to tell you this was quite a bit better than the go-nowhere, do-nothing, S&P 500.

Proceed with Caution as Economy Recovers

But before you sell the farm and buy out the electric company, heed the warning that this unlikely hero has likely wilted back into the safe haven of slow growth, where it is usually found. Investors bestowed their beneficence on utility sector stocks because of their reputation for being safe and sound, but now their price to earnings ratio has gone a bit high; up to 14, well above the S&P’s average of 12.2, a warning to proceed with caution.

"Utilities stocks were red-hot, but the public needs to know the tide has turned against them," says Alec Young, global equity strategist for S&P Capital IQ. "It's an untold story, and there hasn't been enough coverage of it."

What makes Young say this? During recessions, such as the one we are hopefully emerging from, investors flee to utility stocks for their lovely mix of stability and yield. But as the economy recovers with decent GDP growth and jobless rates lowering, history has shown that counter-cyclical stocks like utilities tend to fall behind.

"The macro picture is improving, and we're past the point of maximum fear," says Young. "Now there will be less focus on yield and capital preservation, and more willingness to speculate. All of that is bad news for utilities."

Survey Shows Gas Prices Climbing in the US

Commodities, Economy, ,

The average price of gasoline at the pumps has been steadily climbing for the past five

Going Up

weeks, a survey conducted by Trilby Lundberg has shown.

In the latest survey, which covers the two weeks ending on January 20, the average price of gas went up by an average of 3.48 cents, reaching the price of $3.3944 per gallon. The survey polled 2,500 gasoline stations located throughout the continental United States.

This is considered a modest increase, especially compared to the huge jump the price of gas took during the prior three week period ending on January 6. During those 21 days gas prices shot up by 12 cents per gallon.

Part of the reason for the increases is higher prices for crude oil. The price surge can also be attributed to crisis developing in Iran and Nigeria which has put pressure on the supply of crude oil. However, there has been a slowing of demand for oil coming from Europe due to their debt crisis, so it is hard to say whether or not prices will continue to climb, hold steady, or even drop.

Last week’s slight rise in crude oil prices leads Lundberg to say that gas prices could easily continue to increase, perhaps by another 5 cents, at least in the short term.

The survey showed that, among the cities taking part in the survey, Salt Lake City, Utah, had the lowest gas prices on average, of about $2.94 per gallon; Los Angeles had the highest price of $3.71 per gallon.

Poll Shows New Hiring Lagging Behind Recovery

Economy, , ,

A new survey conducted by the National Association of Business Economics showed that about two-thirds of those polled do not expect to see any change in employment in their companies over the coming six months. This is the largest number of employers in recent quarters who do not plan on taking on new employees, despite the fact that they do believe that the economy will prove to be a bit stronger this year.

The US economy seems to be reaching a plateau as the jobless rate falls to its lowest in three years, 8.5%, yet fewer businesses seem to be ready to hire new workers, compared to the previous industry poll.

The survey was done between December 15, 2011 and January 5, 2012 and found that 65% of those polled are expecting a rise in the gross domestic product of at least 2% between last year’s fourth quarter and this coming year’s fourth quarter.

This figure was higher than the 1.6% growth rate which economists suggested when a Reuters poll questioned them.

Approximately two-thirds of the polled companies do not believe that the economic crisis in Europe would have much of an impact on their own sales in the first half of 2012. A pessimistic view was taken by 27% of those surveyed, believing that they will see a decline in sales of 10 percent, or less.

US Tourism Industry Hoping to Cash In With Visa Reform

Economy, , , ,

President Obama announced a strategy which he hopes will stimulate international tourism

US Tourist Site/Mount Rushmore

more in the direction of the United States;  the plan is to make the process of getting a tourist visa for potential visitors easier and quicker.

According to the United Nation’s World Tourism Organizations, there is expected to be at least one billion tourists from all over the world traveling this year. The problem is that very few of these tourists choose to visit the United States, often because obtaining a visa for a visit is an arduous, time-consuming and expensive undertaking.

Obama’s plan to streamline the acquisition of tourist visas could not come at a better time, since there is also expected to be an upsurge of touring Chinese and Brazilians, helping to more than offset an expected decline in tourism from Europe as a result of the difficult economic situation there.

“The fact that the president recognized the importance of international tourism is an incredibly positive move,” said Jim Evans, CEO of Brand USA, a public-private tourism promotion organization. “It definitely will have a very positive impact on hotel occupancies,” which in turn will boost profitability and growth in tourism-related jobs. “It just has a positive effect on all metrics for hospitality.”

Tourists for outside the country are a real boon to tourism. They spend their money on hotels, restaurants, go shopping, and pay all the taxes which these activities require. And when the go home, their money stays here.

But the United States has been steadily taking in less and less from this valuable market, even as the total number of tourists across the globe has been rising. In 2000 the US benefited from 17% of the international tourist trade, while in 2010 that percentage dropped to only 11%.

Obama announced his plan to change the procedure for obtaining tourist visas to the US at Orlando’s Walt Disney World last Thursday, believing this step, and others, can help reclaim some of the valuable market share of tourism.

“Just looking at the sheer numbers, it’s going to be huge,” said Kathleen Matthews, executive vice president of public affairs at Marriott International and member of the United States Travel and Tourism Advisory Board. “Reducing the wait time is going to be tremendous.”

Slow Growth Forecast for Kansas

Economy, , , ,
Jeremy Hill

An updated forecast predicts that the economy in Kansas is heading up in 2012, but not as quickly as what had first been expected.

According to the Center for Economic Development and Business Research at Wichita State University, the forecast for employment for the Wichita metropolitan area, as well as the state as a whole, will be lower than the previous outlook. The center says that slower national growth in general and lack of confidence in the local and global economy downgraded the forecast.

“This is due to the weakness within the euro zone, remaining uncertainty of the U.S. economy and expectations of the Boeing departure,” said Jeremy Hill, the center’s director.

The revised expectation is that the Kansas economy will grow slowly. The unemployment rate should improve by 1%, translating into 13.010 new jobs, down from the 1.1% original prediction which was made in October last year.

“The Kansas economy has been flat in 2011, showing almost no growth from 2010 to 2011,” Hill said. “However, farmers and farm income have been the stabilizing force in our economy.”

Although Kansas is indeed expected to have an upturn in its economy and unemployment figures, the growth is slower than originally forecast due in large measure to the news that Boeing, the aircraft manufacturer, will be closing its facility in the area.