Bad news for savers
Savers will likely be penalized for their prudence for at least the next few years, said Margaret Collins in Bloomberg.com. The Federal Reserve announced last week that it plans to keep short-term interest rates near zero through 2014. That may help stimulate the economy by rewarding borrowers, but it also punishes savers, particularly retirees, who have already suffered through several years of low rates that don’t beat inflation. People socking money into low-risk investments like savings accounts, money-market funds, and short-term CDs are getting a national average of just 0.59 percent interest, says market analyst Dan Geller, the lowest since he began tracking such data, in 1990. Fed Chairman Ben Bernanke said the central bank is mindful of the plight of savers, but that a growing economy will help them best. “Savers in our economy are dependent on a healthy economy in order to get adequate returns,” he said.
Does Apple still look ripe?
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Apple is vying with ExxonMobil for the title of world’s most valuable company after last week’s blockbuster earnings report, said David Randall in Reuters.com. But even as its shares hit all-time highs, “Apple still looks like a value stock to many investors.” Market analysts bullish on the company point out that the stock trades at a very reasonable price-to-earnings ratio of 12; by comparison, Amazon’s P/E ratio is 98. So why isn’t Apple trading even higher than it is now? The market seems to doubt that the company can maintain its incredible growth, “now that it has a dominant position in the smartphone and tablet markets.” But continued growth overseas, particularly among Chinese consumers, could mute that concern and send the stock still higher.
What stock buybacks tell us
Just because a company begins buying back its own shares doesn’t mean investors should do the same, said Jack Hough in SmartMoney.com. Investors tend to see stock buybacks as a tempting signal; the number of shares is reduced through the purchases, which can boost earnings per share and make shares more valuable. But “companies have a poor record of buying low,” and may have ulterior motives, like missed earnings targets or executive pay that is tied to earnings per share. So it’s important to dig deeper. For smart buys, look for companies with low valuations, as well as firms where managers spend their personal cash on shares.
