Microsoft’s Latest Stunt

Thursday, August 13th, 2009

I couldn’t resist sharing this with you. This is hilarious! Each time I watched it, I laughed harder, and it felt pretty good.

Click play to watch:

Source: Microsoft’s Marketing Stunt Goes Viral, Yahoo Tech Ticker, August 13, 2009

Tags: Marketing Viral, Microsoft, Video Marketing, Video Source, Viral Marketing, Yahoo, Yahoo Ticker, Yahoo Video
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Doug Kass Turns Bearish

Thursday, August 13th, 2009

While we haven’t covered the musings of Doug Kass in a while, we found his latest piece on TheStreet.com to be timely and insightful. Some of you may remember that Kass, noted short-seller and manager of hedge fund Seabreeze Partners, was very bullish back in March and essentially nailed ‘the bottom’ as a great trade. Our hats off to him as that was an excellent market timing call. He seems to zig when others zag and this occasion is no different. While bullish sentiment is reaching highs and everyone seems to think that risk has abated from the markets, Kass thinks otherwise. He is bearish now and points out many signals telling him to be so, writing

1. Cost cuts are a corporate lifeline and so is fiscal stimulus, but both have a defined and limited life.

2. Cost cuts (exacerbated by wage deflation) pose an enduring threat to the consumer, which is still the most significant contributor to domestic growth.

3. The consumer entered the current downcycle exposed and levered to the hilt, and net worths have been damaged and will need to be repaired through higher savings and lower consumption.

4. The credit aftershock will continue to haunt the economy.

5. The effect of the Fed’s monetarist experiment and its impact on investing and spending still remain uncertain.

6. While the housing market has stabilized, its recovery will be muted, and there are few growth drivers to replace the important role taken by the real estate markets in the prior upturn.

7. Commercial real estate has only begun to enter a cyclical downturn.

8. While the public works component of public policy is a stimulant, the impact might be more muted than is generally recognized. There may be less than meets the eye as most of the current fiscal policy initiatives represent transfer payments that have a negative multiplier and create work disincentives.

9. Municipalities have historically provided economic stability — no more.

10. Federal, state and local taxes will be rising as the deficit must eventually be funded, and high-tax health and energy bills also loom.

Insightful stuff from Kass and it will be interesting to see if he can time the market so perfectly yet again. We wouldn’t doubt it, as we’ve been noticing much of the same rampant bullishness amidst a still tepid economy. When everyone is headed one direction, tides almost always find a way to change. We also note that Kass joins prolific hedge fund manager Paul Tudor Jones in the act of calling for a pullback. Last week, Tudor noted that he thought the current market euphoria is a bear market rally. Kass posted up his ‘signs needed for a market recovery‘ back in February and it’s interesting to look over them again. While some of them have partially come true, there is still plenty of room left for improvement. For those of you interested in more of Kass’ thoughts, we posted up Kass’ model portfolio update back in the middle of June. We’ll check back in on Kass’ bearish call in a few months, but our guess is that he’ll be right on this one as well. Source: TheStreet

Tags: Aftershock, Bullish Sentiment, Commercial Real Estate, Current Fiscal Policy, Doug Kass, Economic Stability, ETF, Fiscal Stimulus, Growth Drivers, Hedge Fund, Hilt, Local Taxes, Market Timing, Monetarist, Negative Multiplier, Policy Initiatives, Seabreeze Partners, Thestreet Com, Transfer Payments, Upturn, Worths
Posted in Emerging Markets, Markets | No Comments »

Q&A on emerging markets with Mark Mobius

Thursday, August 13th, 2009

I have been positive on emerging markets for a while, maintaining that especially China and other Asian countries, as well as resource-based Latin American countries, would be the leaders of the economic recovery and stock market performance in the next upswing. These views are supported by a recent Q&A with Mark Mobius, Templeton Asset Management’s guru on emerging markets, as published in the company’s Market Views newsletter.

Emerging markets have been outperforming thus far in 2009, do you think this trend will continue for the rest of the year?
Although we are optimistic about the opportunities for upside potential, it is important to realize the volatility is still with us and will be with us for some time. This means there will be periods when the markets go down as well as periods when they go up. We should therefore take advantage of dips in the markets to buy stocks cheaply, paying attention to valuations and long-term earnings growth prospects in order to avoid buying or holding expensive stocks. We continue to find good value in markets like China, Thailand, Brazil, Mexico, Turkey and South Africa.

What sectors are you looking at now?
Commodity stocks look attractive because many of them have declined below their intrinsic value and we expect the global demand for commodities to continue its long-term growth. Consumer stocks also look attractive. With rising per capita income and strong demand for consumer and other goods, the earnings growth outlook for these stocks is positive.

Will the global equity market retest the low point in March?
There is always the possibility of this happening and it could be triggered by something totally unexpected, such as war breaking out on the Korean peninsula or a massive global flu pandemic. As I have said, markets will continue to be volatile as global economies remain fragile and we should see rises and falls in the months ahead.

Which country do you expect to be the best performer among the BRIC markets?
That would be impossible to say at this time but we think China has a good chance of achieving that goal. Of course, I’m talking about measuring that move from the beginning of this year. Russia also looks very undervalued.

In view of China’s strong market performance, would you say it’s in a bull market?
You can see that it is a bull market since the increase has been so dramatic, but it would be difficult to call it a sustainable bull market in view of its very sharp rise. I still feel we will face volatility and there will be corrections along the way. We do, however, expect China to continue to lead the global market recovery.

Will the Chinese government propose another stimulus package in 2009, and why?
That all depends on the success of the measures already in place. They clearly have the resources to do this again. We should expect them to act if current measures and programs do not produce the desired results.

You mentioned in October that Russia’s cheap stocks were a once-in-a-lifetime opportunity. Since then, the RTS Index in Russia fell a bit more to 498, then subsequently doubled this year. After that great performance, are stocks still good value, or is it time to take a breather?
Russian stocks still look cheap. Yes, they have risen dramatically from their low point but they are still a long way from their previous high. Of course, the PE has risen this year but Russian stocks, as represented by the MSCI Russia Index, are still trading at a single-digit PE of 6.8x as at end May 2009 - an increase from an even lower 3.4x as at end December 2008.

Do the economic problems within Russia - unemployment rising to 10%, inflation at 13%, and possible GDP contraction of 6% - undermine the investment case for the country right now?
These factors will have a short-term impact on the market, but we always evaluate companies on a long-term basis - taking a five-year view. Thus, we are in fact able to benefit from buying stocks at cheaper prices now.

Do you see any parallels between the market crash of 1998 in Russia and the one over the last year? Is there fear focused on this market that leads to sharper crashes than elsewhere? Did you learn anything in 1998 about Russia that helped you navigate this crisis?
No, because Russia and most other markets are in a much stronger position, financially and economically, than they were in 1998. Russia has built up strong foreign exchange reserves and trade surplus that have enabled it to withstand external shocks to its economy.

The Russian market was also affected by the correction in commodity prices due to its high exports of oil and other commodities, as opposed to any extraordinary fear focused on this market. However, we maintain the view that commodity prices will continue to increase in the long term due to greater demand from emerging markets and a relatively inelastic supply. This will thus benefit Russia in the future.

The most important lesson we’ve learnt from 1998 or any other crisis is that markets always recover - it’s just a matter of time. Thus one should always maintain a long-term and patient view with regard to investing.

Lastly, you have been investing in the emerging markets for the last four decades. Being an expert in investing in emerging markets, do you have any advice to share with investors during the current market situation?
It is very important for investors to remember some key principles: (1) diversify - it is important to diversify in order to minimize risk - this is why investing in a diversified mutual fund is best for investors, (2) look globally - no country has a monopoly on good opportunities so you must search globally - this is why we have global emerging-market funds, (3) be patient - don’t expect to obtain quick gains - the long-term investors do best, (4) don’t invest unless you understand the investment you are making - understanding will strengthen your confidence and enable you to make long-term investments.

Source: Mark Mobius, Templeton Asset Management - Market Views, July, 2009.

Tags: Asian Countries, BRIC, Commodities, Commodity Stocks, Consumer Stocks, Earnings Growth, Economic Recovery, Emerging Markets, Global Demand, Global Economies, Global Equity, Global Flu Pandemic, Growth Outlook, Growth Prospects, Intrinsic Value, Korean Peninsula, Latin American Countries, Mark Mobius, oil, S Market, Stock Market Performance, Templeton Asset Management, Term Earnings
Posted in Emerging Markets, Markets | No Comments »

USA and Canada: Tale of 2 Trade Balances

Thursday, August 13th, 2009

August 12, 2009 - Today is FOMC day and therefore everyone’s focus is on the upcoming Fed rate decision. In our FOMC Preview and our Game Plan for FOMC , we have outlined our expectations and how to trade it. There are 3 central questions that the market wants answers to 1) Will the Asset Purchase Program be Increased 2) Has the Economy Improved Enough to Warrant an Upgraded Assessment? 3) Is it Time to Talk about Exit Strategies? We only expect the Fed to deliver on one of these fronts. Given the improvements in the labor market data and the manufacturing sector, the central bank has no choice but to turn a bit more optimistic.

As we count down to the FOMC announcement, the currency market is also absorbing the latest trade numbers from the U.S. and Canada. Although the U.S. trade figure was better than expected, the deficit still increased by 4 percent in June. Since the deficit had narrowed to the lowest level in close to 10 years the month prior, a small increase is reasonable. The guts of the report were more encouraging with imports and exports rising more than 2 percent, providing evidence that domestic and global demand is recovering. The dollar has edged higher against the Yen in response to the U.S. trade figures.

Up north, the Canadian dollar has also rallied after their better than expected trade numbers. The country’s deficit shrank to the smallest level since March thanks to an increase in energy and industrial exports. Imports however fell for the fourth month in a row. House prices also dropped for the ninth straight month.

Fed Fund futures are pricing in a rate hike as early as the first quarter and therefore the bar is set high. As a result, we know that traders are looking for some sign of optimism from the Federal Reserve. This can come in the form of an upgraded economic assessment, talk of an exit strategy or any other indication that interest rates will not remain low for an extended period of time. In our opinion, the Federal Reserve will probably retain the tone of the previous statement, mentioning only some of the improvements in the economy and avoid talking about an exit strategy. You can find more details about this in our FOMC Preview ( Will the Fed Deliver any Surprises ). However as the U.K. central bank has surprised us with their dovishness while the central banks of Canada and Australia have surprised with their hawkishness, we do not rule out market moving comments from the FOMC. If the Fed changes or drops their “the pace of economic is slowing” and” economic activity is likely to remain weak for a time,” statements, expect a rally in USD/JPY. If they talk of exit strategies and bond yields start to rise, we could see a more dramatic dollar rally. If the Fed disappoints by downplaying the improvements in the U.S. economy, we could see an ugly reversal in the greenback. The currency pair that will have the purest reaction to the FOMC decision will be USD/JPY. Although we also believe that the dollar could rally against the euro on the heels of a positive outcome, it is too early to tell if the dollar is trading on fundamentals or risk appetite. So the best game plan is to focus on USD/JPY.

Fed’s Options

Tags: Asset Purchase, Canada, Canadian Dollar, Central Questions, Currency Market, Economic Assessment, Exit Strategies, Exit Strategy, Fed Rate, Federal Reserve, Fomc, Game Plan, Global Demand, House Prices, Imports And Exports, Industrial Exports, Manufacturing Sector, Rate Hike, Row House, Trade Balances, Trade Numbers
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Deleveraging the US Economy

Thursday, August 13th, 2009

A special report by Comstock Partners, the highly regarded investment manager run by Charles Minter, argues that US economic growth may be just as lethargic over the next 20 years as that of Japan during the last 20.

The first paragraphs are given below.

“We are in the process of deleveraging the most leveraged economy in history. Many investors look at this deleveraging as a positive for the United States. We, on the other hand, look at this deleveraging as a major negative that will weigh on the economy for years to come and we could wind up with a lost couple of decades just as Japan experienced over the past 20 years. It is true that Japan didn’t act as quickly as we did but our debt ratio presently is much worse than Japan’s debt ratios throughout its deleveraging process.

“Presently, the stock market is exploding to the upside, which you could say argues against the case we are attempting to make in this special report. However, if you step back and look at the larger picture, you can see the stock market is still down over 35% from the highs reached in 2007 and also down over 33% from the highs reached in early 2000. In fact, the market now is acting in the same manner as it did in early 2000 at the peak of the dot com bubble and again in 2006 and 2007 at the combined housing and stock market bubble.

“This seems to us to be a ‘mini-bubble’ of stocks reacting to an abundance of ‘money printing’ by governments all over the world since stocks are rising worldwide. Of course, if the US doesn’t recover there will be no worldwide recovery since the rest of the world is still dependent upon the US consumers’ appetite for their goods and services (despite the so-called growth of domestic consumption in China and India). We, however, don’t believe the US’s massive stimulus programmes and money printing can solve a problem of excess debt generation that resulted from greed and living way beyond our means. If this were the answer Argentina would be one of the most prosperous countries in the world. This excess debt actually resulted from the same money printing and easy money that we are now using to alleviate the pain.”

Click here for the full report.

Source: Comstock Partners, August 6, 2009.

Tags: Abundance, Appetite, Consumers, Debt Ratio, Debt Ratios, Decades, Domestic Consumption, Economic Growth, Economy, Emerging Markets, Excess Debt, Governments World, Greed, India, Investment Manager, Minter, Money Printing, Paragraphs, Rest Of The World, Stimulus, Stock Market Bubble, Stocks
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More on Bob Farrell’s Rule #9

Thursday, August 13th, 2009

I published “Bob Farrell’s rules for investing” and “More on Bob Farrell’s rule #8” a few days ago, and these posts attracted a large number of readers, obviously in search of some guidance at this juncture in the markets.

Today, I consider rule #9, “When all the experts and forecasts agree, something else is going to happen”, in the context of the current situation.

Firstly, David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, quoted a CNBC poll of Tuesday showing that 90% of Wall Street economists believed the recession had ended. “It is highly unlikely that 90% of the economics community can be right on the same thing at the same time,” he said. Also, a Bloomberg survey showed that the consensus sees real US GDP expanding at annual rate of at least 2% for the next four quarters, leading Rosenberg to warn that a lot of good news was already ‘out there’.

Secondly, the latest survey among investment advisors by Investors Intelligence shows that the proportion of bulls has just moved up to 49.4% - the highest level since December 2007. The bears dropped to 21.3% - the fewest negative advisors since October 2007. The spread of +28.1% is regarded as a negative from a contrarian point of view.

“It does appear that we have some groupthink to consider - at this stage virtually everyone is bullish on the market. This could mean that we are not going to get a lot more buying power to propel this equity rally over the near-term as it means we have a lot of good news priced into the market,” concluded Rosenberg.

Be careful out there.

Tags: Bob Farrell, Bulls, Chief Economist, Cnbc, Consensus, Current Situation, David Rosenberg, Economics Community, GDP, Gluskin Sheff, Groupthink, Investment Advisors, Investors Intelligence, Juncture, Point Of View, Proportion, Recession, Strategist, Survey Showed That, Wall Street Economists
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Faber and Roubini: Dr. Doom Double-Dose

Thursday, August 13th, 2009

The two “Dr Dooms” - Marc Faber, editor of the Gloom, Boom and Doom Report, and Nouriel Roubini, professor of economics at the Stern School of Business, New York University and chairman of RGE Monitor - discuss the outlook for the economy and financial markets.

As always with these two commentators, they provide a stimulating discussion that is well worth watching.

Source: CNBC (via YouTube.com), August 12, 2009.

Tags: Boom, Business New, Cape Town, Cnbc, Commentators, Dooms, Double Dose, Dr Doom, Economics, Economy, Financial Markets, Gloom Boom And Doom Report, Marc Faber, New York University, Postcards, Roubini, School Of Business, Stern School Of Business, Target, Youtube
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Bob Prechter - “Step Aside” From Long Positions

Thursday, August 13th, 2009

I yesterday published a short post on “When will the rally end“, quoting Ned Davis’s indicators. It also makes for interesting reading to consider Bob Precther’s views. Prechter of Elliott Wave International, who is often wrongly described as a permabear, in late February said “cover your shorts” and predicted a sharp rally that would take the S&P into the 1,000 to 1,100 range. With that prediction having come to pass, Prechter is now saying, as reported by Yahoo Finance, Tech Ticker, investors should “step aside” from long positions, and speculators should “start looking at the short side”.

“The big question is whether the rally is over,” Prechter says, suggesting “countertrend moves can be tricky” to predict. But the veteran market watcher is “quite sure the next wave down is going to be larger than what we’ve already experienced,” and take major averages well below their March 2009 lows.

Source:  Yahoo Finance, Tech Ticker, August 11, 2009.

Tags: Amp, August 11, Bob Prechter, Elliott Wave International, Investors, Lows, Market Watcher, Ned Davis, Next Wave, Rally, Speculators, Ticker, Yahoo, Yahoo Finance
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