News Analysis for the Investor on July 5, 2012

Bank of England and European Central Bank actions will impact markets today

The Bank of England has announced that it will inject $78 billion into the UK economy today, according to CNBC. It will buy these assets with newly created money with the belief that it will help keep the economy out of recession.  The European Central Bank is expected to announce later today that it will lower interest rates to a record low.  Experts indicate that lowering the rate below 1 percent will show the ECB’s satisfaction with the agreement of the Euro nations last week to speed up cross border banking.  European markets are up on Thursday while Asian markets are mixed.  The Dow closed on Tuesday at 12,943, up 72 points from the prior day.

China expected to post worst growth since 2008

China’s economy slowed further in the second quarter to grow 7.6 percent, its worst performance since 2008 and 2009.  It is predicted that this will be its slowest growth rate in 13 years, according to CNBC.  China is expected to loosen its monetary policy this month to avoid the risk of a sharp downturn.  Many economists believe that the second quarter was China's worst for 2012 and are anticipating an upswing as the year progresses.

Dividend paying stocks do the best in the summer months

According to USA Today, over the past two summers, dividend paying stocks have averaged a 4.11 percent return, while non-dividend paying stocks lost an average of 0.45 percent.  In contrast, the remainder of the year, November through April, saw non-dividend paying stocks averaging 8.5 percent, compared to 6.5 percent for dividend paying stocks.  Over the entire year, the top dividend payers returned nearly 11 percent compared to 8 percent for non-dividend payers.  Experts indicate that dividend paying stocks tend to outperform others with lower volatility.  Time for some dividend paying stocks?

Malware may knock thousands off of internet on Monday

More than 277,000 computers worldwide may be knocked off of the internet on Monday due to malware that may have taken over their machines more than a year ago, according to the Associated Press,   There are estimated to be 64,000 computer affected in the US.  The problem began a year ago when international hackers ran an ad scam.  The FBI hired a private agency and set up a safety net so that individuals would not lose their access. That safety net will expire on Monday.  Most victims don’t know their computers are infected.  But service providers, such as Facebook and Google, have set up messages that will allow infected users to know they have a problem should the infected computer try to access their site.  Computer owners will need to work with their internet provider to clean up the problem.

Consumers asked to pay more for milk to save farms

Consumers have been willing to pay more for coffee and chocolate to support farmers supplying those products, so farmers in Vermont are asking consumers to pay more for their milk to support them.  According to the Associated Press, Keep Local Farms is asking colleges, universities and other institutions to charge more for milk with the extra going to support local dairy farmers.  A similar fair trade group, Family Farm Defenders, has been set up in Wisconsin asking consumers to pay more for cheese.  In New England, universities such as Harvard have signed on for the program as well as businesses such as Ben and Jerry’s.  Wisconsin’s Family Farm Defenders was able to send $100 checks to 1370 farms last year.

Hedge fund files for bankruptcy

A hedge fund run by Alphonse “Buddy” Fletcher, Jr., once known as the “Wizard of Wall Street”, has filed for bankruptcy.  According to the Wall Street Journal,  the filing comes after a judge in the Cayman Islands appointed a liquidator to wind up another related fund run by the hedge fund manager.  In the 1990s, Fletcher was famous for 300 percent a year returns.  The Cayman Island ruling was caused by three pension funds demanding their money after receiving IOUs when previously asking for cash.

US Crop Worries will fuel world food prices

International grain prices have surged to highs last seen during the 2007 and 2008 food crisis, according to Reuters.  Extreme heat and dry weather in the Midwest has caused the US Department of Agriculture to downgrade the crop quality.  The UN Food and Agriculture Organisation indicates that despite the potential for a shortage of corn and soybeans, it does not expect major food supply  problems because of robust wheat and rice supplies.  The FAO Food Price Index was down to 201 points in June, the lowest since September 2010.