Words from The (Investment) Wise (July 6 – 12, 2009)

Sunday, July 12th, 2009

As I reluc­tantly start pack­ing my bags after a most enjoy­able two weeks of R&R in Europe (see my posts on Slove­nia and Switzer­land), “Words from the Wise” comes to you a bit more cryp­ti­cally than usual. How­ever, a full dose of excerpts from inter­est­ing news items and quotes from mar­ket com­men­ta­tors is included.

Despite hav­ing criss­crossed Heidi’s coun­try, I have yet to find the elu­sive Swiss gnomes to glean what they make of finan­cial mar­kets at this junc­ture. Mean­while, the past week has been char­ac­ter­ized by a fresh wave of risk aver­sion, as uncer­tainty over the global eco­nomic out­look took its toll on stock mar­kets, com­modi­ties and pre­cious met­als, and investors favored safe-haven assets such as gov­ern­ment bonds and the Japan­ese yen.

The S&P 500 Index, Dow Jones Indus­trial Index and the Reuters/Jeffries CRB Index — all now in cor­rec­tive mode — closed down for a fourth con­sec­u­tive week, while US Trea­suries recorded gains for a fifth straight week and the Japan­ese yen for four out of the past five weeks.

The yen is often seen as a global barom­e­ter of risk aver­sion. The graph below demon­strates the strong inverse rela­tion­ship between the move­ments of the yen (against the euro, in this case) and those of the Dow Jones World Index. As shown, a falling yen indi­cates risk tol­er­ance (and a will­ing­ness to buy risky assets) and a ris­ing yen shows risk aver­sion (and an indis­po­si­tion towards risky assets). A down­turn in the yen exchange rate could be a good indi­ca­tor to keep an eye out for con­fir­ma­tion of bet­ter times ahead for stocks and commodities.

Source: StockCharts.com

Also fea­tur­ing promi­nently in invest­ment dis­cus­sions dur­ing the week were the via­bil­ity of the Public-Private Invest­ment Pro­gram (PPIP) and the mer­its of a sec­ond stim­u­lus pack­age — calls for this comes at a time when esti­mates of trillion-dollar fis­cal deficits and unsus­tain­able debt lev­els are rais­ing infla­tion expec­ta­tions and putting upward pres­sure on long-term yields, thus partly undo­ing the Fed’s mon­e­tary easing.

Source: Eric Allie, July 8, 2009.

The past week’s per­for­mance of the major asset classes is sum­ma­rized by the chart below — a set of num­bers that indi­cates risk aver­sion is creep­ing back into finan­cial markets.

Source: StockCharts.com

A sum­mary of the move­ments of major stock mar­kets for the past week, as well as var­i­ous other mea­sure­ment peri­ods, is given below. As the second-quarter earn­ings results in the US start rolling in, the Amer­i­can and most other mar­kets closed the week in neg­a­tive ter­ri­tory, with the Shang­hai Com­pos­ite Index being one of the few major bench­marks to make headway.

With the excep­tion of the Nas­daq Com­pos­ite Index, the major US indices are all back in the red for the year to date.

Click here or on the table below for a larger image.

Stock mar­ket returns for the week ranged from top per­form­ers Nepal (+5.3%), Croa­tia (+3.0%), Uganda (+3.0%), Ecuador (+2.9%) and the Philip­pines (+2.4%) to India (-9.4%), Egypt (-8.5%), Argentina (-8.2%), Rus­sia (-8.1%) and Kuwait (-7.6%) at the other end of the scale.

Of the 98 stock mar­kets I keep an eye on, a major­ity of 64% recorded losses, 34% showed gains and 2% were unchanged. (Click here to access a com­plete list of global stock mar­ket move­ments, as sup­plied by Emergin­vest.)

John Nyaradi (Wall Street Sec­tor Selec­tor) reports that as far as exchange-traded funds (ETFs) are con­cerned, the win­ners for the week included “all things short” such as ProShares Short Mid­Cap 400 (MYY) (+3.5%), ProShares Short Small­Cap 600 (SBB) (+3.2%) and ProShares Short S&P 500 (SH) (+2.0%). Among the long ETFs, Wis­domTree Drey­fus Japan­ese Yen (JYF) (+3.7%), Cur­ren­cyShares Japan­ese Yen (FXY) (+3.7%) and iShares MSCI Tai­wan (EWT) (+2.9%) per­formed well.

On the los­ing side of the ledger, ETFs were cen­tered in the energy sec­tors, includ­ing Pow­er­Shares Solar Energy (PBW) (-12.3%), Clay­more Solar Index (TAN) (-12.1%) and United States Oil (USO) (-10.1%). Mar­ket Vec­tors Rus­sia (RSX) (-12.6%) also had a rough ride.

The quote du jour this week comes from Richard Rus­sell, 84-year-old doyen of newslet­ter writ­ers who has been scrib­ing the Dow The­ory Let­ters for the past 50 years. Rus­sell said: “The whole bailout cam­paign stinks to high heaven. It was cre­ated and run by Wall Street — FOR Wall Street. Again, I say, per­son­ally, I wouldn’t have lifted a fin­ger to bail Wall Street out. Let all these Wall Street thieves stew in their own toxic juices. Thieves should be out on the street or in jail, not lux­u­ri­at­ing in gov­ern­ment bailout money.

“In the end, the bailouts will sim­ply extend the bear mar­ket in stocks and the econ­omy. The Wall Streeters will be richer, and the nation will be poorer, chok­ing on tril­lions in debt that will keep future gen­er­a­tions strug­gling to deal with the sins of Wall Street. Too bad Obama didn’t have the courage (or knowl­edge) to tell the nation what was going on. Obama should have said, ’sit tight’ and ‘this too shall pass’. Unfor­tu­nately, after the tril­lions spent in bailouts, ‘this too will not pass’.

Next, a quick tex­tual analy­sis of my week’s read­ing. No sur­prises here, with all the usual sus­pects such as “mar­ket”, “banks”, “econ­omy” and “finan­cial” fea­tur­ing promi­nently. Although (inter­est) “rates” had some promi­nence, other key words such as “dol­lar” and “China” were rel­a­tively quiet.

Back to equi­ties: The key moving-average lev­els for the major US indices are given in the table below. The S&P 500 Index on Tues­day breached the impor­tant 200-day line to the down­side (for the third time in 26 trad­ing days), join­ing the Dow Jones Indus­trial Aver­age and the Dow Jones Trans­porta­tion Index in bear­ish mode. The US indices are also all trad­ing below their respec­tive 50-day mov­ing averages.

I have also added the BRIC coun­tries and South Africa (my home coun­try) to the table. All these mar­kets are above the 200-day aver­ages, hav­ing pre­vi­ously bro­ken out of base for­ma­tions. How­ever, with the excep­tion of China, the emerg­ing mar­kets have all recently bro­ken below their 50-day mov­ing aver­age sup­port lines. Impor­tantly, the 50-day lines are in all instances still above the 200-day lines and there­fore not yet threat­en­ing the bull­ish “golden crosses” estab­lished when the 50-day aver­ages broke upwards through the 200-day averages.

Click here or on the table below for a larger image.

Addi­tion­ally, the Dow Indus­trial Aver­age and S&P 500 Index on Tues­day also broke through the “neck­line” of a head-and-shoulders for­ma­tion — a bear­ish event. For more on this, key lev­els and the most likely short-term direc­tion of the S&P 500 Index, Adam Hewison’s (INO.com) short tech­ni­cal analy­sis pro­vides valu­able insight. Click here to access the pre­sen­ta­tion. The analy­sis was done on Tues­day, but is still as rel­e­vant today as it was a few days ago. (Adam also cov­ered the out­look for crude oil and the dollar/yen exchange rate in recent analy­ses. Click the links to view these.)

The first mean­ing­ful pull­back since the March 9 low has brought the bears out of the woods. Accord­ing to Bespoke, the weekly poll of the Amer­i­can Asso­ci­a­tion of Indi­vid­ual Investors (AAII) shows bear­ish sen­ti­ment cur­rently at 54.65% — higher than any other point since March 5.

Source: Bespoke, July 9, 2009.

“The onus is now on bulls to keep stocks buoy­ant. The tech­ni­cal break­down of stocks is com­plete. Unless stocks rally robustly for sev­eral days — not just a one-day surge — stocks are likely to test 850 on the S&P 500 and then the very impor­tant 825 level …,” added Bill King (The King Report).

Richard Rus­sell, high­lighted the lat­est sta­tis­tic from Lowry Research, say­ing: “Turn­ing to the cur­rent mar­ket, what to me is most sig­nif­i­cant is that Lowry’s Buy­ing Power Index (demand) is col­laps­ing. As a mat­ter of fact, it’s now below the level that it was on March 9. Mean­while, the Sell­ing Pres­sure Index (sup­ply), after mov­ing side­ways for months, is now trend­ing higher. This is a bear­ish com­bi­na­tion and calls for a very defen­sive stance. On top of every­thing else, total NYSE vol­ume is fad­ing, par­tic­u­larly on days when the broad mar­ket is higher. It’s obvi­ous that buy­ers of stocks are becom­ing scarce. Despite ‘Green Shoots’ non­sense, the stock mar­ket doesn’t like what it sees. And nei­ther do I.”

The last word on stocks goes to Teun Draaisma, highly regarded equity strate­gist at Mor­gan Stan­ley, who argued that there were “plenty of oppor­tu­ni­ties to make money beyond the mar­ket direc­tion call” by pur­su­ing a strat­egy that he described as “the mid­dle ground”, as reported by the Finan­cial Times.

“Macro and the next big mar­ket move have become everyone’s favourite invest­ment topic over the past two years. We sus­pect it is time to move on to the micro of sec­tors, stocks and styles,” he said.

Draaisma’s large “mid­dle ground” of invest­ment oppor­tu­ni­ties includes “the for­got­ten mar­ket” Japan and “sec­tors that are cheap and under-owned with improv­ing fun­da­men­tals” such as util­i­ties, tel­cos and energy. Also “buy­ing stocks with a man­age­ment change, finan­cial restruc­tur­ing or a change of focus can be very lucrative”.

The tech­ni­cals undoubt­edly look ugly, and investors will now focus on the second-quarter earn­ings reports as a test of whether stock prices have run away from fun­da­men­tal real­ity. While investors wait for Mr Mar­ket to show his hand, a cau­tious approach is war­ranted but that should not pre­clude one from find­ing stocks that look cheap.

For more dis­cus­sion on the direc­tion of stock mar­kets, see my recent posts “Stock mar­kets rolling over“, “How to play a stock mar­ket cor­rec­tion“, “Tech­ni­cal talk: S&P 500 — expect retest sequence“, “Rosen­berg inter­view: Cold truth about the econ­omy and mar­kets” and “Video-o-rama: Fresh wave of risk aver­sion“. (And do make a point of lis­ten­ing to Don­ald Coxe’s web­cast of July 10, which can be accessed from the side­bar of the Invest­ment Post­cards site.)

Econ­omy
“Global busi­ness sen­ti­ment con­tin­ues to improve. At the start of July con­fi­dence is as strong as it has been since the start of last Octo­ber. Expec­ta­tions regard­ing the out­look towards the end of this year rose strongly again last week to their high­est level since spring 2006,” said the lat­est Sur­vey of Busi­ness Con­fi­dence of the World con­ducted by Moody’s Economy.com. “Busi­ness sen­ti­ment remains con­sis­tent with a global reces­sion, but the down­turn is quickly moderating.”

Edward Hugh (Global Eco­nomic Per­spec­tives) said: “Global man­u­fac­tur­ing took another step towards growth in June — but the process was, as ever, uneven. The JPMor­gan Global Man­u­fac­tur­ing PMI posted 46.9, its high­est read­ing since last August. Only 4 PMIs — those for China, India, Turkey and Swe­den — posted growth read­ings in June (although Swe­den is not included in the JPMor­gan sur­vey). There was a gen­eral eas­ing in the rates of con­trac­tion recorded else­where. The next two to three months will now be crit­i­cal in order to decide whether the [man­u­fac­tur­ing] sec­tor is going to move over to expan­sion mode, and if it does, at what pace.”

Source: Global Eco­nomic Perspectives

The IMF’s World Eco­nomic Out­look reported that the global econ­omy was begin­ning to emerge from the reces­sion but “sta­bi­liza­tion is uneven and the recov­ery is expected to be slug­gish”. Eco­nomic growth was pro­jected at 0.5 per­cent­age points higher than in April 2009 or a 1.4% con­trac­tion in 2009 and 2.5% growth in 2010. Advanced economies were expected to con­tract by 3.8% in 2009 and expand by 0.6% in 2010, whereas emerg­ing mar­kets would slow sharply, grow­ing by only 1.5% in 2009 before rebound­ing to 4.7% in 2010.

Source: IMF’s World Eco­nomic Out­look, July 8, 2009.

Inter­est­ingly, the report also pub­lished finan­cial stress indices for advanced and emerg­ing economies, show­ing these have receded markedly since the begin­ning of 2009. How­ever, the report men­tioned that “improve­ments are far from uni­form across mar­kets and coun­tries” and “bank lend­ing con­di­tions are expected to remain tight and exter­nal financ­ing con­di­tions con­strained for a con­sid­er­able time”.

Source: IMF’s World Eco­nomic Out­look, July 8, 2009.

A snap­shot of the week’s US eco­nomic data is pro­vided below. (Click on the dates to see North­ern Trust’s assess­ment of the var­i­ous data releases.)

July 10
• The $787 bil­lion fis­cal stim­u­lus pack­age — facts lost in pol­icy rhetoric
• Trade gap posts sig­nif­i­cant improve­ment in May
• Con­sumer out­look turns a bit sour once again

July 9
• Ini­tial Job­less Claims report — dis­tor­tions from sea­sonal adjustments

July 8
• CEO Busi­ness Con­fi­dence moves up in the sec­ond quar­ter
• Mort­gage Pur­chase Index sug­gests an increase in home sales dur­ing June and pos­si­bly July
• Con­sumers con­tinue to bor­row less but pace of decline is notable

July 6
• ISM Sur­vey points to mod­er­a­tion in pace of decline in eco­nomic activity

Also, late pay­ments on home-equity loans rose to a record in the first quar­ter as 18 straight months of job losses and a slump­ing econ­omy left more bor­row­ers unable to pay their debts, the Amer­i­can Bankers Asso­ci­a­tion reported (via Bloomberg). Delin­quen­cies on home-equity loans climbed to 3.52% of all accounts from 3.03% in the fourth quarter.

Sum­ma­riz­ing the US eco­nomic out­look, with spe­cific ref­er­ence to the stim­u­lus plan, Asha Ban­ga­lore (North­ern Trust) said: “At the present time, it is nec­es­sary to assess if the stim­u­lus pack­age is work­ing in the pre­ferred direc­tion and if mod­i­fi­ca­tions and enhance­ments are called for, but it is impru­dent to declare that it is not suc­cess­ful and a sheer waste of tax dol­lars or that a big­ger pack­age is necessary.

“In recent days, much to the cha­grin of eco­nomic bears, a wide range of eco­nomic reports point to improv­ing eco­nomic con­di­tions. With­out doubt more bull­ish eco­nomic data are nec­es­sary to con­firm that the econ­omy is on firm foot­ing. The inten­sity and nature of the eco­nomic and finan­cial mar­ket cri­sis that has been under way sug­gests that eco­nomic mir­a­cles will not mate­ri­al­ize in a short period, which means that a weak eco­nomic report does not trans­late into going back to the draw­ing board in a panic.”

Week’s eco­nomic reports
Click here for the week’s econ­omy in pic­tures, cour­tesy of Jake of Econom­Pic Data.

Date	Time (ET)	Sta­tis­tic	For	Actual	Brief­ing Forecast	Mar­ket Expects	Prior
Jul 6	10:00 AM	ISM Ser­vices	Jun	47.0	45.5	46.0	44.0
Jul 8	10:30 AM	Crude Inven­to­ries	07/03	–2.90M	NA	NA	–3.66M
Jul 8	3:00 PM	Con­sumer Credit	May	-$3.2B	-$7.0B	-$8.5B	-$16.5B
Jul 9	8:30 AM	Ini­tial Claims	07/04	565K	600K	603K	617K
Jul 9	10:00 AM	Whole­sale Inventories	May	–0.8%	–1.0%	–1.0%	–1.3%
Jul 10	8:30 AM	Export Prices ex-agriculture	Jun	0.8%	NA	NA	0.3%
Jul 10	8:30 AM	Import Prices ex-oil	Jun	0.2%	NA	NA	0.1%
Jul 10	8:30 AM	Trade Bal­ance	May	-$26.0B	-$31.0B	-$30.0B	-$28.8B
Jul 10	9:55 AM	Michi­gan Sentiment-preliminary	Jul	64.6	70.0	70.0	70.8

Source: Yahoo Finance, July 10, 2009.

The US eco­nomic high­lights for the com­ing week include the following:

Source: North­ern Trust

Click the link below for the fol­low­ing eco­nom­ics reports:

• Wells Fargo Secu­ri­ties: Weekly Eco­nomic & Finan­cial Com­men­tary (July 10, 2009)
• Wells Fargo Secu­ri­ties: Monthly Out­look (July 2009)

“If you get all the facts, your judg­ment can be right; if you don’t get all the facts, it can’t be right,” said Bernard Baruch. Let’s hope that the news items and quotes from mar­ket com­men­ta­tors included in the “Words from the Wise” review will assist Invest­ment Post­cards read­ers to focus on the facts rather than hav­ing to wade through a plethora of noise.

For short com­ments — max­i­mum 140 char­ac­ters — on top­i­cal eco­nomic and mar­ket issues, web links and graphs, you can also fol­low me on Twit­ter by click­ing here.

That’s the way it looks from Veyson­naz, a quaint Alpine vil­lage in the south-western part of Switzer­land from where I will be head­ing back to Cape Town early next week.

Faith in the US dol­lar is wan­ing — the greenback’s role as the world’s main reserve cur­rency is being chal­lenged by the Chinese …

Source: Economist.com, July 9, 2009.

Mon­eyNews: Pope calls for new world finan­cial order
“Pope Bene­dict XVI called Tues­day for a new world finan­cial order guided by ethics, dig­nity and the search for the com­mon good in the third encycli­cal of his pontificate.

“In ‘Char­ity in Truth’, Bene­dict denounced the profit-at-all-cost men­tal­ity of the glob­al­ized econ­omy and lamented that greed had brought about the worst eco­nomic down­turn since the Great Depression.

“‘Profit is use­ful if it serves as a means toward an end,’ he wrote. ‘Once profit becomes the exclu­sive goal, if it is pro­duced by improper means and with­out the com­mon good as its ulti­mate end, it risks destroy­ing wealth and cre­at­ing poverty.’

“The doc­u­ment, in the works for two years and repeat­edly delayed to incor­po­rate the fall­out from the cri­sis, was released one day before lead­ers of the Group of Eight indus­tri­al­ized nations meet to coör­di­nate efforts to deal with the global meltdown.

“The release was clearly designed to give world lead­ers a strong moral imper­a­tive to cor­rect errors of the past, ‘which wreaked such havoc on the real econ­omy’, and make a more socially just and respon­si­ble world finan­cial order.

“‘The econ­omy needs ethics in order to func­tion cor­rectly — not any ethics, but an ethics which is peo­ple cen­tered,’ he wrote.”

Source: Mon­eyNews, July 7, 2009.

Wolf­gang Mün­chau (Finan­cial Times): Liq­uid­ity injec­tions alone are not enough
“Mon­e­tary policy’s var­i­ous guises from near-zero short-term inter­est rates, to mas­sive liq­uid­ity injec­tions, to quan­ti­ta­tive eas­ing and its rel­a­tives have so far had no trac­tion in this cri­sis. While the global econ­omy is no longer shrink­ing at quite the speeds seen at the begin­ning of the year, it is still trapped in a bad recession.

“The main rea­son for its longevity is the state of the bank­ing sec­tor. The Euro­pean Cen­tral Bank has recently pumped €442bn in one-year liq­uid­ity into the sys­tem, but the money is not reach­ing the real econ­omy. Japanese-style stag­na­tion is no longer pos­si­ble — it is already here. The only ques­tion is how long it will last. Even in an opti­mistic sce­nario, global eco­nomic growth will be weighed down by a com­bi­na­tion of credit squeeze, ris­ing unem­ploy­ment, ris­ing bank­rupt­cies, ris­ing default rates, and bal­ance sheet adjust­ment in the house­hold and finan­cial sectors.

“I would expect the US to have some­thing approach­ing a gen­uine recov­ery at some point in the next decade, but prob­a­bly not in 2010 or 2011. Judg­ing by the co-ordination fail­ure at the level of the Euro­pean Union, the per­sis­tent fail­ure to deal with the continent’s 40 or so cross-border banks at Euro­pean level, and in par­tic­u­lar Germany’s inabil­ity to sort out its toxic-asset con­t­a­m­i­nated Lan­des­banken, the eco­nomic prospects for the euro­zone are infi­nitely worse.

“From com­ments by senior cen­tral bankers in the US and Europe, I am sure they under­stand the grav­ity of the sit­u­a­tion very well. Janet Yellen, present of the Fed­eral Reserve Bank of San Fran­cisco, warned last week that the recov­ery would be ago­nis­ingly slow, that unem­ploy­ment could stay high for many years, and that inter­est rates might stay low for a long time.

“I would also inter­pret the decid­edly down­beat state­ment last week by Jean-Claude Trichet, pres­i­dent of the Euro­pean Cen­tral Bank, as a sign that the ECB is get­ting more wor­ried — when oth­ers are get­ting more opti­mistic. In Europe, there is some evi­dence that the credit crunch has dete­ri­o­rated in recent weeks. Much of that evi­dence is anec­do­tal, but these anec­dotes are disquieting.

“Com­pa­nies who file for bank­ruptcy increas­ingly blame the banks, and the num­ber of bank­rupt­cies is ris­ing rapidly. Only a fool would take com­fort from the strength in eco­nomic indi­ca­tors. Dur­ing a finan­cial cri­sis, these indi­ca­tors could be a met­ric of its respon­dents’ degree of delusion.

“The prob­lem is that the tril­lions of dol­lars and euros in liq­uid­ity are not get­ting through. There is no point in blam­ing the banks.”

Click here for the full article.

Source: Wolf­gang Mün­chau, Finan­cial Times, July 5, 2009.

Lucian Bebchuk (The Wall Street Jour­nal): The fall of the toxic-assets plan
“The plan for buy­ing trou­bled assets — which was ear­lier announced as the cen­tral ele­ment of the administration’s finan­cial sta­bil­ity plan — has been recently cur­tailed dras­ti­cally. The Trea­sury and the FDIC have attrib­uted this devel­op­ment to banks’ new abil­ity to raise cap­i­tal through stock sales with­out hav­ing to sell toxic assets. But the program’s inabil­ity to take off is in large part due to deci­sions by bank­ing reg­u­la­tors and account­ing offi­cials to allow banks to pre­tend that toxic assets haven’t declined in value as long as they avoid sell­ing them.

“The toxic assets clog­ging banks’ bal­ance sheets have long been viewed — by both the Bush and the Obama admin­is­tra­tions — as being at the heart of the finan­cial cri­sis. Sec­re­tary Gei­th­ner put for­ward in March a ‘public-private invest­ment pro­gram’ (PPIP) to pro­vide up to $1 tril­lion to invest­ment funds run by pri­vate man­agers and ded­i­cated to pur­chas­ing trou­bled assets. The plan aimed at ‘cleans­ing’ banks’ books of toxic assets and pro­duc­ing prices that would enable valu­ing toxic assets still remain­ing on these books.

“The pro­gram nat­u­rally attracted much atten­tion, and the Trea­sury and the FDIC have begun imple­ment­ing it. Recently, how­ever, one half of the pro­gram, focused on buy­ing toxic loans from banks, was shelved. The other half, focused on buy­ing toxic secu­ri­ties from both banks and other finan­cial insti­tu­tions, is expected to begin oper­at­ing shortly but on a much more mod­est scale than ini­tially planned.

“What hap­pened? Banks’ bal­ance sheets do remain clogged with toxic assets, which are still dif­fi­cult to value. But the will­ing­ness of banks to sell toxic assets to invest­ment funds has been killed by deci­sions of account­ing author­i­ties and bank­ing regulators.

“Ear­lier in the cri­sis, banks’ reluc­tance to sell toxic assets could have been attrib­uted to inabil­ity to get prices reflect­ing fair value due to the dry­ing up of liq­uid­ity. If the PIPP pro­gram began oper­at­ing on a large scale, how­ever, that would no longer been the case.

“Armed with ample gov­ern­ment fund­ing, the pri­vate man­agers run­ning funds set under the pro­gram would be expected to offer fair value for banks’ assets. Indeed, because the government’s fund­ing would come in the form of non-recourse financ­ing, many have expressed wor­ries that such fund man­agers would have incen­tives to pay even more than fair value for banks’ assets. The prob­lem, how­ever, is that banks now have strong incen­tives to avoid sell­ing toxic assets at any price below face value even when the price fully reflects fair value.

“A month after the PPIP pro­gram was announced, under pres­sure from banks and Con­gress, the US Finan­cial Account­ing Stan­dards Board watered down account­ing rules and made it eas­ier for banks not to mark down the value of toxic assets. For many toxic assets whose fun­da­men­tal value fell below face value, banks may avoid rec­og­niz­ing the loss as long as they don’t sell the assets.”

Click here for the full article.

Source: Lucian Bebchuk, The Wall Street Jour­nal, July 10, 2009.

Finan­cial Times: EU plans new push on bank reform
“New Euro­pean Union laws to drive banks to strengthen cap­i­tal cush­ions will be unveiled in Octo­ber, the Finan­cial Times has learnt, as EU mem­ber states inten­sify a reg­u­la­tory assault aimed at pre­vent­ing a repeat of the global finan­cial crisis.

“A draft report expected to be backed by EU finance min­is­ters in Brus­sels on Tues­day says that there is a ’strong case’ for curb­ing exist­ing rules on banks’ fund­ing needs, which crit­ics say exac­er­bate the ups and downs of eco­nomic cycles.

“The report rec­om­mends account­ing reforms and other pol­icy mea­sures to build more resilient cap­i­tal ‘buffers’ dur­ing good eco­nomic times.

“The aim of the new laws would be to make it eas­ier for banks to build up pro­vi­sions in good times with­out hav­ing to assign the money to spe­cific impaired assets. These funds could then be used to weather future eco­nomic storms.”

Source: Nikki Tait, Chris Bryant and Patrick Jenk­ins, Finan­cial Times, July 6, 2009.

The Wall Street Jour­nal: GM takes new direc­tion
“Gen­eral Motors kicked off a new era fol­low­ing its exit from bank­ruptcy pro­tec­tion on Fri­day, with Chief Exec­u­tive Fred­er­ick ‘Fritz’ Hen­der­son promis­ing to trans­form the auto maker into a leaner and more customer-focused company.

“The new com­pany will put a pre­mium on speed, account­abil­ity and risk tak­ing, and root out the lay­ers of man­age­ment that had hob­bled deci­sion mak­ing, he said at a news conference.

“‘Busi­ness as usual is over at GM,’ Mr. Hen­der­son said. He said the com­pany was scrap­ping a num­ber of senior posts and has dis­banded two com­mit­tees of top exec­u­tives that made key deci­sions for the company’s auto­mo­tive oper­a­tions. Mr. Hen­der­son expects hun­dreds of mid­dle man­agers to be let go in the weeks ahead, and the company’s sales and mar­ket­ing oper­a­tion will be reorganized.

“‘Our cul­ture to this point has been an imped­i­ment,’ Mr. Hen­der­son, a 25-year GM vet­eran, said. ‘This is all about flat­ten­ing the man­age­ment structure.’

“Mr. Hen­der­son said he is adopt­ing some tech­niques used by the alliance of Renault SA and Nis­san Motor Co., led by Car­los Ghosn. Sev­eral of GM’s highest-ranking exec­u­tives stud­ied Mr. Ghosn’s approach in 2006 while GM’s board weighed a poten­tial merger with Nissan-Renault.

“Mr. Hen­der­son and his top lieu­tenants also are plan­ning to hit the road in August to talk to deal­ers and con­sumers to gain insight into the US mar­ket. In the past, GM based much of its deci­sion mak­ing on market-research stud­ies, focus groups and strat­egy meet­ings among exec­u­tives. Deal­ers said the com­pany needs to recon­nect with consumers.”

Source: John Stoll and Sharon Ter­lep, The Wall Street Jour­nal, July 11, 2009.

Finan­cial Times: Trans­formed GM
“Dan McCrum, FT’s US Lex colum­nist, talks about the new trans­formed GM as the car­maker emerges from bankruptcy.”

Source: Finan­cial Times, July 10, 2009.

Mon­eyNews: IMF — global reces­sion end­ing
“The global econ­omy is start­ing to pull out of its deep­est reces­sion since World War Two but recov­ery will be slug­gish and poli­cies need to remain sup­port­ive, the Inter­na­tional Mon­e­tary Fund said on Wednesday.

“In an update of its World Eco­nomic Out­look, the IMF said the global econ­omy is likely to con­tract 1.4% this year, a touch steeper than the 1.3% decline it expected in April.

“How­ever, it now sees world eco­nomic growth of 2.5% in 2010, com­pared with an April pro­jec­tion of 1.9%.

“‘Finan­cial con­di­tions have improved more than expected, owing mainly to pub­lic inter­ven­tion, and recent data sug­gest that the rate of decline in eco­nomic activ­ity is mod­er­at­ing, although to vary­ing degrees among regions,’ the IMF said.

“The IMF said while the world’s advanced economies are expected to recover slightly next year, growth will remain below poten­tial until later in 2010, sug­gest­ing unem­ploy­ment will con­tinue to rise.

“It said the US econ­omy will con­tract 2.6% this year, slightly less than it thought in April, with growth resum­ing in 2010 albeit at a mere 0.8%.

“It said the euro-area econ­omy would shrink by 4.8% in 2009, a down­ward revi­sion of 0.6% from its April fore­cast. Next year, the IMF said the euro-area would con­tract 0.3%, slightly less than it fore­cast in April.

“Japan’s econ­omy is expected to con­tract by 6% this year, with growth resum­ing slightly to around 1.7% next year, the IMF said.

“Emerg­ing and devel­op­ing coun­tries are likely to regain growth momen­tum dur­ing the sec­ond half of 2009, it said.

“In a sep­a­rate updated report, the fund under­scored the need for sus­tained eco­nomic stimulus.

“‘Finan­cial con­di­tions have improved, as unprece­dented pol­icy inter­ven­tion has reduced the risk of sys­temic col­lapse and expec­ta­tions of eco­nomic recov­ery have risen,’ it said in an update to its global finan­cial sta­bil­ity report.

“‘Nonethe­less, vul­ner­a­bil­i­ties remain and com­pla­cency must be avoided.’”

Source: Mon­eyNews, July 8, 2009.

Bloomberg: G-8 says recov­ery is too weak to with­draw stim­u­lus
“Group of Eight lead­ers said the eco­nomic recov­ery from the steep­est reces­sion since World War II was too frag­ile for them to con­sider revers­ing efforts to pump money into the economy.

“Pres­i­dent Barack Obama pressed for the door to remain open to more stim­u­lus mea­sures as a renewed stock-market drop stirred con­cern that $2 tril­lion spent world­wide so far hasn’t jolted con­sumers and busi­nesses back to life.

“‘The G-8 needed to sound a sec­ond wakeup call for the world econ­omy,’ British Prime Min­is­ter Gor­don Brown told reporters yes­ter­day in L’Aquila, Italy, after the open­ing ses­sions of the lead­ers’ annual gath­er­ing. ‘There are warn­ing sig­nals about the world econ­omy that we can­not ignore.’

“Diver­gences over what to do next and calls from devel­op­ing nations to do more to counter the slump under­scored the G-8’s lim­ited room for maneu­ver. The biggest bor­row­ing spree in 60 years has failed to halt ris­ing unem­ploy­ment and left investors doubt­ing the strength of the recovery.

“‘We’ve been advo­cat­ing stim­u­late now, con­sol­i­date later,’ Angel Gur­ria, sec­re­tary gen­eral of the Orga­ni­za­tion for Eco­nomic Coöper­a­tion and Devel­op­ment, told Bloomberg Tele­vi­sion today from the sum­mit. ‘You’re not going to remove the stim­u­lus now. It’s too early.’”

Source: Helene Fou­quet and James Neuger, Bloomberg, July 9, 2009.

Tele­graph: Ship­ping flashes early warn­ing sig­nals again
“Port sta­tis­tics are reveal­ing. They were a lead­ing indi­ca­tor before the pro­duc­tion col­lapse in the Japan, Europe, and the US over the win­ter, and they may be telling us some­thing again.

“Amrita Sen at Bar­clays Cap­i­tal says the num­ber of Baltic Dry ships wait­ing to berth — mostly in China and Aus­tralia — has begun to fall after peak­ing at 154 in mid-June.

“The Cape­size Iron Ore Port Con­ges­tion Index is repli­cat­ing the pat­tern seen a year ago just before the com­mod­ity boom tipped over.

“‘The anec­do­tal evi­dence we are hear­ing is that ves­sel queues have been falling. There are reports of can­celled ton­nage from China point­ing to a slow­down in Chi­nese buy­ing of coal and iron ore.

“‘We are def­i­nitely expect­ing a cor­rec­tion. Peo­ple have been build­ing stocks of iron ore too quickly in antic­i­pa­tion of the stim­u­lus pack­age in China,’ she said.

“The Baltic Dry Index mea­sur­ing freight rates jumped 450% in the first half of the year on the China rebound, but has begun to fall back over the last two weeks. (Sen doubts freight rates will recover much since 1000 new ships are hit­ting the mar­ket this year and again next year, com­pared to 300 in nor­mal years. There is obvi­ously a hor­ren­dous ship­ping glut).”

Source: Ambrose Evans-Pritchard, Tele­graph, July 8, 2009.

Bloomberg: Obama adviser says US should mull sec­ond stim­u­lus
“The US should con­sider draft­ing a sec­ond stim­u­lus pack­age focus­ing on infra­struc­ture projects because the $787 bil­lion approved in Feb­ru­ary was ‘a bit too small’, said Laura Tyson, an out­side adviser to Pres­i­dent Barack Obama.

“The cur­rent plan ‘will have a pos­i­tive effect, but the real econ­omy is a sicker patient,’ Tyson said in a speech in Sin­ga­pore today [Tues­day]. The pack­age will have a more pro­nounced impact in the third and fourth quar­ters, she added, stress­ing that she was speak­ing for her­self and not the administration.

“Tyson’s com­ments con­trast with remarks made two days ago by Vice Pres­i­dent Joe Biden and fel­low Obama adviser Aus­tan Gools­bee, who said it was pre­ma­ture to dis­cuss craft­ing another stim­u­lus because the cur­rent mea­sures have yet to fully take effect. The gov­ern­ment is fac­ing crit­i­cism that the first pack­age was rolled out too slowly and failed to stop unem­ploy­ment from soar­ing to the high­est in almost 26 years.

“‘The econ­omy is worse than we fore­cast on which the stim­u­lus pro­gram was based,’ Tyson, who is a mem­ber of Obama’s Eco­nomic Recov­ery Advi­sory board, told the Nomura Equity Forum. ‘We prob­a­bly have already 2.5 mil­lion more job losses than anticipated.’

“‘The money is just really start­ing to come out in more sig­nif­i­cant amounts now,” Tyson said. “The stim­u­lus is per­form­ing close to expec­ta­tions but not in timing.’”

Source: Shamim Adam, Bloomberg, July 7, 2009.

The Wall Street Jour­nal: Econ­o­mists say no to a sec­ond stim­u­lus
“The Wall Street Journal’s lat­est fore­cast­ing sur­vey shows most econ­o­mists oppose another round of stim­u­lus (43 against, 8 for), despite fore­casts for lin­ger­ing double-digit unem­ploy­ment until at least June 2010. WSJ’s Phil Izzo and Kelsey Hub­bard discuss.”

Source: The Wall Street Jour­nal, July 9, 2009. (Click here for a Finan­cial Times arti­cle enti­tled “We do not need a sec­ond stim­u­lus plan”.)

Finan­cial Times: Fed warns on Con­gres­sional scrutiny
“The Fed­eral Reserve warned on Thurs­day that a grow­ing con­gres­sional threat to cur­tail its inde­pen­dence would desta­bilise mar­kets and raise the cost of ser­vic­ing US debt for ‘cur­rent and future generations’.

“Ron Paul, the Texas Repub­li­can, has gath­ered the sup­port of a major­ity of the House of Rep­re­sen­ta­tives for a bill that would audit the Fed’s mon­e­tary pol­icy deci­sions. He told a Con­gres­sional hear­ing he wanted the power to pre­vent the Fed being ’secret and clan­des­tine and serv­ing spe­cial interests’.

“The Fed is strug­gling to face down a polit­i­cal back­lash from dif­fer­ent parts of Con­gress amid scep­ti­cism over its poli­cies designed to restart the flow of credit and the award of new pow­ers to curb sys­temic risks.

“Don­ald Kohn, vice-chairman of the Fed, argued at the House finan­cial ser­vices sub­com­mit­tee hear­ing that any sense of polit­i­cal inter­fer­ence would neg­a­tively affect mar­kets. ‘Any sub­stan­tial ero­sion of the Fed­eral Reserve’s mon­e­tary inde­pen­dence likely would lead to higher long-term inter­est rates as investors begin to fear future infla­tion,’ he said.

“Not only did Mr Kohn argue that the Fed should be given the power to reg­u­late large sys­tem­i­cally sig­nif­i­cant com­pa­nies, but he argued against giv­ing up respon­si­bil­ity for con­sumer pro­tec­tion, ask­ing Con­gress to over­turn the Obama administration’s pro­posal to cre­ate a new Con­sumer Finan­cial Pro­tec­tion Agency.

“‘I would hope that the Con­gress might think about whether there are ways of strength­en­ing the Fed­eral Reserve’s com­mit­ment to con­sumer reg­u­la­tion as an alter­na­tive to cre­at­ing a new reg­u­la­tor,’ he said.”

Source: Tom Braith­waite, Finan­cial Times, July 9, 2009.

Philip Aldrick (Tele­graph): US lurch­ing towards “debt explo­sion” with long-term inter­est rates on course to dou­ble
“In a 2003 paper, Thomas Laubach, the US Fed­eral Reserve’s senior econ­o­mist, cal­cu­lated the impact on long-term inter­est rates of ris­ing fis­cal deficits and soar­ing national debt. Apply­ing his assump­tions to the recent spike in the US fis­cal deficit and national debt, long-term inter­ests rates will dou­ble from their cur­rent 3.5%.

“The impact would be dev­as­tat­ing by mak­ing it puni­tively expen­sive to finance national bor­row­ings and lead­ing to what Tim Con­g­don, founder of Lom­bard Street Research, called a ‘debt explo­sion’. Mr Laubach’s study has impli­ca­tions for the UK, too, as pub­lic debt is soar­ing. A US cri­sis would have impli­ca­tions for the rest of the world, in any case.

“Using his­tor­i­cal exam­ples for his paper, New Evi­dence on the Inter­est Rate Effects of Bud­get Deficits and Debt, Mr Laubach came to the con­clu­sion that ‘a per­cent­age point increase in the pro­jected deficit-to-GDP ratio raises the 10-year bond rate expected to pre­vail five years into the future by 20 to 40 basis points, a typ­i­cal esti­mate is about 25 basis points’.

“The US deficit has blown out from 3% to 13.5% in the past year but long-term rates are largely unchanged. Assum­ing Mr Laubach’s ‘typ­i­cal esti­mate’, long-term rates have to climb 2.5 per­cent­age points.

“He added: ‘Sim­i­larly, a per­cent­age point increase in the pro­jected debt-to-GDP ratio raises future inter­est rates by about 4 to 5 basis points.’ Econ­o­mists are pre­dict­ing a wide range of ratios but Mr Con­g­don said it was ‘not unrea­son­able” to assume debt dou­bling to 140%. At that level, Mr Laubach’s cal­cu­la­tions would see long-term rates rise by 3.5 per­cent­age points.

“Mr Con­g­don said the study illus­trated the ‘hor­ri­fy­ing’ con­se­quences for lead­ing west­ern economies of bail­ing out their banks and attempt­ing to stim­u­late mar­kets by cut­ting taxes and boost­ing pub­lic spend­ing. He said the mar­kets had failed to digest fully the scale of fis­cal largesse and said ‘cur­rent gilt yields [pub­lic debt] are extra­or­di­nary low given the size of deficits’.

“Should the cost of rais­ing or refi­nanc­ing pub­lic debt in the mar­kets dou­ble, ‘the debt could just explode’, he said, adding that it would come to a head in ‘five to 10 years’.”

Source: Philip Aldrick, Tele­graph, July 6, 2009.

Nouriel Roubini (Forbes): Brown manure, not green shoots
“The June employ­ment report sug­gests that the alleged green shoots are mostly yel­low weeds that may even­tu­ally turn into brown manure. The employ­ment report shows that con­di­tions in the labor mar­ket con­tinue to be extremely weak, with job losses in June of over 460,000. With the cur­rent rate of job losses, it is very clear that the unem­ploy­ment rate could reach 10% by later this sum­mer — around August or Sep­tem­ber — and will be closer to 10.5%, if not 11%, by year-end. I expect the unem­ploy­ment rate is going to peak at around 11% at some point in 2010, well above his­tor­i­cal stan­dards for even severe recessions.

“It’s clear that even if the reces­sion were to be over any­time soon — and it’s not going to be over before the end of the year — job losses are going to con­tinue for at least another year and a half. His­tor­i­cally, dur­ing the last two reces­sions, job losses con­tin­ued for at least a year and a half after the reces­sion was over. Dur­ing the 2001 reces­sion, the reces­sion was over in Novem­ber 2001, and job losses con­tin­ued through August 2003 for a cumu­la­tive loss of jobs of over 5 mil­lion; this time we are already see­ing more than 6 mil­lion job losses and the reces­sion is not over.

“The details of the unem­ploy­ment report are even worse than the head­line. Not only are there large job losses right now, but as a way of shar­ing the pain, firms are induc­ing work­ers to reduce hours and hourly wages. There­fore, when we’re look­ing at the effect of the labor mar­ket on labor income, we should con­sider that the total value of labor income is the prod­uct of jobs, hours and aver­age hourly wages — and that all three ele­ments are falling right now. So the effect on labor income is much more sig­nif­i­cant than job losses alone.”

Click here for the full article.

Source: Nouriel Roubini, Forbes, July 9, 2009.

BCA Research: US econ­omy — it looks like a recov­ery
“The US econ­omy is tran­si­tion­ing to a recov­ery path, though it will be bumpy and sub­dued com­pared with past cycles.

“The ISM for the non-manufacturing sec­tor rein­forced that the econ­omy is sta­bi­liz­ing fol­low­ing the ’sud­den stop’ that occurred in the fourth quar­ter of last year. The new orders index rose to a post-Lehman high and is prob­ing expan­sion­ary ter­ri­tory, indi­cat­ing com­pa­nies are regain­ing some con­fi­dence in final demand. This is cor­rob­o­rated by the con­tin­u­ing rise in the employ­ment com­po­nent, which shows that busi­nesses are slow­ing the pace of job cuts, despite June’s dis­ap­point­ing pay­roll figures.

“The ISM sur­veys sig­nal that the econ­omy is on the cusp of a recov­ery. Investor con­vic­tion, how­ever, will only come with evi­dence that the US con­sumer is begin­ning to spend a bit more freely, which we expect to see over the next sev­eral months.”

Source: BCA Research, July 8, 2009.

Asha Ban­ga­lore (North­ern Trust): CEO Busi­ness Con­fi­dence moves up in the sec­ond quar­ter
“The Con­fer­ence Board’s CEO Busi­ness Con­fi­dence Sur­vey increased to 55 in the sec­ond quar­ter from 30 in the first quar­ter. The cycle low for the index is 24. The CEO Con­fi­dence Index advanced three quar­ters has a strong pos­i­tive cor­re­la­tion (0.62) with the year-to-year change in equip­ment and soft­ware spend­ing. Based on this his­tor­i­cal evi­dence, cap­i­tal spend­ing most likely posted its worst per­for­mance in the first quar­ter of 2009.”

Source: Asha Ban­ga­lore, North­ern Trust — Daily Global Com­men­tary, July 8, 2009.

Asha Ban­ga­lore (North­ern Trust): Trade gap posts sig­nif­i­cant improve­ment in May
“The trade deficit nar­rowed to $26 bil­lion in May from $28.79 bil­lion in April. Read­ings close to the May trade gap were last seen in Novem­ber 1999.

“After adjust­ing for infla­tion, the trade deficit of goods nar­rowed to $36.2 bil­lion. This is the small­est trade deficit since Decem­ber 1999 ($35.31 bil­lion). The sig­nif­i­cant improve­ment in the trade deficit is a big plus for sec­ond quar­ter real GDP and for the long term sta­tus of the economy.”

Source: Asha Ban­ga­lore, North­ern Trust — Daily Global Com­men­tary, July 10, 2009.

Asha Ban­ga­lore (North­ern Trust): ISM Sur­vey points to mod­er­a­tion in pace of decline in eco­nomic activ­ity
“The ISM Non-Manufacturing sur­vey results for June indi­cate improv­ing con­di­tions in the non-manufacturing sec­tor, with the com­pos­ite index climb­ing 3 points to 47.0. Indexes track­ing busi­ness activ­ity (49.8 ver­sus 42.4 in May), new orders (48.6 ver­sus 44.4), and employ­ment (43.4 ver­sus 39.0) moved up in June. These read­ings are below 50.0 imply­ing that the sec­tor con­tin­ues to con­tract but each index is mov­ing closer to the line of demar­ca­tion between con­trac­tion and expan­sion sug­gest­ing that the pace of decline is moderating.

“Both the non-manufacturing and man­u­fac­tur­ing com­pos­ite indexes have a strong pos­i­tive cor­re­la­tion with the quarter-to-quarter change in real GDP. The recent mod­er­a­tion in these com­pos­ite indexes points to a mod­er­a­tion in the pace at which real GDP is declining.”

Source: Asha Ban­ga­lore, North­ern Trust — Daily Global Com­men­tary, July 6, 2009.

Bill King (The King Report): Labor sit­u­a­tion much worse than head­line num­bers depict
“Net of the Con­cur­rent Sea­sonal Fac­tor Bias and net of dis­tor­tions built into the report­ing by the Birth-Death Model, the June jobs loss likely exceeded 700,000.

“John Williams (Shadow Gov­ern­ment Sta­tis­tics) on the goofy B/D Model: ‘The sys­tem was not designed to accom­mo­date reces­sions, but the bench­mark revi­sions tended to show a pat­tern of fairly con­sis­tent over­state­ment with the annual revi­sions, regard­less of the busi­ness cycle. Dur­ing the report­ing cycle cov­er­ing the 1990 to 1991 reces­sion, a par­tic­u­larly large down­ward bench­mark revi­sion in pre­vi­ously reported pay­rolls lev­els was blamed par­tially on the BLS assum­ing that com­pa­nies that had stopped report­ing dur­ing the reces­sion still were in busi­ness, with pro­por­tion­ate pay­roll employ­ment attrib­uted to them by the BLS. The prob­lem was that much of the non-reporting reflected com­pa­nies going out of busi­ness. The bulk of that mod­el­ing was based on peri­ods of eco­nomic growth.

“‘The unad­justed annual decline in June pay­rolls was the deep­est since a sim­i­lar decline at the trough of the 1958 reces­sion, but still shy of the 4.9% trough seen in the 1949 down­turn. When the 1949 annual low growth is bro­ken, pos­si­bly next month, the annual per­cent­age con­trac­tion in pay­rolls will be the most severe since the pro­duc­tion shut­down fol­low­ing World War II.’”

Source: John Williams, Shadow Gov­ern­ment Sta­tis­tics (via The King Report), July 6, 2009.

Asha Ban­ga­lore (North­ern Trust): Ini­tial Job­less Claims report — sea­son­ally dis­tor­tion
“Ini­tial job­less claims fell 52,000 to 565,000 for the week ended July 4. Sea­sonal dis­tor­tions aris­ing from the smaller-than-expected lay­offs in the auto sec­tor and the hol­i­day short­ened week are cited as rea­sons for the large drop in the sea­son­ally adjusted data.

“Using sea­son­ally unad­justed job­less claims num­bers elim­i­nates the prob­lem of inter­pret­ing data with sea­sonal dis­tor­tions. Sea­son­ally unad­justed data indi­cate that on a year-to-year basis, ini­tial job­less claims advanced 56% in June ver­sus larger gains in the prior months. The peak appears to have occurred in Feb­ru­ary (86% yoy increase). The chart below points out that the worst in the labor mar­ket is most likely behind us.

“Con­tin­u­ing claims, which lag ini­tial claims by one week, increased 159,000 to 6.883 mil­lion and the insured unem­ploy­ment rate rose to 5.1% from 5.0% in the prior week.”

Source: Asha Ban­ga­lore, North­ern Trust — Daily Global Com­men­tary, July 9, 2009.

Yahoo Finance: Retail­ers report weak June sales
“Esca­lat­ing job wor­ries and rainy weather damp­ened shop­pers’ appetite for buy­ing sum­mer sta­ples like shorts and dresses, result­ing in sharper-than-expected sales declines for many mer­chants in June and increas­ing con­cerns about the back-to-school shop­ping season.

“As retail­ers reported their monthly fig­ures Thurs­day, the weak­ness cut across all sec­tors but hit mall-based cloth­ing stores par­tic­u­larly hard.

“Same-store sales — sales at stores open at least a year — are con­sid­ered a key indi­ca­tor of a retailer’s health.

“‘Con­sumers are under severe pres­sure on the job front, so dis­cre­tionary spend­ing is just not hap­pen­ing,’ said Ken Perkins, pres­i­dent of retail con­sult­ing firm Retail Metrics.

“… finan­cial wor­ries are clearly dis­cour­ag­ing shop­pers too. The lat­est fed­eral jobs report, which showed wages shrink­ing and higher job losses than expected in June, is increas­ing con­cerns about con­sumers’ abil­ity to spend in the months ahead.”

Source: Anne D’Innocenzio, Yahoo Finance, July 9, 2009.

Asha Ban­ga­lore (North­ern Trust): Con­sumer out­look turns a bit sour once again
“The Uni­ver­sity of Michi­gan Con­sumer Sen­ti­ment Index fell to 64.6 in the early-July sur­vey from 70.8 in June. Both the Cur­rent Con­di­tions Index (70.4 ver­sus 73.2 in June) and the Expec­ta­tions Index (60.9 ver­sus 69.2 in June) dropped in July. The decline in the Con­sumer Expec­ta­tions Index is a big neg­a­tive for the July Index of Lead­ing Eco­nomic Indi­ca­tors. The lat­est out­look of con­sumers has turned grim after show­ing improve­ments dur­ing five of the six months ended June.”

Source: Asha Ban­ga­lore, North­ern Trust — Daily Global Com­men­tary, July 10, 2009.

Asha Ban­ga­lore (North­ern Trust): Con­sumers con­tinue to bor­row less but pace of decline is notable
“Con­sumer credit declined at an annual rate of 1.5% in May, after a 7.8% plunge in April and a 7.3% drop in March. The con­sumer delever­ag­ing trend com­menced in August 2008. The small decline in bor­row­ing after a larger drop in prior months sug­gests that house­hold bal­ance sheets are mend­ing which is a big plus for con­sumer spend­ing, albeit not imme­di­ately. The impor­tant point is that the pre­ferred trend in con­sumer bor­row­ing is emerging.”

Source: Asha Ban­ga­lore, North­ern Trust — Daily Global Com­men­tary, July 8, 2009.

Clus­ter­stock: Hey, Amer­ica, get ready to sup­port your par­ents
“While the offi­cial retire­ment age in the US is 66, the major­ity of work­ers retire at 64 and draw their pen­sions for 16 years on aver­age. Cur­rently, there are about four Amer­i­can work­ers for every per­son who is 65 and over, and retired. This ratio will change sig­nif­i­cantly in the next 40 years putting a strain on our pen­sion sys­tem as there will be about two work­ers per retiree.

“But the US and the UK still have bet­ter odds than aging Japan, which will have 1:1 ratio by 2050.”

Source: Kamelia Angelova, Clus­ter­stock, July 10, 2009.

Asha Ban­ga­lore (North­ern Trust): Mort­gage Pur­chase Index sug­gests an increase in home sales dur­ing June
“The Mort­gage Pur­chase Index of Mort­gage Bankers Asso­ci­a­tion increased 6.7% to 285.6 dur­ing the week ended July 3. The impor­tant news is that this index has risen in seven of the last ten weeks. The Pend­ing Home Sales Index (PHSI) has risen in each of the four months ended May. The upshot is that it should not be sur­pris­ing to see an increase in home sales in June when the sales reports are pub­lished later in the month. The chart below indi­cates the pos­i­tive rela­tion­ship between home sales and the Pur­chase Index. The PHSI points to a likely increase in home sales in July; the Pur­chase Index of the next few weeks should help to con­firm this forecast.

“Mul­ti­ple appli­ca­tions for the same prop­erty and a reduc­tion in the num­ber of mort­gage bankers dis­torted the Pur­chase Index in 2007. The Mort­gage Refi­nance Index also advanced 15.2% in the lat­est weekly tally.”

Source: Asha Ban­ga­lore, North­ern Trust — Daily Global Com­men­tary, July 8, 2009.

Bloomberg: Delin­quen­cies on US home-equity loans reach record
“Late pay­ments on home-equity loans rose to a record in the first quar­ter as 18 straight months of job losses and a slump­ing econ­omy left more bor­row­ers unable to pay their debts, the Amer­i­can Bankers Asso­ci­a­tion reported.

“Delin­quen­cies on home-equity loans climbed to 3.52% of all accounts from 3.03% in the fourth quar­ter, and late pay­ments on home-equity lines of credit climbed to a record 1.89%, the group reported today. An index of eight types of loans rose for a fourth straight quar­ter, to 3.23% from 3.22% in Octo­ber through Decem­ber, the group said.

“‘The num­ber one dri­ver of delin­quen­cies is job losses, which we’ve seen build and build,’ James Chessen, the group’s chief econ­o­mist, said in a tele­phone inter­view. ‘Delin­quen­cies won’t come down with­out a dra­matic improve­ment in the econ­omy and busi­nesses will have to start hir­ing again.’”

Source: Mar­garet Chad­bourn, Bloomberg, July 7, 2009.

Bloomberg: Dis­tressed com­mer­cial prop­erty in US dou­bles to $108 bil­lion
“Com­mer­cial prop­er­ties in the US val­ued at more than $108 bil­lion are now in default, fore­clo­sure or bank­ruptcy, almost dou­ble than at the start of the year, Real Cap­i­tal Ana­lyt­ics said.

“There were 5,315 build­ings in finan­cial dis­tress at the end of June, the New York-based real estate research firm said in a report issued today. That’s more than twice the num­ber of trou­bled prop­er­ties at the end of 2008.

“Hotels and retail prop­er­ties are among the most ‘prob­lem­atic’ assets fol­low­ing bank­ruptcy fil­ings by mall owner Gen­eral Growth Prop­er­ties and Extended Stay Amer­ica, accord­ing to the report. The scarcity of credit is caus­ing prop­erty defaults in all regions and among every investor type, Real Cap­i­tal said.

“‘Per­haps more alarm­ing than the rapid growth in the dis­tress totals is the very mod­est rate at which trou­bled sit­u­a­tions are being resolved,’ the report said.

“About $4.1 bil­lion of com­mer­cial prop­er­ties have emerged from dis­tress, accord­ing to Real Capital.

“‘In far more sit­u­a­tions, mod­i­fi­ca­tions and short-term exten­sions are being granted, but these can hardly be con­sid­ered resolved, only delayed,” the study said.”

Source: David Levitt, Bloomberg, July 8, 2009.

Bloomberg: Gold­man trading-code invest­ment put at risk by theft
“Gold­man Sachs Group Inc. may lose its invest­ment in a pro­pri­etary trad­ing code and mil­lions of dol­lars from increased com­pe­ti­tion if soft­ware allegedly stolen by a for­mer employee gets into the wrong hands, a pros­e­cu­tor said.

“Sergey Aleynikov, an ex-Goldman Sachs com­puter pro­gram­mer, was arrested July 3 after arriv­ing at Lib­erty Inter­na­tional Air­port in Newark, New Jer­sey, US offi­cials said. Aleynikov, 39, who has dual Amer­i­can and Russ­ian cit­i­zen­ship, is charged in a crim­i­nal com­plaint with steal­ing the trad­ing soft­ware. Teza Tech­nolo­gies LLC, a Chicago-based firm co-founded by a for­mer Citadel Invest­ment Group LLC trader, said it sus­pended Aleynikov, who started there on July 2.

“At a court appear­ance July 4 in Man­hat­tan, Assis­tant US Attor­ney Joseph Fac­ciponti told a fed­eral judge that Aleynikov’s alleged theft poses a risk to US mar­kets. Aleynikov trans­ferred the code, which is worth mil­lions of dol­lars, to a com­puter server in Ger­many, and oth­ers may have had access to it, Fac­ciponti said, adding that New York-based Gold­man Sachs may be harmed if the soft­ware is disseminated.

“‘The bank has raised the pos­si­bil­ity that there is a dan­ger that some­body who knew how to use this pro­gram could use it to manip­u­late mar­kets in unfair ways,’ Fac­ciponti said, accord­ing to a record­ing of the hear­ing made pub­lic today. ‘The copy in Ger­many is still out there, and we at this time do not know who else has access to it.’

“The pro­pri­etary code lets the firm do ’sophis­ti­cated, high-speed and high-volume trades on var­i­ous stock and com­modi­ties mar­kets,’ pros­e­cu­tors said in court papers. The trades gen­er­ate ‘many mil­lions of dol­lars’ each year.”

Source: David Glovin and Chris­tine Harper, Bloomberg, July 6, 2009.

Bloomberg: Steal­ing secrets from Gold­man Sachs
“For­mer Gold­man pro­gram­mer Sergey Aleynikov arrested for theft charges on July 3.”

Source: Bloomberg (via YouTube), July 9, 2009.

Bespoke: Invest­ment grade cor­po­rate bonds hold­ing up well
“Even though equity mar­kets have pulled back since the June 12 top, invest­ment grade cor­po­rate bonds have con­tin­ued to per­form well. Below is a year-to-date price chart of LQD, which is an ETF that tracks the invest­ment grade cor­po­rate bond mar­ket. Since bot­tom­ing in early March, the ETF has been in a very strong uptrend, bounc­ing off of the bot­tom and top of an upward slop­ing chan­nel as it has worked its way higher. While the S&P 500 is off more than 7% from its recent high, LQD is on the verge of break­ing out to a six-month high.”

Source: Bespoke, July 9, 2009.

Barry Ritholtz (The Big Pic­ture): S&P 500 vs CDs (1994–2008)
“Imag­ine two peo­ple who added $10,000 to their invest­ment accounts on Jan­u­ary 1, every year for the past 15 years.

“One of them is risk averse. They put the money into Cer­tifi­cates of Deposits, get­ting a few per­cent­age points each year, but the prin­ci­pal is insured.

“The other is less risk averse; they put money into an S&P 500 Index each year.

Stocks ver­sus Cer­tifi­cates of Deposit (1994–2008)

“CDs in 2009 yield 1%-2%, as the mar­ket fell and then rally; if the S&P doesn’t per­form well for the rest of this year, CDs will have more gains again.

“As of March, bonds had out­per­formed stocks from 1968 to 2009 — 40 years.”

Source: Barry Ritholtz, The Big Pic­ture, July 7, 2009.

Bespoke: Over­sold mar­ket reach­ing extremes
“The graphic below shows the cur­rent lev­els as well as the one week change in the trad­ing ranges of the S&P 500 and its ten sec­tors. The cir­cles rep­re­sent where the sec­tors and index cur­rently stand, while the tail rep­re­sents where it was one week ago. When the cir­cle is in the red zone, the sec­tor or index is over­bought (light red = over­bought, dark red-extreme over­bought). Read­ings in the green zone indi­cate that the index or sec­tor is over­sold (light green = over­sold, dark green = extreme over­sold). For this analy­sis, over­bought and over­sold mea­sures are defined as one stan­dard devi­a­tion above or below the index’s 50-day mov­ing average.

“Fol­low­ing the recent declines, the S&P 500 has now moved into over­sold ter­ri­tory for the first time since March 11. On a sec­tor basis, only two (Health Care and Con­sumer Sta­ples) are cur­rently above their 50-DMAs, while eight are below. Of the eight trad­ing below their 50-days, six are cur­rently over­sold, and four of those (Con­sumer Dis­cre­tionary, Energy, Indus­tri­als, and Mate­ri­als) have reached ‘extreme’ over­sold lev­els (two stan­dard devi­a­tions below 50-DMA). Like the over­all mar­ket, it has been a while since this many sec­tors were ‘extremely’ over­sold. You have to go all the way back to the March 9 low to find a day when more sec­tors were over­sold. If you’re bear­ish, this is the break you’ve been look­ing for, while if you’ve been wait­ing for a cor­rec­tion to get in, now is your chance.”

Source: Bespoke, July 8, 2009.

Bespoke: Just 24% of S&P 500 stocks are above their 50-day mov­ing aver­ages
“After rest­ing above 75% for most of the past three months, the per­cent­age of stocks above their 50-day mov­ing aver­ages in the S&P 500 has tanked to just 24%. There are cur­rently zero stocks in the Energy and Tele­com sec­tors that are trad­ing above their 50-days. Indus­tri­als are the third worst at 3%, fol­lowed by Finan­cials at 6% and Mate­ri­als at 7%. Util­i­ties, Con­sumer Sta­ples and Health Care are all above 60%, so there has been quite a bit of rota­tion dur­ing this mar­ket pull­back. The last time the over­all num­bers were this weak, all sec­tors were down in the dumps.”

Source: Bespoke, July 8, 2009.

Finan­cial Times: Mor­gan Stan­ley lifts equi­ties
“Improve­ments in mar­ket con­di­tions over the past few weeks have led Teun Draaisma, equity strate­gist at Mor­gan Stan­ley, to shift from an ‘under­weight’ posi­tion on equi­ties to ‘neutral’.

“But he adds: ‘We are keep­ing an open mind and not turn­ing out­right bull­ish, as there are still plenty of uncer­tain­ties related to US hous­ing, Euro­pean earn­ings, the Euro­pean bank­ing sys­tem, the default cycle, Chi­nese growth and pol­icy action.’

“Lower bond yields, a pull back in sen­ti­ment and falling equity prices are among the fac­tors that have led Mor­gan Stan­ley to move 5% of their weight­ing from gov­ern­ment bonds to equities.

“But with stronger sig­nals still needed to take a stance on mar­ket direc­tion either way, Mr Draaisma argues there are ‘plenty of oppor­tu­ni­ties to make money beyond the mar­ket direc­tion call’ by pur­su­ing a strat­egy that he describes as ‘the mid­dle ground’.

“‘Macro and the next big mar­ket move has become everyone’s favourite invest­ment topic over the past two years. We sus­pect it is time to move on to the micro of sec­tors, stocks and styles.’

“Among a large ‘mid­dle ground’ of invest­ment oppor­tu­ni­ties include ‘the for­got­ten mar­ket’ Japan and ’sec­tors that are cheap and under-owned with improv­ing fun­da­men­tals’ such as util­i­ties, tel­cos and energy. Also ‘buy­ing stocks with a man­age­ment change, finan­cial restruc­tur­ing or a change of focus can be very lucrative’.”

Source: Teun Draaisma, Finan­cial Times, July 6, 2009.

Richard Rus­sell (Dow The­ory Let­ters): March lows to be tested
“I’ve given this next state­ment a lot of thought. I don’t think most ana­lysts under­stand the amaz­ing power and tenac­ity of the great pri­mary trend of the mar­ket. Most of today’s ana­lysts have had no expe­ri­ence with bear mar­kets. We’re now in a pri­mary bear mar­ket. Most peo­ple believe that if the gov­ern­ment or the Fed does this or that, the bear mar­ket can be halted or reversed. Noth­ing could be fur­ther from the truth.

“The fact is that in the mar­ket, noth­ing is more pow­er­ful or insis­tent than the great pri­mary trend. The pri­mary trend can best be com­pared with the tide of the ocean. All man’s efforts to thwart or turn the tide are like so many sand cas­tles built on the edge of the near­est waves. The incom­ing tide will wash all the sand cas­tles away, if not with the first wave then with the sec­ond or the third. Thus, the incom­ing tide will con­quer all.

“This is why all of Obama’s and Bernanke’s and Geithner’s ’sand cas­tles’ will be washed away by the bear mar­ket. All that will be left will be crip­pled cor­po­ra­tions and mon­ster debts.

“Obama believes that Roo­sevelt with his spend­ing and alpha­bet agen­cies ended the Great Depres­sion. Sorry, Pres­i­dent Obama, you are wrong. The Great Bear mar­ket and Depres­sion finally ended when the bear mar­ket died of exhaus­tion on July 8, 1932. That was the day when the D-J Indus­trial Aver­age halted its decline at Dow 41.22. At that time, the Dow pro­vided a div­i­dend yield of 10.2%. That’s when the bear mar­ket actu­ally ended. It ended the way all bear mar­kets do — in utter exhaustion.

“On another sub­ject, I’ve felt all along that the gov­ern­ment and the Fed should have allowed this bear mar­ket to run its course, rather than wast­ing tril­lions of dol­lars in an attempt to halt the bear mar­ket. Per­haps polit­i­cally, this would have been impos­si­ble, but in the end it would have been bet­ter for the nation.

“Accord­ingly, although I cer­tainly do not want to see the March lows vio­lated, my stud­ies sug­gest that the odds favor an even­tual break­ing of the March lows and then a much lower bear market.

“Sorry, those are my deep­est and most truth­ful thoughts.”

Richard Rus­sell (Dow The­ory Let­ters): Gold looks inter­est­ing
“Below we see a daily chart of gold going back six months. The 50-day MA is ris­ing and above the ris­ing red 200-day MA. RSI and MACD are in bull­ish posi­tions, and it remains to be seen whether gold will (once again) try for the ‘over-one-thousand area’.

“Below is a weekly pic­ture show­ing the huge ‘head-and-shoulders’ pat­tern that has formed in gold. The obvi­ous ques­tion is whether gold can rally to break out above the resis­tance at roughly 1,000. This is a poten­tially very pow­er­ful for­ma­tion, and gold is at an excit­ing junc­ture. Hard to believe that this for­ma­tion won’t even­tu­ally break out to the upside, but gold is the most emo­tional of all trad­able items. The Fed does not want to see gold spurt higher, and there’s no telling what the Fed might do to halt gold’s progress.

“The supreme irony is that the Fed and the gov­ern­ment want a lower deval­ued dol­lar, but they don’t want the world to see what they’re doing via surg­ing gold.”

Source: Richard Rus­sell, Dow The­ory Let­ters, July 6, 2009.

David Fuller (Fuller­money): Risky assets tem­porar­ily in retreat
“Recently we have seen an unwind­ing of spec­u­la­tive posi­tions in crude oil and many other commodities.

“Inevitably, this will influ­ence mon­e­tary pol­icy deci­sions, includ­ing quan­ti­ta­tive eas­ing, taken by many gov­ern­ments. Com­mod­ity price infla­tion is tem­porar­ily in retreat once again. The stock mar­ket cor­rec­tion will sub­due talk of eco­nomic ‘green shoots’. Con­se­quently gov­ern­ment long-dated bond yields are retreat­ing once again in what I believe will be a base for­ma­tion exten­sion phase. For instance, the US 10-year bond yield nearly dou­bled in ris­ing from a low just above 2% in Decem­ber 2008 to a high frac­tion­ally over 4% last month. A mean rever­sion towards 3% should not sur­prise us.

“While these recent trend rever­sals con­tinue, many gov­ern­ments are likely to increase their efforts to cush­ion eco­nomic reces­sion and stem the advance in unem­ploy­ment fig­ures. This will not be easy, as we have already seen. Nev­er­the­less, hav­ing embarked on the road of quan­ti­ta­tive eas­ing, they are unlikely to change course until com­mod­ity prices, stock mar­ket indices and par­tic­u­larly long-dated gov­ern­ment bond yields are strength­en­ing once again.”

Source: David Fuller, Fuller­money, July 8, 2009.

Jef­frey Saut (Ray­mond James): Cau­tious, but not bear­ish
“The call for this week: We think the world is chang­ing; and, chang­ing VERY rapidly. Ergo, we sug­gest think­ing more strate­gi­cally, which would be in accord with the afore­men­tioned points. That said, we also believe there will be tac­ti­cal oppor­tu­ni­ties for the well pre­pared investor in the months ahead. Tac­ti­cally, we are cur­rently cau­tious, but not bear­ish, as we await oppor­tunis­tic points to enhance our cap­i­tal. Over­all, we are opti­mistic, believ­ing the worst is in the rear-view mir­ror as we antic­i­pate a bet­ter future. Indeed, the future is com­ing, but only you can decide where it is going …

Source: Jef­frey Saut, Ray­mond James, July 6, 2009.

Bespoke: 62% is the magic num­ber
“If the mar­ket is going to be able to trade higher this earn­ings sea­son, the per­cent­age of com­pa­nies beat­ing earn­ings esti­mates needs to be equal to or higher than the 62% read­ing we saw last quar­ter. The mar­ket did well dur­ing the last earn­ings sea­son because the earn­ings beat rate finally saw a quar­ter over quar­ter increase. Prior to the 62% read­ing, the num­ber had gone down every quar­ter since the sec­ond quar­ter of 2007 when the bear mar­ket started. It’s going to be hard to top 62% because ana­lysts have been rais­ing earn­ings esti­mates instead of cut­ting them this quarter.”

Source: Bespoke, July 9, 2009.

Mon­eyNews: Zoel­lick — dol­lar reserve cur­rency not at risk
“The US dollar’s role as a global reserve cur­rency is not cur­rently at risk but Wash­ing­ton should heed con­cerns about its large and grow­ing bud­get deficit, World Bank Pres­i­dent Robert Zoel­lick said on Tuesday.

“‘The US should take all these (remarks by) com­men­ta­tors as seri­ous state­ments about the need to pre­serve the unique sta­tus of the dol­lar as a reserve cur­rency,’ Zoel­lick said in an inter­view with Reuters by tele­phone ahead of a G8 lead­ers’ sum­mit in Italy.

“‘That means mak­ing sure, that after the stim­u­lus plans, to restore fis­cal dis­ci­pline and have a sound mon­e­tary pol­icy,’ he added.

“China, Rus­sia and Brazil have said they will use this week’s sum­mit to push their view that the world needs to start seek­ing a new global reserve cur­rency as an alter­na­tive to the dollar.

“How­ever, G8 sources told Reuters they do not expect a seri­ous dis­cus­sion on the issue.”

Source: Mon­eyNews, July 7, 2009.

Fin24: Zim­babwe puts rand on table again
“The Zim­bab­wean gov­ern­ment put the adop­tion of the rand back on to the table with the country’s indus­try and com­merce min­is­ter say­ing the option would be debated.

“Welsh­man Ncube, indus­try and com­merce min­is­ter, was quoted by Reuters to have said on Tues­day that the coun­try could not ‘… re-enter the Zim­babwe dol­lar with­out the econ­omy to sup­port that’.

“‘We need another solu­tion. We can­not con­tinue for­ever with mul­ti­ple cur­ren­cies,’ Ncube said. He was address­ing an Africa forum in Zimbabwe.

“‘If we can at least join rand mon­e­tary union, we will have money allo­cated to Zim­babwe through that sys­tem,’ he said.

“The Zim­bab­wean dol­lar was aban­doned at the begin­ning of the year, when run­away infla­tion and a thriv­ing black mar­ket ren­dered the dol­lar vir­tu­ally use­less. The issue of Zim­babwe using the rand as its bespoke cur­rency hit the news at the turn of the year but after sev­eral weeks of spec­u­la­tion the mat­ter was ditched.

“Dawie Roodt, an ana­lyst at Effi­cient Group said Zim­babwe does not have the means to peg its cur­rency to the rand. ‘Whether they do it with or with­out the South African government’s per­mis­sion, they need large cur­rency reserves to enact such a plan, which don’t exist,’ he said.

“Accord­ing to Roodt, Zim­babwe needs to focus on rebuild­ing its insti­tu­tions to ensure a proper democ­racy, before any real improve­ment in the econ­omy will be seen.”

Source: Leani Wes­sels, Fin24, July 7, 2009.

Finan­cial Times: G8 shifts focus from food aid to farm­ing
“The G8 coun­tries will this week announce a ‘food secu­rity ini­tia­tive’ at their sum­mit, com­mit­ting more than $12 bil­lion for agri­cul­tural devel­op­ment over the next three years, in a move that sig­nals a fur­ther shift from food aid to long-term invest­ments in farm­ing in the devel­op­ing world.

“The US and Japan will pro­vide the bulk of the fund­ing, with $3–4 bil­lion each, with the rest com­ing from Europe and Canada, accord­ing to United Nations offi­cials and Group of Eight diplo­mats briefed on the ‘L’Aquila Food Secu­rity Ini­tia­tive’ — named after the Ital­ian town where the sum­mit is being held. Offi­cials said that it would more than triple spending.

“At the sum­mit begin­ning on Wednes­day, G8 lead­ers will pledge to reverse ‘the ten­dency of decreas­ing offi­cial devel­op­ment aid and national financ­ing to agri­cul­ture’, accord­ing to the draft dec­la­ra­tion seen by the FT.

“‘The com­bined effect of long-standing under­in­vest­ment in agri­cul­ture and food secu­rity, price trends and the eco­nomic cri­sis have led to increased hunger,’ it states. ‘Food secu­rity is closely con­nected with eco­nomic growth and social progress as well as with polit­i­cal stability.’

“The G8 ini­tia­tive under­scores Washington’s new approach to fight­ing global hunger, revers­ing a two-decades-old pol­icy focused almost exclu­sively on food aid. Hillary Clin­ton, US sec­re­tary of state, and Tom Vil­sack, the agri­cul­ture sec­re­tary, have high­lighted the shift­ing empha­sis in recent speeches.”

Source : Javier Blas, Finan­cial Times, July 6, 2009.

Peter Hick­son (UBS): Cycli­cal recov­ery for met­als
“Met­als prices are expected to weaken in the third quar­ter as China com­pletes re-stocking and its gov­ern­ment becomes more cau­tious on loan growth — but Peter Hick­son, ana­lyst at UBS, expects com­mod­ity mar­kets to ben­e­fit from a broad cycli­cal upswing later this year.

“‘We expect global eco­nomic growth to accel­er­ate into 2011 as the full impact of stim­u­lus pro­grammes and accom­moda­tive mon­e­tary poli­cies takes effect,’ says Mr Hickson.

“UBS has revised higher its met­als and bulk com­mod­ity price fore­casts for 2010.

“Among the biggest movers include cop­per, up 43% to $5,500 a tonne, sil­ver, also up 43% to $18.30 a troy ounce, and nickel, up 33% to $700 a tonne.

“The cop­per mar­ket will remain tightly bal­anced for the fore­see­able future as Chi­nese re-stocking pre­vents a size­able inven­tory sur­plus from accu­mu­lat­ing. But after buy­ing between 500,000 and 700,000 tonnes of cop­per in the first half of 2009, Mr Hick­son says China is now  ‘overstocked’.

“China’s State Reserve Bureau has offered to sell up to 100,000 tonnes of cop­per back to the mar­ket and a sig­nif­i­cant por­tion of the stock­piles will be used to sat­isfy domes­tic demand.”

Source: Peter Hick­son, UBS (via Finan­cial Times), July 7, 2009.

Mar­ket­Watch: Reg­u­la­tor to con­sider lim­its on com­mod­ity spec­u­la­tors
“In their biggest move yet to respond to irreg­u­lar swings in oil and other com­mod­ity prices the past few years, mar­ket reg­u­la­tors are con­sid­er­ing impos­ing a range of con­trols includ­ing lim­its on invest­ments by exchange-traded funds and index investors.

“The Com­mod­ity Futures Trad­ing Com­mis­sion said Tues­day it will hold a series of hear­ings this sum­mer on whether to limit investor posi­tions in com­modi­ties to address the spec­u­la­tion that has roiled prices of every­thing from oil to wheat and corn in the last few years. The reg­u­la­tory focus comes in the wake of trad­ing pat­terns that saw oil jump to almost $150 a bar­rel last year, only to fall back to below $40 this spring before ris­ing again to $70.

“Big pen­sion and endow­ment funds in recent years have diver­si­fied their invest­ments into com­modi­ties to hedge against infla­tion and a weaker dol­lar. Some posi­tions grew so large that leg­is­la­tors and ana­lysts said the trend was push­ing oil prices to lev­els that couldn’t be jus­ti­fied by fundamentals.

“A Mar­ket­Watch analy­sis last week showed that pas­sive investors increased their crude-oil hold­ings to the equiv­a­lent of more than 600 mil­lion bar­rels in June, up more than 30% from the end of last year, likely sup­port­ing the climb in oil prices.

“The Futures Indus­try Asso­ci­a­tion, an indus­try group rep­re­sent­ing bro­kers, hedge funds and other futures mar­ket par­tic­i­pants, said in a state­ment that it hopes the CFTC’s hear­ings ‘will address pub­lic con­cerns about the impact of spec­u­la­tion on futures mar­ket prices with­out caus­ing these mar­kets to become less fair, open and efficient’.

“‘FIA would be con­cerned by any mea­sures to bar legit­i­mate par­tic­i­pants from these mar­kets or that would make it less effi­cient for US cor­po­ra­tions to use futures as a tool for man­ag­ing price risk,’ it added.”

Source: Mom­ing Zhou and Christina Bur­ton, Mar­ket­Watch, July 7, 2009.

The New York Times: US-Russia nuclear agree­ment is first step in broad effort
“Pres­i­dent Obama signed an agree­ment on Mon­day to cut Amer­i­can and Russ­ian strate­gic nuclear arse­nals by at least one-quarter, a first step in a broader effort intended to reduce the threat of such weapons dras­ti­cally and to pre­vent their fur­ther spread to unsta­ble regions.

“Mr. Obama, on his first visit to Rus­sia since tak­ing office, and Pres­i­dent Dmitri Medvedev agreed on the basic terms of a treaty to reduce the num­ber of war­heads and mis­siles to the low­est lev­els since the early years of the cold war.

“The new treaty, to be fin­ished by Decem­ber, would be sub­ject to rat­i­fi­ca­tion by the Sen­ate and could then lead to talks next year on more sub­stan­tial reductions.

“The progress reflected an effort to re-establish ties a year after Russia’s war with Geor­gia left the rela­tion­ship more strained than at any time since the fall of the Soviet Union. The two sides agreed to resume mil­i­tary con­tacts sus­pended after the Geor­gia war and sealed a deal allow­ing the United States to send thou­sands of flights of troops and weapons to Afghanistan through Russ­ian air­space each year.

“They remained at log­ger­heads over Amer­i­can plans to build a mis­sile defense sys­tem in East­ern Europe, which Wash­ing­ton describes as a hedge against an Iran­ian nuclear break­through and which Rus­sia vehe­mently opposes as a threat in its backyard.

“But after hours of meet­ings at the Krem­lin, the pres­i­dents agreed to con­duct a joint assess­ment of any Iran­ian threat and pre­sented a united front against the spread of nuclear weapons.

“Mr. Obama hailed the arms agree­ment as an exam­ple for the world as he pur­sued a broader agenda aimed at coun­ter­ing — and even­tu­ally elim­i­nat­ing — the spread of nuclear weapons, a goal he hopes to make a defin­ing legacy of his presidency.”

Source: Clif­ford Levy and Peter Baker, The New York Times, July 6, 2009.

Finan­cial Times: Obama urges end to Cold War dis­trust
“Barack Obama on Tues­day called on Rus­sia and the US to shake off Cold War dis­trust and forge a new global part­ner­ship as he bid to ‘reset’ strained rela­tions between the two coun­tries. Quentin Peel, inter­na­tional affairs edi­tor, talks to Daniel Gar­ra­han about whether Mr Obama’s trip has been a success.”

Click here for the article.

Source: Finan­cial Times, July 7, 2009.

Finan­cial Times: Bern to block UBS record trans­fer to US
“The Swiss gov­ern­ment on Wednes­day waded into the legal bat­tle between UBS and the US author­i­ties by say­ing it would for­bid the bank from hand­ing over con­fi­den­tial client infor­ma­tion, if a cru­cial court case next week required it.

“Bern warned it might go as far as con­fis­cat­ing the data, should a US court in Miami rule the bank was obliged to trans­fer the client names requested.

“The move marks a major esca­la­tion in the war of words between Bern and Wash­ing­ton over US demands that UBS hand over names of up to 52,000 US tax­pay­ers hold­ing off­shore accounts in Switzerland.

“Although the Swiss gov­ern­ment is not directly involved, Bern is rep­re­sented as a ‘friend of the court’. In a fil­ing revealed Wednes­day, the gov­ern­ment warned it would issue a block­ing order and, if nec­es­sary, con­fis­cate all rel­e­vant mate­r­ial, to pre­vent UBS from com­ply­ing, should the Miami court side with the US authorities.

“‘The enforce­ment of the sum­mons would require UBS to vio­late Swiss law,’ it said.

“UBS has argued such mat­ters are best han­dled bilat­er­ally between gov­ern­ments. The US has con­tended its action is valid, as UBS has admit­ted that Switzerland-based bankers broke US laws when vis­it­ing clients in America.

“Last Feb­ru­ary, UBS agreed to pay $780 mil­lion to set­tle a sep­a­rate, but linked, crim­i­nal action by the US author­i­ties. How­ever, a civil case requir­ing the bank to reveal up to 52,000 client iden­ti­ties remained open, cul­mi­nat­ing in next week’s hearings.

“Swiss min­is­ters have acknowl­edged UBS made mis­takes in solic­it­ing busi­ness from US clients and have recog­nised the bank will face heavy penal­ties. Observers expect an out-of-court set­tle­ment, involv­ing heavy fines and pos­si­bly other sanc­tions. But while the bank has long appeared ready for a deal, the US has held out for names, rais­ing pres­sure on UBS and turn­ing the affair into a diplo­matic issue.”

Source: Haig Simon­ian, Finan­cial Times, July 8, 2009.

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Tags: Brazil, BRIC, BRICs, Canadian Market, Commodities, Corrective Mode, Crb Index, David Rosenberg, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Index, Emerging Markets, ETF, Fiscal Deficits, Global Economic Outlook, Government Bonds, India, Inflation Expectations, Inverse Relationship, Japanese Yen, Market Commentators, oil, Oil Sands, Ppip, precious metals, Risk Aversion, Risk Tolerance, Risky Assets, Stimulus Package, Stocks And Commodities, Yen Exchange Rate
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Rebecca Wilder: Finding Some Turning Points (Economic Update — July 10)

Sunday, July 12th, 2009

This post is a guest con­tri­bu­tion by Rebecca Wilder*, author of the of the News N Eco­nom­ics blog.

Here in the US, mar­kets are look­ing for the actual turn­ing point, hav­ing priced in the “falling less quickly”, or the “sec­ond deriv­a­tive”, story. Unfor­tu­nately, the turn­ing points have yet to mate­ri­al­ize in much of the domes­tic reports: indus­trial pro­duc­tion remains in descent; hous­ing moves lat­er­ally on the bot­tom; and trade is (maybe) show­ing some life.

How­ever, glob­ally the first deriv­a­tive action (actual monthly growth) is more obvi­ous: build­ing per­mits in Canada were way up in May; auto sales in China con­tinue to sur­prise, up almost 50% over the year; exports in South Korea are seri­ously less neg­a­tive since 2008; and indus­trial pro­duc­tion in Ger­many got a big May bump (almost back to 2005 lev­els of pro­duc­tion). But it pretty much ends there this week: Euro­zone retail sales con­tin­ued to slide, –3.3% over the year in May.

Here are the global charts of the week

Find­ing a bot­tom: loss in goods export rev­enue is taper­ing off at –20% to –35% over the year

The unem­ploy­ment rate con­tin­ues its relent­less surge in Aus­tralia and Switzer­land (The chart illus­trates the annual change in the unem­ploy­ment rate.)

And some good(ish) news: the first deriv­a­tive action

Auto sales in China are Red HOT: notice the columns are the color of the Chi­nese flag

China’s auto sales are up 47.7% over the year, its third con­sec­u­tive increase in the annual growth rate.

Builders in Canada are plan­ning ahead: res­i­den­tial and non-residential build­ing autho­riza­tion per­mits surged 15% and 14%, respec­tively, in May. Much of the res­i­den­tial growth was in the volatile multi-family space (single-family autho­riza­tions grew 1.4%); but new hous­ing stock con­tributes to pos­i­tive GDP growth.

And Indus­trial Pro­duc­tion (IP) in Ger­many surged 3.7% in May, while UK IP fell 0.57%. But don’t get too excited: Ger­man index shows that IP lev­els are almost back to those seen in 2005 (four years ago).

Finally, the bad news: Euro­zone retail sales strug­gling to make headway….

Over­all, this week’s global eco­nomic reports show that the global econ­omy is (likely) at the sta­bi­liza­tion phase of the busi­ness cycle. Going for­ward, this col­umn will be look­ing for global turn­ing points in the data.

Source: Rebecca Wilder, News N Eco­nom­ics, July 10, 2009.

* Rebecca Wilder is an econ­o­mist in the finan­cial indus­try. She was pre­vi­ously an assis­tant pro­fes­sor and holds a doc­tor­ate in economics.

Tags: Action Auto, Authorizations, Auto Sales, Builders In Canada, Canadian Market, Chinese Flag, Consecutive Increase, Derivative Action, Export Revenue, Family Space, Flag China, GDP Growth, German Index, Global Charts, Ish News, Residential Building, Residential Growth, Retail Sales, South Korea, Unemployment Rate, Year Exports
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Mark Mobius: Emerging Markets Outlook (July 2009)

Sunday, July 12th, 2009

This post is a guest con­tri­bu­tion by Dr Mark Mobius, exec­u­tive chair­man of Tem­ple­ton Asset Management.

Emerg­ing mar­kets surged in the sec­ond quar­ter of 2009 with the MSCI Emerg­ing Mar­kets Index return­ing 34.8% in US$ terms. Part of this return was due to weak­ness in the US dol­lar. A return of con­fi­dence in emerg­ing mar­kets, the desire for higher returns and the search for under­val­ued com­pa­nies sup­port the mar­kets’ uptrend.

Latin Amer­i­can and East­ern Euro­pean mar­kets were among the strongest per­form­ers dur­ing the quar­ter, while most Asian mar­kets also recorded strong double-digit returns. A rebound in com­mod­ity prices and stronger domes­tic cur­ren­cies sup­ported mar­kets in Latin Amer­ica. Asian mar­kets con­tin­ued to attract sig­nif­i­cant port­fo­lio inflows allow­ing mar­kets such as China, India and Thai­land to out­per­form their regional coun­ter­parts. In East­ern Europe, Hun­gary returned 69.7% in US$ terms in part due to a strong forint. Poland returned 37.0% in US$ terms, while Rus­sia ended the quar­ter up 37.8%. Turkey was among the top emerging-market per­form­ers with a return of 57.2% in US$ terms. A stronger rand led the South African mar­ket to end the three-month period with a 31.3% gain in US$ terms.

The grow­ing assertive­ness and impor­tance of emerg­ing mar­kets in the global econ­omy were demon­strated when Brazil, Rus­sia, India and China held an inau­gural sum­mit in Rus­sia where they called for greater involve­ment from emerg­ing economies in global finan­cial insti­tu­tions. Lead­ers from the four coun­tries also voiced their desire for increased eco­nomic reform.

Regional update

China’s GDP grew 6.1% year on year in the first quar­ter of 2009, com­pared to 6.8% year on year in the last quar­ter of 2008. This was mainly due to a decline in export growth and lower man­u­fac­tur­ing and indus­trial growth. How­ever, invest­ment in fixed assets increased by 28.8% year on year, as gov­ern­ment efforts to boost eco­nomic recov­ery showed results. A rebound in indus­trial pro­duc­tion and retail sales growth in May con­tin­ued to point to the suc­cess of the government’s fis­cal stim­u­lus mea­sures. Retail sales rose by 15.2% year on year in May, higher than the 14.8% and 11.6% y‑o-y increases in April and Feb­ru­ary 2009 respec­tively. Value-added out­put increased by 8.9% year on year in May, fol­low­ing a 7.3% y-o-y growth in April. Exports, how­ever, con­tracted by 26.4% year on year in May due to weaker demand.

Con­sumer prices con­tin­ued to decline, with a 1.4% y-o-y fall in May due to lower trans­port, food and hous­ing costs.

Aimed at improv­ing trade and eco­nomic rela­tions with its global coun­ter­parts, China signed a num­ber of agree­ments with the Euro­pean Union, Brazil and Tai­wan. China also vowed to improve coöper­a­tion with the US on cli­mate change.

Gov­ern­ment efforts to stim­u­late South Korea’s econ­omy showed some results in the first quar­ter of 2009. GDP grew 0.1% quar­ter on quar­ter, after declin­ing by 5.1% quar­ter on quar­ter in the last three months of 2008. Key dri­vers included a rebound in pri­vate con­sump­tion and gov­ern­ment expen­di­ture. While exports declined by 4.2% quar­ter on quar­ter, the con­trac­tion was an improve­ment from the 8.9% q-o-q fall reported in the final quar­ter of 2008.

After cut­ting its bench­mark inter­est rate by a total of 325 basis points (3.25%) in the pre­ced­ing six months to sup­port the domes­tic econ­omy, the Cen­tral Bank left the rate unchanged at a record low of 2.0% in June.

In an effort to sup­port the finan­cial sec­tor, the Finan­cial Ser­vices Com­mis­sion launched a US$15 bil­lion fund to recap­i­tal­ize the country’s largest banks.

South Korea and the US vowed to strengthen bilat­eral rela­tions dur­ing a three-day US visit by Pres­i­dent Lee Myung-bak where he met his coun­ter­part, Barack Obama. South Korean and EU trade min­is­ters agreed to accel­er­ate the com­ple­tion of the bilat­eral trade agree­ment. More­over, South Korea signed a bilat­eral agree­ment with the United Arab Emi­rates on greater coöper­a­tion on devel­op­ing the latter’s nuclear energy program.

The Mex­i­can econ­omy con­tracted by 8.2% year on year in the first quar­ter of 2009 as a result of declines in the man­u­fac­tur­ing, con­struc­tion, retail and ter­tiary ser­vices sec­tors. The gov­ern­ment fore­casts 2009 GDP to decline 4.1% year on year. The indus­trial sec­tor con­tin­ued to suf­fer, with pro­duc­tion con­tract­ing by 13.2% year on year in April — more than dou­ble the 6.4% fall in March.

The Cen­tral Bank con­tin­ued to lower inter­est rates dur­ing the quar­ter as part of efforts to stim­u­late the domes­tic econ­omy. The Bank reduced its bench­mark inter­est rate by 200 basis points (2.0%) to 4.75%.

Infla­tion­ary pres­sures main­tained a down­ward trend due to lower domes­tic demand. Con­sumer prices rose by 5.98% year on year, a 7-month low and below 6% for the first time this year. This com­pared to an increase of 6.5% year on year in Decem­ber 2008.

The Inter­na­tional Mon­e­tary Fund (IMF) approved a US$47 bil­lion credit line for Mex­ico under its new Flex­i­ble Credit Line facil­ity as a pre­cau­tion­ary measure.

In Brazil, the GDP declined by 1.8% year on year in the first three months of 2009, its sharpest con­trac­tion in more than 10 years. This was mainly due to weak global demand and invest­ment in machin­ery and equip­ment, which resulted in a 15.2% y‑o‑y decline in exports and a 14.0% y-o-y drop in gross fixed cap­i­tal for­ma­tion. On the pos­i­tive side, pri­vate con­sump­tion rose by 1.3% year on year. More­over, the gov­ern­ment announced addi­tional mea­sures to sup­port the economy.

The Cen­tral Bank main­tained an expan­sion­ary mon­e­tary pol­icy dur­ing the quar­ter by cut­ting its bench­mark inter­est rate by 200 basis points (2.0%) to 9.25%. Infla­tion­ary pres­sures also con­tin­ued to ease. Con­sumer prices increased by 5.2% year on year, within the Bank’s tar­get range of 2.5%-6.5%, mainly due to weaker domes­tic demand and lower global com­mod­ity prices.

Aimed at fur­ther boost­ing trade and eco­nomic rela­tions, Pres­i­dent Luiz Ina­cio Lula da Silva and Chi­nese Pres­i­dent Hu Jin­tao signed a num­ber of agree­ments per­tain­ing to areas such as sci­ence, law, finance, energy and agri­cul­ture dur­ing the former’s recent trip to China. Lula also vis­ited Turkey where both sides vowed to fur­ther develop bilat­eral relations.

South Africa’s GDP declined by 1.6% quar­ter on quar­ter and 6.4% year on year in the first quar­ter of 2009. Double-digit declines in the man­u­fac­tur­ing and min­ing sec­tors had the largest impact on growth. The con­struc­tion sec­tor, in con­trast, con­tributed to eco­nomic growth with a 9.4% increase in gov­ern­ment infrastructure.

After cut­ting its bench­mark inter­est rate twice in May, the South African Reserve Bank decided to keep the inter­est rate unchanged in June. The inter­est rate was cut by 200 basis points (2.0%) to 7.5% on news that the econ­omy was offi­cially in a reces­sion and infla­tion remained rel­a­tively high. This brought the total rate cut to 400 basis points (4.0%) for the first six months of this year.

Infla­tion­ary pres­sures have also eased, with con­sumer prices increas­ing by 8.0% in May — its low­est level since Decem­ber 2007.

Polit­i­cally, gen­eral elec­tions were held in April and the rul­ing African National Con­gress (ANC) Party emerged vic­to­ri­ous, but nar­rowly missed achiev­ing a two-thirds major­ity. Party leader Jacob Zuma was sworn in as pres­i­dent in May and a new cab­i­net was announced in June.

The Russ­ian econ­omy con­tracted by 9.8% year on year in the first quar­ter of 2009, com­pared to a 1.2% y-o-y growth in the final three months of 2008. Weak­ness in man­u­fac­tur­ing and con­struc­tion were the key cul­prits. The man­u­fac­tur­ing sec­tor declined by 23.5% year on year, while con­struc­tion out­put fell by 20.9% year on year.

After increas­ing the bench­mark inter­est rate by 300 basis points (3.0%) in 2008, the Cen­tral Bank switched to a loos­en­ing mon­e­tary pol­icy in April by cut­ting its bench­mark inter­est rate for the first time since June 2007. The inter­est rate was sub­se­quently reduced again in May and June. In total, the inter­est rate was reduced by 150 basis points (1.5%) to 11.5% dur­ing the quarter.

Con­sumer prices increased by 12.3% year on year in May — the low­est in more than a year.

Russ­ian offi­cials under­took a num­ber of over­seas trips in May to strengthen eco­nomic ties with its trad­ing part­ners. Prime Min­is­ter Vladimir Putin paid a visit to Japan to dis­cuss enhanc­ing bilat­eral rela­tions in the energy and busi­ness sec­tors. Putin also vis­ited Mon­go­lia to boost coöper­a­tion in the areas of trade and econ­omy with the sign­ing of agree­ments per­tain­ing to areas such as agriculture.

In Turkey, GDP declined by 13.3% year on year in the first three months of 2009. While growth in pub­lic spend­ing sup­ported GDP, con­trac­tions in pri­vate con­sump­tion, exports and gross fixed cap­i­tal for­ma­tion caused GDP to fall. Exports fell by 11.3% year on year while gross fixed cap­i­tal for­ma­tion declined by 29.7% year on year.

The Cen­tral Bank main­tained an expan­sion­ary mon­e­tary pol­icy to sup­port the domes­tic econ­omy. The Bank reduced its bench­mark inter­est rate by 175 basis points (1.75%) to 8.75% dur­ing the three-month period ended June.

The IMF and Turkey agreed to restart stalled talks on a three-year stand-by loan agree­ment val­ued at US$25 billion-US$45 bil­lion. Prime Min­is­ter Erdo­gan vis­ited Brus­sels in June to accel­er­ate Euro­pean Union (EU) mem­ber­ship talks.

A new chap­ter on tax­a­tion was also opened for dis­cus­sion, bring­ing the total num­ber of sub­jects under nego­ti­a­tion to 11.

For­eign Min­is­ter Ahmet Davu­to­glu met with US Sec­re­tary of State Hillary Clin­ton in Wash­ing­ton in June, where both par­ties agreed to expand US-Turkey bilat­eral rela­tions. Brazil­ian Pres­i­dent Luiz Ina­cio Lula da Silva also vis­ited Turkey in May where both sides agreed to fur­ther develop bilat­eral ties.

Polit­i­cally, Prime Min­is­ter Recep Tayyip Erdo­gan reshuf­fled his cab­i­net in May. For­mer For­eign Min­is­ter Ali Baba­can was appointed as State Min­is­ter and Deputy Min­is­ter respon­si­ble for the Turk­ish economy.

Out­look

The out­look for emerg­ing mar­kets remains pos­i­tive thanks to their rel­a­tively strong fun­da­men­tal char­ac­ter­is­tics and faster growth than their devel­oped coun­ter­parts. While some emerg­ing economies con­tracted in early 2009, most are expected to return to pos­i­tive growth by end 2009 or 2010.

In the face of the global eco­nomic slow­down, the major mar­kets of China and India con­tinue to record excep­tion­ally robust growth rates. China and India are expected to grow by 8% and 6% respec­tively in 2009.

The accu­mu­la­tion of for­eign exchange reserves also puts emerg­ing economies in a much stronger posi­tion to weather exter­nal shocks with reserves.

More­over, an impor­tant and strong con­trib­u­tor to growth in emerg­ing mar­kets has been the grow­ing mid­dle class. Emerg­ing mar­kets account for more than 80% of the world’s pop­u­la­tion, pro­vid­ing them with strong pur­chas­ing power and the abil­ity to spend their way into growth. At the fore­front are mar­kets such as China, India and Brazil.

Another area that is poised to sup­port eco­nomic growth in emerg­ing mar­kets is invest­ment, par­tic­u­larly in infra­struc­ture. This is an area in which we have seen gov­ern­ments boost pub­lic spend­ing in mar­kets such as China and India. More impor­tantly, the cur­rent val­u­a­tions of emerg­ing mar­kets remain attractive.

Source: Mark Mobius, Tem­ple­ton Asset Man­age­ment — Emerg­ing Mar­kets Overview, June 2009.

Tags: Asian Markets, Assertiveness, Bill Gross, Brazil, BRIC, BRICs, Commodities, Commodity Prices, Domestic Currencies, Dr Mark, Eastern European Markets, Economic Reform, Emerging Economies, Emerging Market, Emerging Markets, Executive Chairman, Fixed Assets, Global Economy, Global Financial Institutions, Government Efforts, Inaugural Summit, India, Latin American, Msci Emerging Markets, Msci Emerging Markets Index, Templeton Asset Management, Uptrend
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WealthTrack’s Great Investors: A Conversation with Robert Rodriguez

Sunday, July 12th, 2009

This week in WealthTrack’s series on “Great Investors”, Con­suelo Mack trav­els to Los Ange­les to inter­view Robert Rodriguez, CEO of First Pacific Advi­sors. His 25-year track record of run­ning both a top-performing stock and bond fund has earned him the acco­lade “best fund man­ager of our time”.

“The out­spo­ken Rodriguez who shel­tered share­hold­ers from the credit cri­sis explains why he is even more wor­ried now about the future and how he intends to invest as a result.”

Note: The tran­script of this inter­view is not avail­able yet, but will be posted hear as soon as it arrives.

Source: Wealth­Track, July 10, 2009.

 

Tags: Accolade, Bond Fund, Ceo, Credit Crisis, First Pacific Advisors, Invest, Investors, Mack, Robert Rodriguez, Running, Shareholders, Top Performing Stock, Travels, Wealthtrack
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