Brian Shactman: Energy And Jobs
1. Fracking regulations will slow down the U.S. energy boom.
There has been an explosion in U.S. crude oil and natural gas production. Much of the boom comes from expansive use of hydraulic fracturing. Basically, you drill, make tiny explosions and then blast water and "material" into the tiny spaces. The result? Oil and natural gas flow out. The problem is that no one knows what's in the fracking water and what the long-term impact might be. Already, regulators are ready to pounce, and expect the pressure to continue. If Congress forces oil and gas companies to open the Oz-like curtain of secrecy, these sexy shale plays could be in jeopardy.
2. Rare earth stocks come back down to earth.
Stocks in companies like Molycorp have already returned to earth \(budum-bum\). In 2012, they will actually begin to produce the not-so-rare but hard-to-mine metals. If the thesis behind the rare earth bulls comes to pass, the revenues for a Molycorp should spike late in the year. If they do as planed, the stock should revert back to its former lofty levels. If they don't, the rare-earth trade might be done before a lot of the companies have even started.
3. A jobs comeback in America? In manufacturing?
I have been traveling the country, and all I hear of late is that manufacturing in China isn't like the old days — meaning it's not so cheap anymore. Of course, it's still inexpensive — just not as much as in the past. But as the U.S. jobs economy continues to sputter, the cost spread will continue to shrink, and many companies will decide to make things on U.S. shores because the upside could spark sales if the price isn't too far off.
1. America's inflation problem becomes evident.
Inflation remains historically low, and most of the commodities that sparked the fears (cotton, for example) are significantly down from their highs. Ooops.
2. Retailers will struggle to pass along costs to the consumer
How can you get an "F" for the first and a "B" for this one? Easy. For much of 2011, input costs were actually a major issue. What's more, companies were separated by whether they could pass along cost. Those who could not witnessed an erosion of margins and more selling pressure than their competition.
3. More consolidation is on the way in the consumer goods space.
There were some interesting deals like the movement of the Pringles brand in a $1.5 billion deal, but the area was relatively quiet, except for movement on the other side of the equation, namelyKraftannouncing a split.
4. Kraft under pressure with CEO Irene Rosenfeld on the hotseat.
Speaking of Kraft , Rosenfeld clearly responded to the pressure on her. The split into a domestic grocer business and a global snack company has been viewed as a coup for large activist shareholders in an effort to unlock value. She says she will lead one of the two companies, but that answer will come when the split actually occurs sometime in 2012.
5. Johnson & Johnson makes a comeback.
There was no resounding success for Johnson & Johnson , but that in itself is a victory. For the most part, the negative news flow was much less than in 2010. The children's products are returning to shelves, and the stock has outperformed the broader Dow Jones Industrial Average.