Saturday, November 24, 2007

buy american

Recession worries aside, it's a pretty good time to put money in the U.S. stock market.

Part of the attraction is a simple cross-border shopping rationale. With our dollar worth more than American bucks, U.S. stocks are on sale. But there's also a longer-term benefit in that buying U.S. shares today puts you in a position to benefit when - not if, when - the Canadian dollar starts to eventually lose ground. Just as a rising dollar has massacred the value of U.S. stocks held in Canadian accounts, a falling dollar would add value.

So what do you buy in the U.S. market right now? In this edition of the Portfolio Strategy column, we look at the stocks that U.S. equity fund managers like right now, some analyst favourites, some top picks of an investing newsletter and the most popular exchange-traded funds.

If you decide to follow up on any of these ideas with some research of your own, be sure to consider the U.S. economic outlook. The risk of a sharp economic downturn is such that no less a source than The Economist magazine last week declared that "the United States may well be heading for recession."

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Blame the U.S. consumer. The Economist said a troubled housing market will make it tougher for them to borrow to finance their spending at a time when lenders are getting choosier about who borrows their money and, at the same time, oil prices are boosting home heating costs. "The result is likely to be America's first consumer-led downturn in close to two decades."

The currency argument in favour of buying American was explained nicely in the November issue of the Global Spin newsletter published by the money managers at Hahn Investment Stewards. They say the U.S. dollar could fall a little further, but a bottom is near.

From a currency standpoint, then, now is a good time to buy American. "From our perch in Canada, the next few months likely present the lowest-risk buying opportunity of U.S. dollars in at least half a century," the Hahn newsletter concludes.

Now comes the question of what to buy. Here are four different sources of ideas.

1. U.S. stocks that mutual fund managers like.

Thanks to analyst Tilly Cheung, we have a list of the stocks that were most popular with managers of U.S. equity funds as of the end of last month. The Top 10 list is almost exclusively made up of widely known multinational companies such as Microsoft, Exxon Mobil and General Electric. The only lesser-known names on the list are DaVita, a provider of dialysis services for people with kidney problems, and Everest Re Group, an insurance company.

The list of the most popular funds with U.S. equity fund managers shows that financial stocks are not being avoided as a result of the continuing problems emanating from the subprime mortgage market. Globefund data show Citigroup has dropped off the Top 10 list in recent months, but Bank of America and American International Group remain and both JPMorgan and Everest Re have been added.

Bank of America is worth a close look because its dividend yield reached an exceptionally high 6 per cent this week as investors reacted to news of a $3-billion (U.S.) writedown related to investments in a kind of asset-backed security based on mortgages. Bank of America still gets a consensus "buy" rating from brokerage analysts, according to

2. U.S. stocks that Standard & Poor's likes.

S&P is the world's largest producer of independent equity research, which means the firm is unlike big brokerage houses in that it doesn't provide advisory services to the same firms for which it provides ratings. S&P works on a five-star rating system where five stars tells you a stock is a strong buy and that it's expected to beat its benchmark by a wide margin over the next 12 months.

Stocks for which S&P has recently reiterated five-star ratings include FedEx, AT&T, Stanley Works and Oracle. Four- and five-star stocks with strong quality ratings from S&P include Johnson & Johnson and Automatic Data Processing. One other five-star S&P stock: Bank of America.

S&P's Top 10 Portfolio, comprising four- and five-star stocks that are believed to be well positioned for the year ahead, includes such widely known names as Procter & Gamble, McDonald's, Abercrombie & Fitch and CVS Caremark, a major U.S. drugstore chain.

KENNEWICK, Wash.- New tips for holiday toy shopping, but they may be hard to follow.

After a long list of recalls, consumer groups urge shoppers to buy American made toys to be safe.

KNDU randomly picked 15 toys Friday at Toys-R-Us, not one of those 15 was made in the U.S.

That makes it tough to follow the rules many consumer groups are putting out this season.

Urging worried parents to buy American made toys if they're worried.

Shoppers KNDU talked to say toy safety is definitely on their mind, and shopping for those homegrown toys is tough if not impossible.

"I prefer to buy american made things anyhow, but i mean there isn't a lot out there," said mother Shannon Keller.

"We've also found it's pretty hard to find where it's made from until you get the box open, but we do, that is something we've considered," said Carl Reda, a father. The Reverend Billy, with peroxide, swept-back hair and a white tuxedo, stands before the tourists and shoppers of Times Square in New York and declares that Mickey Mouse is the Antichrist.

Under his dog collar, the Reverend wears a T-shirt with an image of the mouse, arms outstretched under a mouse-trap, Christlike, his black ears poking out.

For the last decade, the Reverend has toured the United States with his gospel choir from the Church of Stop Shopping, to urge Americans to curb their spending and recognise that the wealthiest nation of the world is dangerously addicted to the mall.

"What we are seeing is the Shopocalypse. We are all buying, we are all dying, we are being consumed," he says.

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Taking coffee with the Reverend Billy
The antics of Bill Talen, a screen-writer who became so concerned about the influence of global corporations such as Walt Disney, Starbucks and Wal-Mart and America's obsession with shopping that he created the character of the Reverend, are now the subject of a new film by Morgan Spurlock. While Mr Talen's character is fictional, his message is genuine.

The film, What Would Jesus Buy?, opened in the US last week, and follows the actor, who tries to use the comedic preacher to urge Americans to question why they spend and consider the true cost of their purchases.

In an interview with The Times, Mr Spurlock � whose last main film, Super Size Me, sought to highlight the impact of America's excessive fast food diets - said: "The average American has $15,000 (£7,268) of credit card debt. It's not uncommon to hear stories of people who have a card delivered in the mail and have it maxed-out by the end of the day.

"For many American families, they spend so much over Christmas, they spend seven months paying it off. We used to be a nation which produced things, now we import. We are consumers. A value system has developed in the US which is buy more, spend less," he added.

Mr Spurlock's attack on spending could be perceived as unpatriotic. The shopping mall is the bedrock of the American economy. Around 40 per cent of gross domestic product is derived from consumer spending.

After the terrorist attacks of September 2001, President Bush was so worried that Americans would stay at home, keep away from the malls and trigger a fall in consumer spending, that he told them to do their patriotic duty and go shopping.

While Americans' obsession with shopping has helped build the US to be the wealthiest country in the world with an economy valued at $13.9 trillion, the other side of the coin is that Americans have run up a combined consumer debt bill of $2.4 trillion.

For the first time since the Great Depression, American households have a savings rate on average of zero � they spend all they earn.

From yesterday until Christmas Eve, Americans are expected to spend half a trillion dollars in shopping malls.

"How can shopping be patriotic? Increasingly, we are trying to get something for nothing on the back of sweat-shops in the Far East.," Mr Spurlock argues.

"I think that is a very un-American thing to do. We have products made overseas where no one is controlling the environment where they are made.

"We seek satisfaction by shopping, by buying more and more things and seem to be more and more dissatisfied," he adds.

So does the Reverend, in a 1960s-style coach emblazoned with the slogan "$ave yourself", really think he can make a difference?

Mr Talen has become such a thorn in the side of Starbucks that the group has issued a court order banning him from entering any of their coffee shops across the US.

His wife, who also appears in the film, cannot remember how many times he has been arrested, or manhandled off the premises of a corporation.

Unsurprisingly, he is not exactly welcome in a trip to Wal-Mart's head office in Bentonville, Arkansas, when the Reverend and his gospel choir perform a mock exorcism on the world's biggest retailer.

Mr Talen says his task is to try to make people think, to unravel the lure of the advert. "We live within a system of product selling. The packaging always promises a Utopia.

"Advertisers think they are heaven-makers with so many references to eternal life and happiness shot through the commercials."

Mr Spurlock, who hopes that the film will be screened on British TV before Christmas, offers a final note of gloom: "They say the UK is behind the US by about ten years, don't they? So this addiction is coming your way."

KNDU checked toys in all sections, including educational toys, none of the 15 toys randomly surveyed were made in America.


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