PowerTrend Brief: Slowing Growth and Rising Uncertainties Abound

Chris Versace

Chris Versace is a financial columnist and equity analyst with more than 20 years of experience in the investment industry.

This week, the stock market fell under the influence of concerns that, for the most part, are not new ones, but rather ones that simply have been renewed. I’m referring to last Friday’s disappointing April Employment Report, which marked the fourth consecutive month in slower job creation, a continued drop in the work force, and the fallout from European elections. With a lull in earnings reports and only a handful of economic reports this week, the market focused on these two issues, as well as concerns about the health of the domestic recovery.

In short, uncertainty once again has risen. Commentary from German politicians, who have been warning Greece that the country would not receive more aid unless it fulfills all the conditions of its international bailout, is adding fuel to the uncertainty fire. As we all know, uncertainty in the market leads to turbulent times. With the stock market only 4% below its recent highs, as of the close of trading on May 10, whether using the Dow Jones Industrial Average or the S&P 500, the rise in uncertainty has me seeing the overall market as equal, at best, on a risk-to-reward basis, if not tilted to the riskier side. That said, successful investors always are revisiting their shopping list of companies and related stocks, and we will be using PowerTrends to do just that in the coming weeks.

Outside the world of Wall Street, in New Orleans this week was the 2012 CTIA Wireless trade show, an annual event that draws more than 1,000 exhibitors and more than 40,000 attendees. It is the biggest wireless event held in the United States and, as such, a flurry of mobile news has been hitting the market tape this week. Historically, the show has centered on new mobile devices. But in the last few years, the focus has shifted to services and apps, and this year was no exception. At the center of it all was my Cashless Consumption PowerTrend as MasterCard, Visa and others made high-profile announcements that confirm this PowerTrend. On Monday, MasterCard introduced its PayPass Wallet Services. The product is designed to enable banks, merchants and other MasterCard partners to offer wallets for online and offline purchases on various devices, including smartphones and tablets. Besides payment, MasterCard said its wallet offer would include account look-up before purchases, spending controls and alerts and delivery of targeted offers, coupons and loyalty programs. This situation confirms we are in the early stages of this PowerTrend. Near term, I’ll be examining a number of companies to determine the best way to play it and sharing the names of those companies with subscribers of my monthly investment newsletter, PowerTrend Profits.

This Week’s PowerTrend Data Points

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• Living Longer Lives – U.S. hospitals are ripping out wall-mounted toilets and replacing them with floor models to better support obese patients. The Federal Transit Administration wants buses to be tested for the impact of heavier riders on steering and braking. Cars are burning nearly a billion gallons of gasoline more a year than if passengers weighed what they did in 1960. The U.S. health-care reform law of 2010 allows employers to charge obese workers 30% to 50% more for health insurance if they decline to participate in a qualified wellness program. As economists put a price tag on sky-high body mass indexes (BMIs), policymakers and the private sector are mobilizing to find solutions to the obesity epidemic.

• New Demand, New Solutions – At Light+Building 2012, Cree Inc. announced it has developed a white light-emitting diode (LED) whose luminous efficiency is as high as 254 lumens per watt. Increasing brightness for LEDs is critical to spur the replacement of existing light solutions in the general illumination market with far more power efficient LED solutions.

• The Rise and Fall of the Middle Class – The Earth Policy Institute, an environmental research group, has pulled together some fascinating data from the U.S. Department of Agriculture on meat consumption in China and America. China surpassed America’s total meat consumption in 1990 and is chomping through ever-bigger quantities as the country becomes richer. This year, China is forecast to eat 71 million tons compared with America’s 33 million tons.

• Cashless Consumption – In addition to the annual CTIA show mentioned above, a new survey from Motorola Solutions shows there is increasing interest from retail, hospitality and field service industries for mobile Point of Sale (mPOS) solutions, such as NFC payments and mobile loyalty programs, as a core strategy for improving customer service. According to the survey, which comprised 541 retail, hospitality and field service employees from North America, the United Kingdom, France and Germany, 66% of respondents are interested in mPOS, while 42% of respondents currently are piloting or starting trials within the next 36 months.

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• Always On, Always Connected – OEM-connected car system shipments are expected to grow from 8.22 million in 2012 to 39.5 million in 2016, according to a new report from ABI Research.

Sincerely,

Chris Versace
Editor, PowerTrend Brief

P.S. Because you’re already an Eagle Financial reader, you get the first look at my brand new research brief… It’s about the multi-trillion-dollar Power Trends that’ll soon rock the market — and how you could leverage them for enormous wealth. Click here, to get started. If you want to read the first issue of the PowerTrend Profits newsletter, we will give you a free preview of the inaugural issue.

Next Week

Following the slow data flow this past week, next week will see a number of key economic reports for April and the second round of corporate earnings reports kicks off with an emphasis on retailers. Facebook is also expected to price its initial public offering next week and I suspect that will attract a lot of attention to not only the offering price but also the related valuation. Here’s what I’ll be paying attention to next week:

Monday, May 14
Dreams Inc. (DRJ)
Groupon Inc. (GRPN)
Noah Education Holdings (NED)
Parkervision Inc. (PRKR)

Tuesday, May 15
Retail Sales (April)
Consumer Price Index (April)
Empire Manufacturing Index (May)
Business Inventories (March)
National Association of Home Builders Housing Market Index (May)
Home Depot Inc. (HD)
JC Penney Company Inc. (JCP)
Lifeway Foods Inc. (LWAY)
Nexxus Lighting (NEXS)
TJX Companies (TJX)
Valspar Corp. (VAL)

Wednesday, May 16
MBA Mortgage Index (Weekly)
Housing Starts (April)
Building Permits (April)
Industrial Production (April)
Industry Capacity Utilization (April)
Federal Open Market Committee Minutes (April 25)
Chico’s FAS Inc. (CHS)
Citi Trends (CTRN)
Cosi Inc. (COSI)
Cost Plus Inc. (CPWN)
Deere & Co. (DE)
Hot Topic Inc. (HOTT)
Limited Brands (LTD)

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Thursday, May 17
Weekly Initial and Continuing Jobless Claims
Philadelphia Fed Index (May)
Leading Indicators (April)
Aeropostale Inc. (ARO)
Applied Materials (AMAT)
Bon-Ton Stores (BONT)
Cato Corp. (CATO)
Children’s Place Retail Stores (PLCE)
Dollar Tree Inc. (DLTR)
Gap Inc. (GPS)
Intuit Inc. (INTU)
Ross Stores Inc. (ROST)
Shoe Carnival (SCVL)
Stein Mart Inc. (SMRT)
The Buckle Inc. (BKE)
Wal-Mart Stores Inc. (WMT)

Friday, May 18
Brown Shoe Co. inc. (BWS)
Foot Locker Inc. (FL)
Hibbett Sports Inc. (HIBB)
Motricity Inc. (MOTR)

Upcoming Appearances

• On Monday, May 14, listen for my weekly appearance on America’s Morning News to talk about the economy, the stock market, stocks and more.

• Please join me for the Las Vegas Money Show, May 14-17, at Caesar’s Palace. To register, call 1-800/970-4355 and mention priority code 026656 or go to ChrisVersace.lasvegasmoneyshow.com.

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The latest negative market conditions for investors include slowing gross domestic product (GDP) growth and poor employment reports in the United States, as well as bad news in Europe. GDP growth in the United States edged down to just an annual rate of 2.2% during the first quarter of 2012, compared to 3% at the end of last year, according to preliminary data. Also worrisome is a reduction in business investment. Businesses spent more money on equipment but far less on infrastructure. Do not

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