U.S. Economic Year In Review

U.S. Economic Year In Review

By: News

Wednesday, December 28, 2011

As 2011 nears a close, a reflection upon the last 52 weeks on Wall Street spurs memories of “more of the same” ever since the markets collapsed in 2008. At this time in 2010, the Dow Jones Industrial Average was on a northbound tear, rising approximately 2,000 points throughout the last six months of the year. 2011 was not quite as friendly to the grand-daddy of indices, but is still wending way for optimism as the year heads to a close; adding about 1,500 points since the beginning of October to push the Dow into positive territory by more than 700 points for the year. It could be a “which comes first, the chicken or the egg?” type of debate, but the Dow Jones exemplifies what is going on with the U.S. economy. The recovery from the fall-out nearly four years ago has been slow and truly shaky at some points, but it is nonetheless a recovery. Investors are typically relatively impatient, but the fact remains that the Dow may be off 2011 highs at this point, but it still is holding levels from back in June 2008, a time when many thought the market valuation may have been a bit high. There’s some New Year’s food for thought.

The industrial plays have performed well throughout 2011. Although not posting large gains, the S&P 500 managed to eek its way into positive territory for the year, thanks to a recent Christmas rally. The tech-rich NASDAQ has been trending upward for several months, but looks to be coming up just shy of green for 2011 and will be ending the year relatively flat.

Trying to pick the biggest news stories of the year is always an arduous task fraught with discussion over the importance of each, but clearly finances ruled the roost again and controlled market momentum. In the first half of the year, it was the U.S.’s Quantitative Easing Part II that was winding down in June that had investors’ on the edge of their seats hoping for another batch of money to hit the scenes to buoy the markets and save financially-strained companies. Such was not the case as Fed Chairman Ben Bernanke didn’t rule out the idea, but put the kibosh to the government gobbling-up more debt. The FDIC took care of plenty of struggling banks; taking control and closing the doors on more than 70 banks in 2011.

2011 was also “the year of the downgrade” with many countries losing prestigious credit ratings from leading agencies, including the United States being stripped of its pristine AAA rating in August, Italy downgraded and warnings issued for dozens of European countries for possible downgrade. On the bright side for us in North America, at least we aren’t Hungary. S&P’s slashed its rating of Hungary’s credit rating to "junk" level because of worries about proposed policy changes regarding the country's central bank.

Overseas problems took the main stage as QE2 ended as the euro maintained its downward spiral, Greece teetered on loan defaults, China started showing signs of a serious growth slowdown and contagion fears gripped the world as another financial fallout appeared imminent unless world leaders stepped-in to help. Of course, the leaders of the world’s largest economies had round after round of meetings discussing thwarting a Eurozone catastrophe which recently has resulted in billions in bond buying and lending to calm the waters heading into the new year.

2011 will be remembered for its financial fiascos, but it should also not be forgotten as a year of monster mergers and major Initial Public Offerings. The big looked to get bigger as Microsoft bought the internet video-phone-service provider Skype Global for $8.5 billion in cash from an investor group led by Silver Lake. Still awaiting regulatory approval (expected in the first half of 2012), Swiss orthopedics maker Synthes accepted a $21.3 billion acquisition offer from U.S. health care conglomerate Johnson & Johnson, representing the largest acquisition in J&J’s history. Still trying to clear regulatory hurdles, Duke Energy Corp. and Progress Energy Inc. agreed to merge in a $26 billion transaction to create the largest utility company in the U.S. Although the deal just got squashed last week, it’s hard not to mention AT&T’s whopping $39 billion bid to acquire T-Mobile that was announced in March which would have created the nation’s largest wireless provider.

IPO’s were down 38% in 2011 as compared to the year prior, but internet-based companies were on the type of roll not seen since the dot-com bubble began. LinkedIn IPO'd with one of the most successful entries into the public markets since Google. With an IPO pricing range originally set around $33, shares still skyrocketed more than 140 percent to exceed $104 almost immediately. Pandora seized the moment of IPO frenzy to raise the number of shares for its IPO and still sizzled upward (although it has lost all gas since its June IPO). The much-heralded debut of Groupon happened to kick-off November with a roller coaster ride into the end of the year. Investors will be keeping their eyes open for a Facebook IPO next year.

We are proud to have brought our members another solid year of undervalued and “under the radar” companies throughout 2011. We are also especially pleased with our plethora of winners from our “Penny Stocks to Watch” each week, where we feature technically poised charts that we believe stand a solid chance of upward movement immediately.

Looking back throughout the year, we hit countless plays across all the exchanges that doubled in the short term, but there were many that simply kept on chugging upward to produce amazing gains. Some proved our picking prowess in a matter of days, such as Fuse Sciences, Inc. (Pink Sheets:DROP) just did in December, rising from 45 cents to $1.25 in less than ten days for a 177.78% gain; Sustainable Environmental Technologies Corporation (Pink Sheets:SETS), which soared from $0.09 to $0.22 (+144.44%) in a matter of days; and Lifevantage Corporation (OTCBB:LFVN) which appreciated from $0.77 to $2.07 (+168.83%) in May. Others, such as Ladenburg Thalmann Financial Services Inc. (AMEX:LTS) and eGain Communications Corp. (Nasdaq:EGAN) have risen steadily and not given up gains. LTS rose from our profiled price of $1.18 in May to touch $2.94 a couple weeks ago (+149.15%) while EGAN climbed from June’s profile price of $3.15 to $9.48 in October for a gain of 200.95%.

While those gains are nothing to sneeze at, the clear winners for 2011 were Jammin Java Corp. (OTCBB:JAMN) and Crossroad Systems, Inc. (Nasdaq:CRDS) which were neck-in-neck for performance. Both plays were picked in March, with CRDS rising from 98 cents to touch $6.92 in September (+606.12%) and JAMN screaming upward from $0.869 to hit $6.35 in May for a gain of a whopping 630.72% in two months.

While some of these plays are still holding strong, well above our original prices, others have given a large portion of the gains back. Those plays exemplify why we always encourage our members to trade smart and secure gains when they are presented. Rest assured that we will continue to work hard to provide our readers with the best of stock charts, featured companies and special reports again in 2012, our 13th year as a leading small cap financial news service. As the waning days of 2011 are upon us, we would like to take a moment to wish our followers a safe, happy and prosperous 2012.

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