The Next Big Emerging Markets?

Friday, July 30th, 2010

By Frank Holmes, CEO and Chief Invest­ment Offi­cer, U.S. Global Investors.

When coun­tries get grouped together for eco­nomic or polit­i­cal pur­poses, an acronym or other short­hand device is soon to fol­low. OPEC, EU and G7 are a few of the old stan­dards, while G20, PIIGS (Euro­pean nations with dan­ger­ously large sov­er­eign debt bur­dens), and of course BRICs are newer examples.

Now The Econ­o­mist is get­ting into the game with “CIVETS.”

This ven­er­a­ble mag­a­zine is not rein­vent­ing itself as a British ver­sion of National Geo­graphic – we’re not talk­ing about the civets that prowl the tree­tops in the trop­i­cal forests of Africa and Asia.

CIVETS in this case refers to Colom­bia, Indone­sia, Viet­nam, Egypt, Turkey and South Africa – six coun­tries that could be the next wave of emerg­ing mar­kets stardom.

The Economist’s basic case: these six have large and young pop­u­la­tions, diver­si­fied economies, rel­a­tive polit­i­cal sta­bil­ity and decent finan­cial sys­tems. In addi­tion, they are for the most part unham­pered by high infla­tion, trade imbal­ances or sov­er­eign debt bombs.

We didn’t think up the acronym, but we have liked the long-term prospects for most of these coun­tries for quite a while. Here are some of our thoughts and observations.

Start with Colom­bia, which has had a hard time get­ting peo­ple to for­get about its nar­coter­ror­ism past and look at its pro-business gov­ern­ment policies.

I met with for­mer Pres­i­dent Alvaro Uribe and it was fas­ci­nat­ing to observe his poli­cies for social sta­bil­ity and job cre­ation. Five years ago, he changed the rules and began to encour­age com­pa­nies to come in and help develop their oil resources. He has taken those petrodol­lars cre­ated and rein­vested them back in the country’s infra­struc­ture and cre­ated jobs.

That is in com­plete con­trast to what Hugo Chavez is doing in Venezuela, or even Mex­ico and its energy pol­icy. Both of those coun­tries are watch­ing their reserves deplete, but there’s no pol­icy to bring in intel­lec­tual cap­i­tal like you’re see­ing in Colombia.

Turkey’s econ­omy is dynamic and cur­rently sup­ported by strong under­ly­ing trends that point to long-term growth ahead. Its econ­omy is the sixth largest in Europe and in the top 20 world­wide with a 2009 GDP of $615 billion.

Accord­ing to a 2009 Inter­na­tional Mon­e­tary Fund (IMF) report, Turkey’s per capita GDP of just over $8,700 is greater than any of the BRICs. Indus­trial out­put leaped by 21 per­cent in the 12 months end­ing March 2010, infla­tion fell to 6.1 per­cent last year from double-digit lev­els a year before, and pub­lic debt is less than 40 per­cent of GDP.

And while Europe still makes up more than half of Turkey’s exports, the cur­rent gov­ern­ment has taken steps to increase exports to Mid­dle East trad­ing part­ners – Saudi Ara­bia, Iraq and Egypt, for instance – as a hedge against any eco­nomic volatil­ity in Europe.

Indonesia’s demo­graph­ics, nat­ural resources and rel­a­tively sta­ble polit­i­cal envi­ron­ment have set up the coun­try for what could be a very strong decade of growth. Its econ­omy dou­bled in the past five years and in greater Jakarta—the world’s second-largest urban area with roughly 23 mil­lion people—GDP per capita grew by 11 per­cent each year from 2006 through 2009.

More impor­tantly, this growth was dri­ven by the pri­vate sec­tor, not by gov­ern­ment spend­ing – the pri­vate sec­tor accounts for roughly 90 per­cent of the country’s GDP. Over the past five years, the aver­age income has dou­bled to $2,350 a year and Deutsche Bank thinks that fig­ure can rise another 50 per­cent by the end of next year.

Despite this income growth, Indone­sia still has the low­est unit labor costs in the Asia-Pacific region, accord­ing to JP Mor­gan. This has attracted man­u­fac­tur­ing activ­i­ties from China. Employ­ment growth is key because half of Indonesia’s pop­u­la­tion is 25 years old or younger, so the work­force as a por­tion of total pop­u­la­tion will rise over the next 20 years. This should increase the country’s con­sump­tion lev­els and fuel fur­ther eco­nomic growth.

Viet­nam has seen rapid eco­nomic growth in recent years. It too has picked up some man­u­fac­tur­ing base that was for­merly in China. The country’s per-capita income of $1,050 last year was nearly five­fold higher than it was in the mid 1990s, and in Hanoi, the income level is clos­ing in on $2,000 per per­son, accord­ing to gov­ern­ment figures.

That new wealth is show­ing up in gold pur­chases. Net retail gold invest­ment in Viet­nam exceeded 500,000 ounces dur­ing the first quar­ter of 2010, up 36 per­cent year-over-year, the World Gold Coun­cil says. Add to that a 20 per­cent increase in gold jew­elry demand.

Beyond the CIVETS, we see some poten­tial in other places. Malaysia’s econ­omy, for instance, grew more than 10 per­cent in the first quar­ter of 2010, and the coun­try has plans to slash its bud­get deficit and at the same time invest more heav­ily in infra­struc­ture. And in Chile, despite February’s earth­quake, pub­lic debt is just 7 per­cent of GDP and the econ­omy is expected to 5.5 per­cent growth this year and 6.5 per­cent in 2011 as resource exports to emerg­ing mar­kets in Asia accelerate.

We see the global growth story – led by key emerg­ing mar­ket coun­tries like the BRICs, the CIVETS and oth­ers – as the most pow­er­ful long-term invest­ment opportunity.

For more on this theme, I invite you to visit our web­site to read through the “Frank Talk” blog for a look at our inter­ac­tive "What’s Dri­ving Emerg­ing Mar­kets" presentation.

Tags: BRIC, BRICs, Chief Investment Officer, Commodities, Debt Burdens, energy, Frank Holmes, Getting Into The Game, Gold, Government Policies, Hugo Chavez, Intellectual Capital, Natural Resources, oil, Oil Resources, Petrodollars, Political Purposes, President Alvaro Uribe, Pro Business, Relative Political Stability, Social Stability, Sovereign Debt, Term Prospects, Tropical Forests, U S Global Investors, Venerable Magazine
Posted in China, Emerging Markets, Energy & Natural Resources, Gold, Infrastructure, Markets, Oil and Gas | Comments Off

U.S. Equity Market Diary (August 2, 2010)

Friday, July 30th, 2010

Domes­tic Equity Market

The chart shows the per­for­mance of each sec­tor in the S&P 500 index for the week. Five sec­tors gained and five declined. The best-performing sec­tor was tele­com ser­vices, up 1.7 per­cent. Other better-performing sec­tors included finan­cials and indus­tri­als. The three worst-performing sec­tors were tech­nol­ogy, con­sumer sta­ples, and con­sumer utilities.

Within the tele­com ser­vices sec­tor the best-performing stock was Ver­i­zon Com­mu­ni­ca­tions Inc, up 4 per­cent. The other top-three per­form­ers were Fron­tier Com­mu­ni­ca­tions Corp and AT&T Inc.

Strengths

• The real estate ser­vices group was the best-performing group for the week, up 12 per­cent, led by its sin­gle mem­ber, CB Richard Ellis Group Inc. The firm’s sec­ond quar­ter earn­ings eas­ily beat the con­sen­sus esti­mate, dri­ven by year-over-year increases in invest­ment sales rev­enue and leas­ing revenue.
• The office elec­tron­ics group was the second-best per­former, increas­ing 5 per­cent. The group’s sin­gle mem­ber, Xerox Corp, reported earn­ings in the prior week above the con­sen­sus esti­mate, and it guided 2010 earn­ings up. The strength in the stock this week appeared to be a car­ry­over from that report.
• The diver­si­fied chem­i­cals group out­per­formed, ris­ing 4 per­cent, led by E.I DuPont & Co which reported earn­ings above the ana­lysts’ con­sen­sus esti­mate and raised its full year out­look above the ana­lysts’ forecast.

Weak­nesses

• The photo prod­ucts group was the worst per­former, down 18 per­cent, led by its sin­gle mem­ber, East­man Kodak Co, which reported earn­ings below the con­sen­sus forecast.
• The tires & rub­ber group under­per­formed, down 13 per­cent. The group’s sin­gle mem­ber, Goodyear Tire & Rub­ber Co, reported earn­ings above the con­sen­sus, but the stock sold off on con­cerns about the out­look for the sec­ond half.
• The build­ing prod­ucts group under­per­formed, los­ing 10 per­cent, led by its sin­gle mem­ber, Masco Corp, which reported earn­ings above the con­sen­sus but warned that the sec­ond half would be chal­leng­ing as home build­ing activ­ity was slow­ing and big-ticket items would con­tinue to be deferred.

Oppor­tu­ni­ties

• There may be an oppor­tu­nity for gain in M&A (merger & acqui­si­tion) trans­ac­tions in 2010. Cor­po­rate liq­uid­ity is high, thereby pro­vid­ing the means to pur­sue acquisitions.

Threats

• Should investors’ expec­ta­tions for an improv­ing econ­omy not come to fruition on a rea­son­able time frame, it could be a threat to stock prices.
• As gov­ern­ments around the world begin to wind-down the mon­e­tary and fis­cal stim­u­lus pro­grams put in place dur­ing the eco­nomic cri­sis, it will likely present a head­wind for stocks.

Tags: Cb Richard Ellis, Cb Richard Ellis Group Inc, Chemicals Group, Consensus Estimate, Consumer Staples, Diversified Chemicals, Eastman Kodak, Eastman Kodak Co, Ellis Group Inc, Estate Services Group, Frontier Communications, Goodyear Tire, Market Diary, Masco Corp, Performing Group, Photo Products, Second Quarter Earnings, Verizon Communications, Verizon Communications Inc, Xerox Corp
Posted in Markets, Outlook, US Stocks | Comments Off

The Economy and Bond Market Diary (August 2, 2010)

Friday, July 30th, 2010

The Econ­omy and Bond Market

Trea­sury bonds ral­lied this week on mixed eco­nomic news. Bonds appeared to be react­ing to stocks, trad­ing inversely this week dri­ven largely by global macro concerns.

Eco­nomic data was mixed this week as sec­ond quar­ter GDP dis­ap­pointed a lit­tle while hous­ing data was a lit­tle bet­ter than expected. An inter­est­ing data point out of Europe this week was the Euro­pean Com­mis­sion Eco­nomic Sen­ti­ment Indi­ca­tor for the Euro­zone which reached the high­est level in more than two years. This is counter intu­itive given the ongo­ing Euro­pean finan­cial cri­sis but the weaker Euro has boosted exports and Ger­man unem­ploy­ment has now fallen for 13 con­sec­u­tive months, so maybe things aren’t as bad as they seem.

Strengths

• Euro­pean con­fi­dence remains sur­pris­ingly strong and is an inter­est­ing counter point to all the recent bad news.
• The S&P/CaseShiller Com­pos­ite 20 Home Price Index rose a bet­ter than expected 4.6 per­cent. At the same time Fred­die Mac reported that mort­gage rates hit another record low of 4.54 percent.
• The Chicago Pur­chas­ing Man­agers Index unex­pect­edly rose, indi­cat­ing that man­u­fac­tur­ing activ­ity remains strong.

Weak­nesses

• Sec­ond quar­ter GDP was some­what dis­ap­point­ing, expand­ing at a mod­est 2.4 percent.
• Durable Goods orders for June declined one per­cent, well below expec­ta­tions of a one per­cent gain.
• The Fed’s Beige Book report high­lighted the slow­ing pace of eco­nomic activ­ity in sev­eral areas of the country.

Oppor­tu­ni­ties

• Infla­tion is unlikely to be a prob­lem for some time and this gives cen­tral bankers and other pol­icy mak­ers around the world room for expan­sive policies.

Threats

• The risk of aus­ter­ity mea­sures going too far and sig­nif­i­cantly dimin­ish­ing eco­nomic growth is a real risk.

Tags: Austerity Measures, Beige Book Report, Bond Market, Durable Goods Orders, Economic Activity, Economic Data, Economic News, Economic Sentiment, European Commission, Eurozone, Financial Crisis, Freddie Mac, German Unemployment, Global Macro, Home Price Index, Market Diary, Mortgage Rates, Purchasing Managers Index, Quarter Gdp, Treasury Bonds
Posted in Bonds, Markets | Comments Off

Gold Market Diary (August 2, 2010)

Friday, July 30th, 2010

Gold Mar­ket Diary (August 2, 2010)

For the week, spot gold closed at $1,181.05 per ounce, down $8.15, or 0.69 per­cent for the week. Gold equi­ties, as mea­sured by the Philadel­phia Gold & Sil­ver Index, fell 2.13 per­cent. The U.S. Trade-Weighted Dol­lar Index decreased 1.03 percent.

Strengths

• The U.S. unit of ETF Secu­ri­ties, a global ETF issuer spe­cial­iz­ing in com­modi­ties, filed papers with the SEC to mar­ket a gold exchange-traded fund that would be the first to store its bul­lion in a Sin­ga­pore vault.
• A poll of 55 ana­lysts and traders showed expec­ta­tions for gold prices in 2011 have risen by nearly 7 per­cent to a median of $1,228 per ounce, and 2010 gold expec­ta­tions have risen 4 per­cent to a median of $1,197 per ounce.
• Jamie Sokalsky, the CFO of the world’s largest gold pro­ducer, recently noted the con­cerns that pushed the gold price to record highs above $1,200 per ounce have not been addressed despite the weak­ened gold price within the past weeks.

Weak­nesses

• A con­gres­sional sub­com­mit­tee has been asked to inves­ti­gate the grow­ing back­log in for­eign pro­cure­ment of U.S. bul­lion and col­lec­tors’ pre­cious met­als coin blanks man­u­fac­tured by the U.S. Mint.
• The gold price fell to a three month low on Tues­day to around $1,160 per ounce due to fear abate­ment, cen­tral bank tight­en­ing, and ETF liquidation.
• Sea­son­ally, the next nat­ural cat­a­lyst for gold will be the return of jew­elry man­u­fac­tures as we close out the sum­mer. In the mean time, the gold mar­ket may be rel­a­tively flat.

Oppor­tu­ni­ties

• UBS recently stated “We believe that ongo­ing pres­sure on sov­er­eign debt mar­kets, com­bined with per­sis­tent con­cerns over pri­vate sec­tor credit con­trac­tion will raise the spec­tre of debt mon­e­ti­za­tion repeat­edly over the next few years. We expect that this back­ground will remain very sup­port­ive for gold prices over the period.”
• Earn­ings report­ing sea­son for gold com­pa­nies is in full swing. What is inter­est­ing is the num­ber of com­pa­nies that have estab­lished a div­i­dend or raised their div­i­dend pay­out, which should give these com­pa­nies greater appeal to main­stream investors.
• The attrac­tion of div­i­dend pay­ments along with gold com­pa­nies start­ing to be com­pared on other fun­da­men­tal val­u­a­tion met­rics such as PE ratios is not a sign that there is “bub­ble in gold com­pany valuations”.

Threats

• The debate around the nation­al­ism of South African mines has cre­ated “great uncer­tainty” with investors, and could even see the devel­op­ment of some projects essen­tially be put on hold, until after the rul­ing the African National Congress’s pol­icy review con­fer­ence in 2012.
• Deutsche Bank believes the “gold price weak­ness has been dri­ven more by a liq­ui­da­tion in a net length among the investor com­mu­nity than a struc­tural change in mar­ket fun­da­men­tals, and his­tory sug­gests investor de-leveraging can per­sist for another month.”
• St. Louis Fed­eral Reserve Bank Pres­i­dent James Bullard com­mented that the eco­nomic out­look was unusu­ally uncer­tain. He fur­ther noted, “The U.S. is closer to a Japanese-style out­come today than at any other time in recent history…”

Tags: Coin Blanks, Commodities, Congressional Subcommittee, Debt Markets, Dollar Index, ETF, Exchange Traded Fund, Gold, Gold Bullion, Gold Companies, Gold Equities, Gold Exchange Traded Fund, Gold Market, Gold Price, Gold Prices, Gold Producer, Market Diary, Natural Catalyst, Philadelphia Gold, precious metals, Reporting Season, Silver, Silver Index, Spot Gold, U S Mint
Posted in Commodities, ETFs, Gold, Markets, Outlook, Silver | Comments Off

Energy and Natural Resources Market Diary (August 2, 2010)

Friday, July 30th, 2010

Energy and Nat­ural Resources Mar­ket Diary (August 2, 2010)

Strengths

• Indone­sia, the largest coal exporter in the world, exported 24.49 mil­lion tonnes of coal in June, ris­ing 32.23 per­cent from 18.52 mil­lion tonnes in May.
• In June, Japan’s crude oil imports were up 0.5 per­cent year-over-year to 3.16 mil­lion bar­rels per day, liq­ue­fied nat­ural gas imports were up 9 per­cent year-over-year and coal imports up 14 per­cent year-over-year, accord­ing to data pub­lished by the Finance Ministry.
• Accord­ing to the National Devel­op­ment and Reform Com­mis­sion, China domes­tic coal pro­duc­tion reached 1.57 bil­lion tons in the first half up by 20.1 per­cent year-over-year.
• Mit­sui O.S.K. Lines Ltd., the oper­a­tor of the world’s largest mer­chant fleet, raised its full-year profit fore­cast as demand for trans­port­ing goods between Asia and the U.S. and Europe rebounded.

Weak­nesses

• Iraq's oil min­istry has said the country's oil exports had dropped to 1.8 mil­lion bar­rels per day in June from 1.9 mil­lion bar­rels per day the month before, due to bad weather and bomb attacks.
• Japan's refined cop­per exports fell 22 per­cent year-over-year in June while refined zinc exports fell 37 per­cent from a year ear­lier, Min­istry of Finance data showed.

Oppor­tu­ni­ties

• The Hel­lenic Ship­ping News reported that Rus­sia plans to give licenses for devel­op­ment of 41 iron-ore and 31 cok­ing coal deposits dur­ing 2011–2015. The iron-ore deposits are esti­mated to have a reserve base of 16.6 bil­lion tonnes, while the cok­ing coal reserves are esti­mated to be about 80.5 bil­lion tones.
• Ara­bian Oil Co., the world's biggest oil com­pany, said Wednes­day it signed con­tracts with sev­eral local and inter­na­tional con­trac­tors to help it build its esti­mated $10 bil­lion export refin­ery at Yanbu on the Red Sea. Announced first in 2005, the refin­ery was orig­i­nally set to cost $6 bil­lion to build. How­ever, the project's price tag dou­bled to as much as $12 bil­lion in 2008 when raw mate­r­ial and com­mod­ity prices peaked. Con­struc­tion of the facil­ity is now esti­mated to cost about $10 billion.
• State-run explorer Oil India has set aside $2 bil­lion for over­seas acqui­si­tions, chair­man NM Borah told reporters this week. Big­ger rival Oil & Nat­ural Gas Cor­po­ra­tion has spear­headed India's hunt for for­eign petro­leum assets, often com­pet­ing with Chi­nese com­pa­nies, but smaller play­ers such as Oil India and refin­ers like Indian Oil Cor­po­ra­tion are also scout­ing for assets, Reuters reported..

Threats

• Oil reserves in Nige­ria have dropped by 4.79 per­cent to 31.81 bil­lion bar­rels over the past year because com­pa­nies refuse to under­take explo­ration, a senior indus­try offi­cial said this week.
• China’s nat­ural gas sup­plies may face pres­sure in some regions this win­ter because of insuf­fi­cient stor­age capac­ity and slow­ness by some com­pa­nies to import sup­plies, said the National Devel­op­ment and Reform Commission.

Tags: Bad Weather, Bomb Attacks, Coal Deposits, Coal Exporter, Coal Imports, Coal Production, Coal Reserves, Commodities, Crude Oil Imports, Domestic Coal, energy, Finance Data, Hellenic Shipping, India, International Contractors, Iron Ore Deposits, K Lines, Liquefied Natural Gas, Market Diary, Merchant Fleet, Natural Gas, Natural Gas Imports, Natural Resources, oil, Refined Copper, Refined Zinc, Russia
Posted in China, Energy & Natural Resources, India, Markets, Oil and Gas | Comments Off

Emerging Markets Diary (August 2, 2010)

Friday, July 30th, 2010

Emerg­ing Mar­kets Diary (August 2, 2010)

Strengths

• South Korea’s GDP expanded by a faster than expected 1.5 per­cent quarter-over– quar­ter, or 7.2 per­cent year-over-year, in the sec­ond quar­ter, dri­ven by strong exports of auto­mo­biles, semi­con­duc­tors, and machin­ery. Con­sumer con­fi­dence held at a five month high of 112 in July.
• Prof­its at China’s large indus­trial com­pa­nies in 24 regions climbed 71.8 per­cent year over year to RMB 1.61 tril­lion in the first half of this year.
• China’s land sup­ply for res­i­den­tial real estate con­struc­tion increased 113 per­cent in the first half com­pared with a year ago, while the aver­age price of res­i­den­tial land declined 10.6 per­cent sequen­tially in the sec­ond quarter.
• The Indone­sian rupiah appre­ci­ated to a three-year high on Thurs­day against the U.S. dol­lar, as the local stock mar­ket rose to a record high and gov­ern­ment fore­casted 6 per­cent GDP growth in the sec­ond half of this year.
• Lojas Ren­ner, one of the largest Brazil­ian retail­ers, reported strong 2Q results that were boosted by bet­ter pro­cure­ment prac­tices that resulted in an improve­ment in the earn­ings before inter­est, taxes, depre­ci­a­tion and amor­ti­za­tion (EBITDA) mar­gin to 24.8 per­cent from 17.8 per­cent a year earlier.
• OHL toll road group in Brazil reported a 29 per­cent traf­fic growth in 2Q brought about by an eco­nomic recov­ery in the country.
• Chilean banks, Banco de Chile and San­tander Chile, also reported strong 2Q results with net income grow­ing 57 per­cent year-over-year.
• Hun­gary sold more debt than planned at an auc­tion of three month Trea­sury bills on Wednes­day as traders said yields were attrac­tive given the inter­est rate out­look, accord­ing to Bloomberg.

Weak­nesses

• China’s new loans to prop­erty devel­op­ers fell 62 per­cent sequen­tially in the sec­ond quar­ter to RMB 122 bil­lion, rep­re­sent­ing a 32 per­cent decrease year-over– year, as banks inten­tion­ally reduced bal­ance sheet expo­sure to the prop­erty sec­tor as a result of credit con­trol and risk management.
• Vietnam’s long term for­eign and local cur­rency debt rat­ings were reduced by Fitch Rat­ings to B+ from BB-, due to con­cerns over declin­ing for­eign reserves and weak bank­ing system.
• The cap­i­tal out­put ratio defined as the invest­ment por­tion of GDP divided by real GDP growth mea­sures how much invest­ment is needed to pro­duce GDP growth, the higher the ratio, the more inef­fi­cient the invest­ment. As the chart shows, the effi­ciency of Russia’s invest­ment into econ­omy was par­tic­u­larly waste­ful under social­ism. It has now reached a sta­ble state at around 4 times (equal to that of China), which is below the world aver­age at 3 times.

Oppor­tu­ni­ties

• Although China’s domes­tic A share mar­ket staged a close to 10 per­cent rebound in July, the best per­former in Asia for the month, Chi­nese mutual funds by and large did not par­tic­i­pate in the rally. These mutual funds, together with domes­tic insur­ance com­pa­nies who are expected to be approved to raise allo­ca­tion to equi­ties in August, may pro­vide liq­uid­ity sup­port for a con­tin­ued recov­ery in Chi­nese domes­ti­cally listed stocks.
• A recent M&A activ­ity in the Brazil­ian tele­com sec­tor has cre­ated three major fully inte­grated play­ers – Amer­ica Movil, Tele­fon­ica and Oi, that should offer bun­dled prod­ucts (fixed line, wire­less and pay TV) at a reduced cost for customers.
• We have noted an inflow into the Chilean equity mar­ket by the local pen­sion funds that scaled down their inter­na­tional expo­sure and boosted val­u­a­tions of the San­ti­ago bourse.
• The IMF’s new loan agree­ment for $15 bil­lion requires fis­cal pol­icy changes from Ukraine aimed at low­er­ing the deficit to 5.5 per­cent of GDP in 2010 and 3.5 per­cent in 2011. The IMF’s renewed engage­ment with Ukraine opens up the pos­si­bil­ity of loans from the Euro­pean Com­mis­sion and the World Bank, accord­ing to RGE Monitor.

Threats

• In addi­tion to ongo­ing prop­erty tight­en­ing, Chi­nese government’s goal to reduce energy con­sump­tion per unit of real GDP by over 5 per­cent this year from 2009, as man­dated by its 11th Five Year Plan, may result in more plant clo­sures, as a mat­ter of expe­di­ency, espe­cially in heavy indus­tries, and a slow­down in eco­nomic activ­ity in the sec­ond half of this year.
• Mac­quarie Air­ports indi­cated that they will be sell­ing its 14 per­cent stake in ASUR. At this point it remains uncer­tain who the buyer might be but the trans­ac­tion may well improve liq­uid­ity in the ASUR shares.
• On Thurs­day, the Russ­ian gov­ern­ment final­ized its list of com­pa­nies to be pri­va­tized in 2011–2013, and the amount it is plan­ning to raise through these pri­va­ti­za­tions is close to $35 bil­lion US dol­lars. The slope of the regres­sion line of Russ­ian Trad­ing Sys­tem mar­ket returns vs. total IPO issuance is neg­a­tive, sug­gest­ing that a large sup­ply of state’s shares could have a neg­a­tive impact on the market.

Tags: 2q Results, Banco De Chile, Brazil, Consumer Confidence, Economic Recovery, Emerging Markets, GDP Growth, Indonesian Rupiah, Interest Rate Outlook, Procurement Practices, Property Developers, Property Sector, Residential Land, Residential Real Estate, Risk Management, Road Group, Russia, Santander Chile, South Korea, Toll Road, Traffic Growth, Treasury Bills
Posted in Brazil, China, Markets, Outlook, US Stocks | Comments Off

Top Ten Mad Men Quotes, and other Weekend Reads

Friday, July 30th, 2010

Here are this weekend's read­ing diver­sions for your enjoyment.

Have a great long weekend!

Left-Sided Cancer–Should You Blame Your Bed and TV?

Curi­ously, the can­cer rate is 10 per­cent higher in the left breast than in the right. This left-side bias holds true for both men and women and it also applies to the skin can­cer melanoma.

5 Com­mon Hap­pi­ness Mis­takes: 'Boost­ers' That Do More Harm Than Good

Every­one has a few tricks for beat­ing the blues — things you do when you're feel­ing down to try to boost your mood.

Top Ten Mad Men Quotes

What's your ulti­mate Mad Men moment?

Cup­cakes — Celebrity Din­ers Club

Izzy's Curly Cakes Red Vel­vet Cupcakes

Top 10 stroke risk fac­tors identified

A stroke involves dam­age to the brain in which some­thing has gone wrong with the cir­cu­la­tion. There are two types of stroke. The most com­mon, ischemic stroke, accounts for about 80 per cent of strokes and occurs when blood flow to the brain is reduced or, more likely, blocked altogether.

Tags: Beating The Blues, Bias, Blood Flow, Cakes, Cancer Rate, Circulation, Diners Club, Diversions, Happiness, Ischemic Stroke, Izzy, Left Breast, Mad Men, Melanoma, Red Velvet, Skin Cancer, Stroke Accounts, Stroke Risk Factors, Strokes, Types Of Stroke
Posted in Markets | Comments Off

What are the Fed's Options? (Northern Trust)

Friday, July 30th, 2010

This arti­cle is a guest con­tri­bu­tion by Asha Ban­ga­lore, North­ern Trust.

The worst of the finan­cial cri­sis is his­tory, but the U.S. econ­omy is still strug­gling to estab­lish self-sustained eco­nomic growth.  There is an ongo­ing debate among econ­o­mists and pol­icy advi­sors as to what is the best course — fis­cal aus­ter­ity or stim­u­lus — to restore finan­cial and eco­nomic tran­quil­ity.  Dis­cus­sions about the Fed's options in the event of fur­ther weak­en­ing of eco­nomic con­di­tions in a defla­tion­ary envi­ron­ment have also sur­faced.  There is no con­sen­sus on what is most suit­able route partly because the rel­a­tively more obvi­ous and aggres­sive mea­sures have already been imple­mented.  Today's focus is a check­list of Fed's options if eco­nomic con­di­tions call for more cre­ative pro­grams to sup­port eco­nomic activity.

Chair­man Bernanke's speech in May 2003 (Some thoughts on mon­e­tary pol­icy in Japan) offers a few alter­na­tives.  The first option Bernanke lists is for a cen­tral bank to announce a "quan­ti­ta­tive objec­tive for prices."  The oper­a­tional aspect of this strat­egy would be a cen­tral bank announc­ing its inten­tion to restore the price level to the value it would have reached if prices had not fallen.  An assump­tion of a mod­er­ate increase in prices would be necessary.

The moti­va­tion to men­tion this approach is the fact that the U.S. Con­sumer Price Index (CPI) has declined for three con­sec­u­tive months. The Core CPI, which excludes food and energy, and the core CPI exclud­ing home­own­ers' equiv­a­lent rent are both indi­cat­ing a decel­er­at­ing trend, with the core CPI show­ing only a 0.9% increase on a year-to-year basis in June.

The Fed prefers the core per­sonal con­sump­tion expen­di­ture price index, which shows a slightly more reas­sur­ing pic­ture (see chart 2, June data will be pub­lished on August 3).

The main objec­tive is to raise infla­tion expec­ta­tions in order to reduce the debt bur­den of bor­row­ers and break the defla­tion­ary psy­chol­ogy that could be hold­ing back house­hold pur­chases.  There is no urgency to take this step in the U.S., as yet, but it is an alter­na­tive wor­thy of con­sid­er­a­tion, if necessary.

A sec­ond option is a mar­riage of mon­e­tary and fis­cal poli­cies to stim­u­late busi­ness activ­ity and break the defla­tion­ary spi­ral.  It would work in the fol­low­ing man­ner.  All tax cuts/spending pro­grams would be financed by issu­ing new gov­ern­ment bonds. The next step would be that the Fed would pur­chase these bonds.  The ben­e­fit of this action is that out­stand­ing pub­licly held debt would be unchanged and future tax oblig­a­tions would be left unchanged.  Lest we for­get that there is no free lunch, this road will lead to infla­tion, which what is the tem­po­rary goal.  The Fed will have to engage in revers­ing this pro­gram at the appro­pri­ate juncture.

Third, the Fed could lower inter­est rate on excess reserves as it is often men­tioned in recent mon­e­tary pol­icy dis­cus­sions.  At the extreme, the Fed could also be cre­ative like the Riks­bank, the cen­tral bank of Swe­den, and charge a fee if banks park excess reserves at the Fed, a nom­i­nal one.  Banks did not earn inter­est on excess reserves not too long ago, which could be rein­stated.  Fur­ther­more, this pol­icy could be tied to tax breaks for banks.  (Pub­lic out­rage, given that banks are per­ceived in neg­a­tive light fol­low­ing the bailout, should not be sur­pris­ing.)  The Fed could estab­lish suit­able loan-to-reserve ratios, when achieved, to earn tax breaks for banks or yield inter­est on excess reserves instead of zero or neg­a­tive returns.  The qual­ity and type of loans and the recip­i­ents of these loans would have to be con­trolled to imple­ment this program.

Fourth, the Fed could pur­chase addi­tional Trea­sury secu­ri­ties or re-establish expired pro­grams.  The down­side of this option is that the "bang for the buck" will be diluted because it will be a repeat story.  In sum, there are other expan­sion­ary mon­e­tary pol­icy avenues to consider.

Tags: Aggressive Measures, Asha, Bernanke, Consumer Price Index, Core Cpi, Creative Programs, Debt Burden, Economic Activity, Economic Conditions, First Option, Fiscal Austerity, Index Cpi, Inflation Expectations, Main Objective, Moderate Increase, Northern Trust, Operational Aspect, Personal Consumption Expenditure, Suitable Route, Sustained Economic Growth
Posted in Bonds, Markets | Comments Off

What Happened to the EU Double-Dip?

Friday, July 30th, 2010

This note is a guest con­tri­bu­tion by Bespoke Invest­ment Group.

Two months ago, it was gen­er­ally con­sid­ered a slam dunk that the EU econ­omy was going to sink back into reces­sion.  Two months later, though, the dou­ble dip is miss­ing in action.  Today's release of EU con­fi­dence in the man­u­fac­tur­ing sec­tor for July rose from –6 to –4.  While still neg­a­tive, this rep­re­sents the high­est read­ing since May 2008, and the 16th straight month with­out a decline.

Tags: Confidence, Decline, Double Dip, Economy, Guest Contribution, Investment Group, Manufacturing Sector, Missing In Action, Recession, Rose, Slam Dunk
Posted in Markets | Comments Off

Commodity Snapshot (Bespoke)

Friday, July 30th, 2010

This note is a guest con­tri­bu­tion from Bespoke Invest­ment Group.

Below we pro­vide trad­ing range charts of ten major com­modi­ties.  In each chart, the green shad­ing rep­re­sents between two stan­dard devi­a­tions above and below the 50-day mov­ing aver­age.  Moves above or below the green zone are con­sid­ered over­bought or over­sold.  As shown, oil is cur­rently at the top end of its trad­ing range, while gold has moved into over­sold ter­ri­tory.  Sil­ver is also at the bot­tom of its trad­ing range, while plat­inum and cop­per are at the top of their ranges.  And wheat and cop­per have done excep­tion­ally well recently.  Wheat has basi­cally gone ver­ti­cal, and cof­fee has made a sig­nif­i­cant break­out out of a long-term side­ways trad­ing pattern.

Copy­right © Bespoke Invest­ment Group

Tags: Bespoke Investment Group, Breakout, coffee, Commodities, Commodity, Copper, Gold, Green Zone, Guest Contribution, oil, Platinum, Range Charts, Shading, Silver, Snapshot, Standard Deviations, Wheat
Posted in Commodities, Energy & Natural Resources, Gold, Markets, Oil and Gas, Silver | Comments Off

Robert Shiller — A Cautious Outlook For Stocks

Friday, July 30th, 2010

Robert Shiller — A Cau­tious Out­look For Stocks

July 9, 2010 — Robert Shiller, Arthur M. Okun Pro­fes­sor of Eco­nom­ics, Yale Uni­ver­sity, is inter­viewed by Dan Richards, ClientInsights.ca.

Highlights/Transcript

Robert Shiller: Val­u­a­tions are on the cau­tious side.

Its hard to pre­dict the market.

A) His work comes from long-term his­tor­i­cal stud­ies on price-to-earnings ratios,
B) The iffy sit­u­a­tion in the world econ­omy right now.

First, P/E ratios — on his web­site, Shiller has his P/E ratio plot­ted, which is Price divided by 10-year earn­ings, going back to 1881.

RS: Its [Shiller P/E] had many ups and downs, and it is a lit­tle bit on the high side, today.

Dan Richards: The nor­mal thing to do is to com­pare the price to the last 12 months of earn­ings, or fore­cast earn­ings. Why does Shiller focus on 10-year of past earn­ings, adjusted for inflation?

RS: Twelve-month earn­ings are too volatile, and tied up with reces­sions — sup­pose we went a lit­tle fur­ther and went to quar­terly earn­ings — as the denom­i­na­tor, then we would have blown up in many cases; recently they've been neg­a­tive. We've never had a year of neg­a­tive earn­ings on the S&P, but we sure could some time and then the isn't even defined.

I think a ten year aver­age is a sen­si­ble, con­ser­v­a­tive bench­mark for what the fun­da­men­tal value of earn­ings power of com­pa­nies is.

DR: It takes up the short term fluctuations.

RS: In my work with John Camp­bell, we found that in going back to 1881, that ratio seems to pre­dict future ten year returns; its not just pre­dict­ing the next day or next month, it's long term.

When the ratio has been very high like it was in 1929, or 2000, it did badly. And when it was low, like it was in 1920, or 1933, or 1980, 1982, those were times when the mar­ket did very well.

Its sim­ple. What goes up, comes down.

DR: What's the long term aver­age price-to-earnings mul­ti­ple based on ten years earnings?

RS: It's about 15 times, depend­ing on which period you're look­ing at. If you raise your sam­ple period up to [the year] 2000 it would be higher than that.

The ratio got up to 46 [times 10-yr. earn­ings] in 2000. That's when he wrote his book, "Irra­tional Exuberance."

I [Shiller] thought that some­thing was amiss then; turns out, [he doesn't like to make fore­casts like this all the time], when it gets so wild and crazy, its time to write a book.

The long-term aver­age is about 15 times.

Our [Shiller's] mea­sure cur­rently points to 22 times 10-yr. earn­ings. It's high, but its not super high.

DR: Wharton's Jeremy Siegel con­tends that the earn­ings of the mar­ket have been dra­mat­i­cally altered by the finan­cial cri­sis, in com­pa­nies like AIG and other finan­cial firms (i.e. banks). To what extent does that skew the results of the "Shiller P/E"?

RS: It's cer­tainly true that the market's earn­ings have been excep­tion­ally volatile recently, as he said, we just had a quar­ter of neg­a­tive earn­ings, but he thinks it would be dif­fi­cult to be sys­tem­atic in cor­rect­ing for that because going back a hun­dred years, its hap­pened before; they've had write-offs, they've done funny things.

I don't know that any­one can be author­i­ta­tive, mak­ing judge­ments like that.

DR: The sec­ond point that Siegel made is in rela­tion to the inter­est rate envi­ron­ment. His com­ment was that, based on his research, that peri­ods that have high inter­est rates, the [mar­ket] P/E mul­ti­ple, his­tor­i­cally, has been much lower, and in peri­ods of low inter­est rates, such as we have today, that mul­ti­ples, the nor­mal mul­ti­ples, that is, would be sig­nif­i­cantly higher, and that we should be adjust­ing for that in terms of what a fair value is. What's Shiller's view on that?

RS: This is a com­pli­cated point. One thing is whether we look at nom­i­nal or real inter­est rates. He assumes that Jeremy Siegel is look­ing at real, like the TIPS in the US or the infla­tion index. But we don't have a his­tory of that before 1997.

Look at nom­i­nal rates. If you look at nom­i­nal long-term rates and you com­pare them with the P/E ratio back to 1881, there were peri­ods where it looked Jeremy was right, but it hasn't been con­sis­tently right. I think that's a half truth.

The other thought is, okay, long term inter­est rates are very low now, so that would seem to say, the stock mar­ket is very high, and also com­modi­ties and every­thing else should be high. There's some truth to that, but the other ques­tion is, how reli­ably are those long term rates going to stay low?

The real ques­tion that peo­ple really want to know the answer to is how do we fore­cast the market?

I don't think that any­one has found that long term rates offer a sig­nif­i­cant way of fore­cast­ing the market.

DR: Last ques­tion. You men­tioned that the long-term aver­age mul­ti­ple is 15 times 10-year earn­ings, cur­rently its about 22 times, which you said, is a bit on the high side, not egre­giously... Based on that, what kind of returns could investors expect over a 10 year period, com­ing from an envi­ron­ment like the one we're in today?

RS: Based on our fore­cast­ing regres­sions, its a tough call, whether stocks or bonds will pay more over that period. Its not an inspired time.

The Campbell-Shiller fore­cast­ing regres­sion sug­gests pos­i­tive returns, but not teriffic.

Tags: 12 Months, Arthur M Okun, Benchmark, Cautious Side, Commodities, Denominator, Forecast Earnings, Fundamental Value, Hamble, inflation, John Campbell, Little Bit, Quarterly Earnings, Rati, Ratios, Recessions, Robert Shiller, Term Fluctuations, Ups, Ups And Downs, Valuations, World Economy, Yale University, Year 2000
Posted in Bonds, Commodities, Markets, Outlook | Comments Off

Gold Correction a Buying Opportunity? (Rosenberg)

Friday, July 30th, 2010

This arti­cle is a guest con­tri­bu­tion from David Rosen­berg, Chief Mar­ket Econ­o­mist, Gluskin Sheff.

In terms of what is dri­ving mar­ket sen­ti­ment right now, it boils down to three things. First, there is a con­sen­sus view that the stress tests in Europe were a game changer and that the cri­sis has been dealt with. Sec­ond, there is a lot of hope that the Chi­nese gov­ern­ment has man­aged to curb the prop­erty and credit bub­ble and did so by engi­neer­ing a soft-landing and not a hard-landing and that no fur­ther pol­icy restraint is going to be needed. Third, almost every­one is dis­miss­ing double-dip risks in the U.S.A., and a whole army of Wall Street research depart­ments are expend­ing con­sid­er­able resources into dis­sect­ing the ECRI and con­clud­ing that it is not fore­shad­ow­ing another recession.

The lat­est was a report that said that the ECRI was only –1.5 (not –10.5) once the effects of mort­gage appli­ca­tions were removed. How about that? Remove hous­ing, and it’s “only” –1.5 (as if that is any good in any event).

This takes us back to 2007 and 2008 when all the research houses (except for the one I toiled at) came to the con­clu­sion that once you strip out the effects of hous­ing, the U.S. econ­omy was just in fine shape, didn’t you know? Hous­ing doesn’t mat­ter, right?

Right.

But all is not right!

At least not with jobs and housing.

First, even though the BLS told us that the U.S. job­less rate fell to 9.5% in June from 9.7%, we know that the rate would be 10.2% if not for the plunge in the labour force over the past two months. Sec­ond, we just received the detailed regional data and they showed that the unem­ploy­ment rate climbed last month in 291 of the 374 areas mon­i­tored; fell in 55 and was flat in 28.

Now how does that grab you? Of the 12 metro areas with a depression-like 15% unem­ploy­ment rate, 10 were sit­u­ated in Cal­i­for­nia – the largest state osten­si­bly is not yet out of reces­sion (just as Janet Yellen moves back to Wash­ing­ton from San Fran). And when you con­sider that the state gov­ern­ment in Cal­i­for­nia just rein­stated a fresh round of fur­loughs, you know that the extent of under­em­ploy­ment along with unem­ploy­ment is extremely deep (see “New Fur­loughs in Cal­i­for­nia” on page A13 of the NYT).

Sec­ond, the hous­ing back­drop is still very weak. The high-end home­owner is now buck­ling as fore­clo­sures among those with jumbo prime mort­gage loans (mort­gages of over $729,750) have soared 600% in the past 2-½ years. Fore­clo­sures among bor­row­ers with prime con­form­ing loans have risen 425%.

Accord­ing to Real­ty­Trac, we still have a sit­u­a­tion today, despite all the tax­payer money that has been thrown at the sit­u­a­tion, where 154 of 206 cities (with pop­u­la­tions of 200,000 or more) have posted increases in fore­clo­sure fil­ings on a YoY basis. Mean­while, sell­ers of prop­er­ties are start­ing to see the light and are cut­ting their prices (not yet evi­dent in the Case-Shiller but will be soon).

Thirty per­cent of homes sold last month were prop­er­ties in which the owner had to cut his/her ask­ing price (Zil­low). As well, it is now tak­ing 8–9 weeks to sell a house upon list­ing, down from 10–11 weeks a year – in another sign that sell­ers are becom­ing more real­is­tic and com­ing closer to match the exist­ing depressed bids there are out there. Remem­ber – this remains a full-fledged buy­ers mar­ket out there with a near-record 19 mil­lion vacant hous­ing units nation­wide to choose from.

GOLD CORRECTION A BUYING OPPORTUNITY

There is no ques­tion that gold’s allure as a safe-haven has taken a bit of a beat­ing with the more con­fi­dent tone com­ing out of Euro­pean mar­kets, but be assured that in a global post-bubble credit col­lapse, skele­tons come out of the closet when you least expect it. The sur­prises are not over; not by a long shot. And the gold price will ebb and flow, but it is in a sec­u­lar bull mar­ket and will retain its nat­ural hedge against recur­ring con­cerns sur­round­ing the integrity of the global finan­cial sys­tem. Water­ing down finan­cial reg­u­la­tion bills in the U.S.A., kick­ing the can down the road via less-than-onerous Euro­zone stress tests and reduced cap­i­tal strin­gency as per Basel III does not alter the delever­ag­ing game that much and the rounds of mar­ket insta­bil­ity that will come our way.

The invest­ment demand for gold remains quite solid at a time when pro­duc­tion growth is still anaemic – the World Gold Coun­cil just released data show­ing that investors bought 273.8 met­ric tons of gold via ETF’s in Q2, the sec­ond high­est tally on record (and brings net invest­ment in these finds to over 2,000 tons value at just under $82 billion).

Com­plete report here.  (Reg­is­tra­tion is required.)

© Gluskin Sheff

Tags: Chief Market, Commodities, Consensus View, Credit Bubble, David Rosenberg, Double Dip, Ecri, energy, ETF, Fine Shape, Gold, Janet Yellen, Jobless Rate, Labour Force, Market Economist, Market Sentiment, Metro Areas, Mortgage Applications, Natural Resources, oil, Regional Data, Research Departments, Research Houses, Sheff, Stress Tests, Unemployment Rate
Posted in Energy & Natural Resources, ETFs, Gold, Markets, Oil and Gas | Comments Off

Another ETF Eye-opener

Thursday, July 29th, 2010

This arti­cle is a guest con­tri­bu­tion by Frank Holmes, CEO, CIO, U.S. Global Investors.

Bil­lions of dol­lars are pour­ing into exchange-traded funds (ETFs), but it seems there is still much for investors to learn about how these funds work.

We’ve writ­ten in the past about ETF liq­uid­ity issues that hurt investors dur­ing the May 6 “flash crash,” the trad­ing costs that can drain away real returns for investors and the impact on investors when ETFs trade at a pre­mium or a dis­count to their under­ly­ing net asset value.

This week’s cover story in Bloomberg Busi­ness­week presents another eye-opener about ETFs. The story urges read­ers to steer clear of com­mod­ity ETFs, call­ing them “America’s worst investment.”

That could be some­thing of an over­state­ment, but the arti­cle does bring up good points about the risks of invest­ing in ETFs that invest in com­mod­ity futures.

One of these risks is “con­tango,” which is when the future deliv­ery con­tracts for a par­tic­u­lar com­mod­ity cost more than the near-term con­tracts. The ETFs don’t want to take phys­i­cal deliv­ery of com­modi­ties, so they sell their futures con­tracts before they expire and use the pro­ceeds to buy more futures with more dis­tant expi­ra­tion dates.

Busi­ness­week cites a con­tango exam­ple for crude oil futures affect­ing ETFs – in May, they sold June con­tracts with an aver­age price of about $76 per bar­rel and bought July con­tracts with an aver­age price of about $80 per bar­rel. The upshot is that the ETFs had to pay $4 per bar­rel more to replace the same mer­chan­dise – this rep­re­sents an imme­di­ate loss to investors.

The crude oil mar­ket is still in con­tango: at mid­day today, the near-month Sep­tem­ber con­tract was $78, the Octo­ber con­tract was $78.45 and the Novem­ber con­tract was priced at $79.14. If con­tango is main­tained, the ETFs that buy and sell crude oil futures are likely look­ing at more losses ahead.

Busi­ness­week also points out pro­fes­sional traders know this weak­ness of these com­mod­ity ETFs and make a lot of money exploit­ing it.

ETFs can have a place in many invest­ment strate­gies, but they are still not well under­stood by investors and that’s a big risk. Before buy­ing, investors need to know what they are get­ting into so they can make the best deci­sions con­sis­tent with their invest­ment goals.

Tags: Asset Value, Billions Of Dollars, Businessweek, Commodities, Commodity Etfs, Commodity Futures, contango, Crude Oil Futures, Crude Oil Market, Delivery Contracts, ETF, ETFs, Exchange Traded Funds, Eye Opener, Frank Holmes, Futures Contracts, Investment Strategies, liquidity, Midday, oil, Overstatement, Physical Delivery, Professional Traders, Term Contracts, U S Global Investors, Upshot
Posted in Commodities, Energy & Natural Resources, ETFs, Oil and Gas | Comments Off

Secrets of Success: Interview with Malcolm Gladwell

Thursday, July 29th, 2010

This arti­cle and audio inter­view is cour­tesy of Radi­o­Lab (WNYC).

July 26, 2010

Mal­colm Glad­well doesn’t like Gifted and Tal­ented Edu­ca­tion Pro­grams. And he doesn’t believe that innate abil­ity can fully explain super­star hockey play­ers or bil­lion­aire soft­ware giants. In this pod­cast, we lis­ten in on a con­ver­sa­tion between Robert and Mal­colm recorded at the 92nd St Y. Robert asks Mal­colm if he’s a “genius denier,” and Mal­colm asks Robert if he’s uncom­fort­able with the power of love, as they duke it out over ques­tions of luck, tal­ent, pas­sion, and suc­cess. (Click play on either player)

Down­load MP3

Photo by: rocket ship/flickrCC

Copy­right © Radi­o­Lab (WNYC)

Tags: 92nd St Y, Audio Interview, Billionaire, Denier, Download Photo, Duke, Education Programs, Genius, Gifted And Talented Education, Hockey Players, Innate Ability, Malcolm Gladwell, Passion, Passion Play, podcast, Power Of Love, Radiolab, Rocket Ship, Secrets Of Success, Secrets Success, Software Giants, Wnyc
Posted in Markets | Comments Off

Thoughts on the Long-term Outlook for Inflation (Rosenberg)

Thursday, July 29th, 2010

This arti­cle is a guest con­tri­bu­tion by David Rosen­berg, Chief Mar­ket Econ­o­mist, Gluskin Sheff.

MARKET COMMENT

A whole 1 point decline in the S&P 500 and for the bears it was like win­ning in extra innings after a three-week los­ing streak (and in con­trast to the rally days, vol­ume on the NYSE expanded 10% yes­ter­day). We received all sorts of emails yes­ter­day that Bar­ton Biggs had reloaded the gun and moved from 50% to a 75% weight­ing in equi­ties. Maybe that was the kiss of death. Maybe we have again stalled out around the 200-day mov­ing aver­age. Or maybe the mar­ket is sim­ply the most over­bought it has been in nearly three months, accord­ing to some oscillators.

Per­haps, like Bar­ton, every­one has gone long the mar­ket again and we recall a sur­vey that we saw over the week­end that PM’s are now 68% weighted in equi­ties in their bal­anced funds. We can also see from the CFTC data that the net spec­u­la­tive posi­tion (futures and options) at the Merc has swung from a net short posi­tion of 40,000 con­tracts in mid-June to a net long posi­tion of 3,300 con­tracts cur­rently. That sort of move will cer­tainly move the nee­dle. Ditto for the 1.2% decline in NYSE short inter­est over the past month. In the past two weeks, Mar­ket Vane bull­ish sen­ti­ment on equi­ties has moved up 5 points. It’s all good. Mean­while, con­sumer con­fi­dence has rolled back to a five-month low (what does Main Street know, anyway?).

Earn­ings on the sur­face seem to be doing just fine but at the same time, we can see that the econ­omy slowed vis­i­bly as Q2 came to a close and the July data are telling us to expect a slightly dif­fer­ent tone to Q3 guid­ance. There was a nifty arti­cle on Mar­ket News yes­ter­day show­ing how 82% of the cor­po­rate uni­verse beat­ing EPS esti­mates is stan­dard fare and that only 68% are doing so in terms of rev­enues (a fig­ure lower than we saw in the sec­ond quar­ter of 2008 when the econ­omy was knee-deep in reces­sion). Sales are up the grand total of 9% YoY and this being com­pounded off a –14% trend this time last year – so mar­gins con­tinue to stretch out to the lim­its and one has to won­der how long that is going to last. Who knows? Maybe prof­its end up going to 100% of national income and labour’s share totally vanishes.

I was asked yes­ter­day in an inter­view how I respond to crit­i­cism for miss­ing the surge in the equity mar­ket. Well, for one thing, those that were long in 2009 got their clients killed in 2008 and it’s still not even a wash. Sec­ond, I was rec­om­mend­ing credit and com­modi­ties last year, not cash, and these strate­gies played out well. There are always ways to make money with­out hav­ing to go whole hog into the stock mar­ket (if you think I’m bear­ish, there are oth­ers who make me look like Jim Car­rey – have a read of “Dooms­day Shel­ters Mak­ing a Come­back” on page 3A of the USA Today).

More to the point – we can get 80% ral­lies in a sec­u­lar bear phase, and to be totally hon­est, I have never billed myself as a mar­ket timer. There are oth­ers here at GS+A that do that much bet­ter than me. The Nikkei has enjoyed 260,000 rally points in the past twenty years and the mar­ket is still down 70%. If you par­take of these bear mar­ket ral­lies, know when to get out – or at least sell call options and col­lect the pre­mium. It is amaz­ing how peo­ple are still stuck in this belief that the 80% rally off the lows is still some­how a pre­vail­ing mar­ket con­di­tion – the S&P 500 peaked on April 26th and even with the recov­ery of the past few weeks, the S&P 500 at 1113, with all due respect, is no higher now than it was on Novem­ber 16th of last year.

Tags: Barton Biggs, Bullish Sentiment, Cftc, Chief Market, Commodities, Consumer Confidence, David Rosenberg, Eps Estimates, Extra Innings, Futures And Options, India, Kiss Of Death, Market Economist, Market Vane, Nifty Article, Oscillators, Point Decline, Rally Days, Short Interest, Short Position, Speculative Position, Term Outlook
Posted in Bonds, China, Commodities, India, Markets, Outlook | Comments Off

Tax Code Goof: BP's $10B Credit for Gulf Oil Spill Loss

Thursday, July 29th, 2010

There is no short­age of news from BP on Tuesday:

• The oil major reported its first quar­terly loss–$17.15 billion–in eigh­teen years, and will sell about $30 bil­lion in assets.
• The com­pany also announced that CEO Tony Hay­ward will step down on Oct. 1 to work at TNK-BP–BP’s joint ven­ture in Russia.
• Bob Dud­ley, an Amer­i­can BP exec­u­tive, will suc­ceed Hay­ward as the new Chief Executive

The more eyebrow-raising news; however, is that BP plans to claim almost $10 bil­lion in U.S. tax credit as a direct result of the Gulf oil spill. Here is how the tax code and math work.

Under the U.S. cor­po­rate tax law, com­pa­nies can take cred­its up to 35% of their loss. Since BP reported $32.2 bil­lion charge related to the cost of the spill, 35% of that will give you roughly $10 bil­lion in credit. So BP’s claim is pretty much what its spokesman said.

"This is the account­ing process, we are going by U.S. laws.”

The inten­tion of the tax code is to encour­age invest­ments and to help com­pa­nies even out profit and loss, along with the asso­ci­ated taxes. Law­mak­ers just for­got to incor­po­rate a rider clause for pub­lic safety and/or envi­ron­men­tal dam­age related expense.

The tax credit, if claimed, could mean $10 bil­lion of the Gulf after­math costs would come out of tax­pay­ers’ pocket. This could poten­tially be quite an embar­rass­ment for the Admin­is­tra­tion as Pres­i­dent Obama vowed that BP will "pay every dime owed" for the spill damage.

Of course, BP could con­ceiv­ably “do the right thing” and drop its tax credit claim to avoid a crash­ing tsunami of pub­lic anger and out­rage. How­ever, don’t expect BP to give up on this siz­able cost off­set that eas­ily, since BP has made con­sid­er­able con­ces­sions such as a vol­un­tary $20 bil­lion oil spill fund, and spec­u­la­tion of U.S. government’s involve­ment in Hayward’s dis­missal and Dudley's appointment.

As rep­u­ta­tion goes, it is hard to imag­ine the IRS would let this $10 bil­lion slip by.  Could revenge of the IRS be in the cards, or as Leona Helm­s­ley famously said “Only the lit­tle peo­ple pay taxes”?

Dian L. Chu, July 27, 2010

Tags: Bp, Bp Oil, Concessions, Do The Right Thing, Dudley, Embarrassment, Environmental Damage, Eyebrow, Goof, Gulf Oil, Hayward, Irs, Math Work, Obama, oil, Oil Spill, Profit And Loss, Public Anger, Quarterly Loss, Russia, Tax Credit, Tnk Bp
Posted in Energy & Natural Resources, Markets, Oil and Gas | Comments Off

Bill Gross: Investment Outlook (August 2010)

Thursday, July 29th, 2010

This arti­cle is a guest con­tri­bu­tion by Bill Gross, CO-CEO, PIMCO.

"Pri­vates Eye"

August 2010

I write this month to con­demn the inven­tor of the elec­tronic “see­ing eye” toi­let. Yes, that’s right, I’m talk­ing toi­lets here, doo-doo-stuff, some of which I hope­fully won’t step in myself over the next few para­graphs. I know there must be more sub­stan­tive and less objec­tion­able top­ics to bring before you, but I have a sense that many of you join me in spirit if not com­mon expe­ri­ence and so I devote this month’s Out­look to another triv­ial snip­pet empha­siz­ing our joint human­ity and sense of loss due to the recent dis­ap­pear­ance of the hand flusher.

I don’t know where it is located exactly, but there’s an elec­tronic eye in the plumb­ing of pub­lic toi­lets these days that can sense when you get up and down (or is it down and up) and are finally fin­ished with your “busi­ness,” if you get my drift. My doc­tor says a proc­tol­ogy exam is a nec­es­sary evil but cam­eras in toi­lets? Never hav­ing seen myself from this par­tic­u­lar angle, it is par­tic­u­larly embar­rass­ing to turn over the assign­ment to a cam­era and in effect say, “Snap away – see any­thing that doesn’t look right?” I fig­ure if there’s an eye there, then there could also be a lit­tle voice that says, “Have a seat,” which of course I do, usu­ally with much haste and a sense that I’d bet­ter get on with it before I attract a crowd.

It’s after the dirty deed is com­plete, how­ever, that the real intrigue begins. Does it flush or doesn’t it? Only the com­puter chip knows for sure. Some­times, though, after the paper­work has been filed, pants pulled up and an attempted get­away ini­ti­ated – noth­ing hap­pens. No flush. Well, what is one to do in such cir­cum­stances? You can’t just leave it there, you know. Some­times when the toilet’s plugged and there’s no plunger like in Euro­pean bath­rooms, you can get out of there quick with con­science in tact, but only, of course, after check­ing to see that there’s no one else in the restroom who might be able to tes­tify against you in court for being a non-flusher. With elec­tronic eye toi­lets, how­ever, the con­science is never clear and so you wave your hand in front of the cam­era, hop­ing to con­vince it by the break­ing of light waves that some­one really has used the toi­let and that some­how it just for­got, or maybe the deposit was so minus­cule that it just didn’t merit a flush. Hello in there! Hav­ing failed to trick it, how­ever, the next step is to look for that lit­tle but­ton in the back that you sup­pos­edly push in an emer­gency – sort of like a “break glass in case of fire” toi­let equiv­a­lent. But think of all the bil­lions of germs! At least with an old han­dle you could kick it with your shoe, hold up your arms like a doc­tor scrub­bing for surgery and make an exit look­ing like you’re audi­tion­ing for a part on ER. Finally I sup­pose you head for the door, all the while lis­ten­ing for the flush, the flush, that beau­ti­ful sound of the flush. I could have done it myself, you know, with a lot less has­sle. Which is why I sup­port a retreat to the old days, (not the back­yard out­house), but the good old-fashioned hand flusher. One push, and presto – you’re good to go!

I really do have a seri­ous mes­sage this month, an adjunct to the New Nor­mal that will likely impact growth and finan­cial mar­kets for years to come. Our New Nor­mal, to repeat ad nau­seam, is pred­i­cated upon delever­ag­ing, rereg­u­la­tion and deglob­al­iza­tion, all of which pro­mote slower eco­nomic growth and lower infla­tion in devel­oped economies while sub­stan­tially bypass­ing emerg­ing mar­ket coun­tries that have more favor­able ini­tial con­di­tions. In recent months, Mohamed El-Erian has added a devel­op­ing corol­lary that empha­sizes the lack of an appro­pri­ate pol­icy response to what is a struc­tural as opposed to a cycli­cal devel­op­ment, and you should read his fre­quently pub­lished op-eds for a more thor­ough analy­sis as well as those writ­ten by Jef­frey Sachs and oth­ers who are con­struc­tively sug­gest­ing a way back to the old normal.

That return jour­ney will be all the more dif­fi­cult to accom­plish, how­ever, because of demo­graph­ics, an influ­ence that much like grav­ity is hard to see but whose effect is all too pow­er­ful. Demo­graph­ics – or in this case pop­u­la­tion growth – is so long term in its influ­ence that econ­o­mists and observers are inclined to explain the func­tion­ing of eco­nomic soci­ety with­out ever fac­tor­ing in the essen­tial part that it plays in growth. Pro­duc­tion depends upon peo­ple, not only in the actual process, but because of the final demand that jus­ti­fies its exis­tence. The more and more con­sumers, the more and more need for things to be pro­duced. I will go so far as to say that not only growth but cap­i­tal­ism itself may be in part depen­dent on a grow­ing pop­u­la­tion. Our mod­ern era of cap­i­tal­ism over the past sev­eral cen­turies has never known a period of time in which pop­u­la­tion declined or grew less than 1% a year. Cur­rently, the globe is adding over 77 mil­lion peo­ple a year at a pace of 1.15% annu­ally, but slow­ing. Still, that’s 77 mil­lion more mouths to feed, 77 mil­lion more pairs of shoes to make, 77 mil­lion more lit­tle eco­nomic units of demand – houses, fur­ni­ture, cars, roads, oil – more, more, more. Cap­i­tal­ism, I would assert, thrives on more, more, and more, but not so well when there is less or an expec­ta­tion of less. This is not the Malthu­sian the­sis, which main­tained that at some point the world would run out of food to sat­isfy a grow­ing pop­u­la­tion; it is an asser­tion that cap­i­tal­ism depends upon final demand and that if there ever comes a time when pop­u­la­tion growth slows, then the world’s most effi­cient eco­nomic sys­tem will be tested. If any­thing, my the­sis is anti-Malthusian in its asser­tion that there will always be enough pro­duc­tion to sat­isfy a grow­ing pop­u­la­tion, but per­haps not enough new peo­ple to sus­tain grow­ing pro­duc­tion.

Tags: Bill Gross, Computer Chip, Dirty Deed, Disappearance, Electronic Eye, Gross Co, Gross Investment, Haste, Intrigue, Inventor, Investment Outlook, Little Voice, Necessary Evil, oil, PIMCO, Plunger, Privates Eye, Proctology Exam, Public Toilets, Seeing Eye, Sense Of Loss, Snippet, Tact
Posted in China, Energy & Natural Resources, Infrastructure, Markets, Oil and Gas, Outlook | Comments Off

One of the Best Gold Watchers

Wednesday, July 28th, 2010

This note is a guest con­tri­bu­tion by Frank Holmes, CEO, CIO, U.S. Global Investors.

Pierre Las­sonde is one of the smartest peo­ple in the gold world, and he has the track record to prove it.

He’s a for­mer pres­i­dent of New­mont Min­ing, the world’s largest gold pro­ducer, and was chair­man of the World Gold Coun­cil. His achieve­ments aren’t all in the past – now he’s chair­man of Franco-Nevada Corp., the most suc­cess­ful gold roy­alty company.

I’ve known Pierre for years, and have learned that when he talks about gold, it makes sense to listen.

In a recent inter­view with Mineweb.com, Pierre said gold sec­tor invest­ment is still in its early days, and it will con­tinue for at least five more years.

His rea­son­ing is sim­i­lar to some of the things we have been say­ing for a while:

• Gold can pro­vide some pro­tec­tion against cur­rency debase­ment as gov­ern­ments try to inflate away their mas­sive sov­er­eign debt burdens;
• A ris­ing mid­dle class in China, India and other coun­tries that value gold is a key demand dri­ver for both jew­elry and gold as an investment;
• China’s appre­ci­at­ing cur­rency will make U.S. dollar-denominated prod­ucts (includ­ing gold) cheaper for Chi­nese consumers.

Of course, the inter­viewer asked Pierre to fore­cast the price of gold.

I believe in two things.  One is that the gold price will have three zeros after the first num­ber — I just don't know how big the first num­ber is going to be.  We are now at $1,200 gold and I do not believe for one sec­ond that that's the end of the bull mar­ket in gold… The U.S. politi­cians have absolutely no guts for another depres­sion and they will always allow the print­ing press to run to answer their prob­lem and there­fore when I look at the long term gold price — very bullish.

Read Pierre’s Inter­view with Mineweb’s Geoff Candy

By click­ing the link above, you will be directed to a third-party web­site. U.S. Global Investors does not endorse all infor­ma­tion sup­plied by this web­site and is not respon­si­ble for its con­tent. The fol­low­ing secu­ri­ties men­tioned in the inter­view were held by one or more of U.S. Global Investors fam­ily of funds as of June 30, 2010:  Bar­rick, New­mont Min­ing, Franco-Nevada.

Tags: Apos S, Chinese Consumers, Debasement, Debt Burdens, Frank Holmes, Gold, Gold Price, Gold Producer, Gold Sector, Gold World, India, Interviewer, Mineweb, Nevada Corp, Newmont Mining, Pierre Lassonde, Price Of Gold, Printing Press, Royalty Company, Sector Investment, Sovereign Debt, U S Global Investors, World Gold Council, Zeros
Posted in China, Gold, India | 1 Comment »

One for the Road (Jeffrey Saut)

Tuesday, July 27th, 2010

This arti­cle is a guest con­tri­bu­tion by Jef­frey Saut, Chief Invest­ment Strate­gist, Ray­mond James.

July 26, 2o1o

“Our approach to asset allo­ca­tion is focused on wealth preser­va­tion by con­trol­ling the over­all expo­sure to risk assets in rela­tion to macro con­di­tions, val­u­a­tion and mar­ket psy­chol­ogy. We are not attempt­ing to fore­cast the spe­cific per­for­mance of var­i­ous asset classes as a means of facil­i­tat­ing mar­ket tim­ing deci­sions, as his­tory has shown that this is rarely a win­ning strat­egy. Rather, we will attempt to pro­vide analy­sis that will help investors play a more active form of defense and offense with their port­fo­lios. In order to achieve these goals, we favour a dynamic approach to asset allo­ca­tion, review­ing the port­fo­lio and mak­ing adjust­ments on a quar­terly basis or as con­di­tions evolve, rather than stick­ing with fixed allo­ca­tions come ‘hell or high water.’ Sys­temic risk in the global econ­omy is far higher than in the pre­vi­ous post-World War II years, volatil­ity promises to remain extra­or­di­nar­ily high and the finan­cial sys­tem may be sub­ject to major shocks. This is a major theme run­ning through The Great Refla­tion. In such an envi­ron­ment, a buy and hold approach to asset allo­ca­tion will carry a lot more embed­ded risk than most peo­ple expect.”

“In prac­tice, the exe­cu­tion of dynamic asset allo­ca­tion is sub­jec­tive and highly com­plex for global investors. Many attempts have been made to cre­ate mod­els or algo­rithms that rely on indi­ca­tors to cal­cu­late an opti­mum asset allo­ca­tion. How­ever, this sort of quan­ti­ta­tive approach inevitably breaks down as the assump­tions that under­pin the model can­not fit every set of eco­nomic con­di­tions. We use indi­ca­tors selec­tively to inform decision-making, but at its core, asset allo­ca­tion is an art, involv­ing equal mea­sures of analy­sis, intu­ition and com­mon sense. Above all, investors must have a clear idea of their tol­er­ance for risk, exer­cise dis­ci­pline and stick to a plan. Some pre­fer one of rigid allo­ca­tions and the lit­er­a­ture tends to sup­port this approach. We favour a dynamic allo­ca­tion process which allows for some flex­i­bil­ity in order to bet­ter con­trol risk at impor­tant mar­ket junc­tures (e.g. stocks in 1999, hous­ing in 2006–2007).”

...Tony & Rob Boeckh, The Boeckh Invest­ment Letter

I have often opined that asset allo­ca­tion is the key to bring­ing alpha (read: out­per­for­mance) to port­fo­lios. I have also stated I am not dog­matic about asset allo­ca­tion. For exam­ple, I have not owned bank stocks for eight years. I “missed” them going down and have “missed” them going up. Obvi­ously, I agree with the Boeckh’s more “dynamic approach to asset allo­ca­tion.” To be sure, for years I have advised par­tic­i­pants to think of invest­ing for the future as an auto­mo­bile, con­vey­ing investors to their finan­cial goals. The invest­ment port­fo­lio is its motor, the asset allo­ca­tion model is the fuel mix­ture, and the invested assets are the fuel. As John Valen­tine, of Valen­tine Cap­i­tal, notes:

“The more effi­ciently the motor runs, the greater the speed with which the whole vehi­cle trav­els toward the des­ti­na­tion. Should the fuel mix­ture, or asset allo­ca­tion, run too rich, the motor wastes pre­cious fuel. Should it run too thin, the car has trou­ble achiev­ing enough for­ward momen­tum... Many indi­vid­u­als on the road to their finan­cial goals fail to make these peri­odic adjust­ments and still even­tu­ally arrive. Not sur­pris­ingly, the investor who rebal­ances his port­fo­lio at reg­u­lar inter­vals may arrive sooner and with more fuel in his tank... Rebalanc­ing a port­fo­lio is cru­cial to the investor seek­ing to reduce the volatil­ity in a port­fo­lio and increase cash flow simul­ta­ne­ously... The longer a port­fo­lio is left unbal­anced, the more com­pro­mised its asset allo­ca­tion may become. There are two poten­tially neg­a­tive repercus­sions asso­ci­ated with a com­pro­mised allo­ca­tion: being over­ex­posed to the down­side and under­ex­posed to the upside. Don’t let this hap­pen to you!”

Tags: Allocations, Asset Classes, Chief Investment Strategist, Core Asset, Dynamic Approach, Dynamic Asset Allocation, Economic Conditions, Global Economy, Global Investors, Gold, High Water, Market Psychology, Market Timing, oil, Quantitative Approach, Quarterly Basis, Raymond James, Reflation, Specific Performance, Systemic Risk, Wealth Preservation, World War Ii
Posted in Bonds, Energy & Natural Resources, Gold, Markets, Oil and Gas | Comments Off

We're All Chartists Now (Rosenberg)

Tuesday, July 27th, 2010

This is a guest con­tri­bu­tion by David Rosen­berg, Chief Mar­ket Econ­o­mist, Gluskin Sheff.

WHILE YOU WERE SLEEPING

The risk trade is intact with bonds sell­ing off frac­tion­ally (the Trea­sury mar­ket is brac­ing for $104 bil­lion of new sup­ply this week), com­modi­ties hold­ing onto their recent hefty gains and the equity mar­ket glob­ally in the green col­umn (save for Japan, China and Korea, which were down marginally).

The earn­ings news overnight from Europe looks to be solid and help­ing bol­ster investor opti­mism (in 3D no less – Daim­ler, Deutsche Bank, Danone; UBS beat as well though SAP did miss). Ger­man con­sumer con­fi­dence (GfK sur­vey) rose unex­pect­edly in July (to the grand total of a two-month high!). Against this back­ground, Euro­pean bourses are rid­ing a six-day win­ning streak.

In the FX mar­ket, safe-havens such as the Swiss franc and the Yen are softer; the DXY has also bro­ken deci­sively below the 100-day mov­ing aver­age and the 50-day is now rolling over. How the tide has changed. It looks like the real kicker in this lat­est runup in the equity mar­ket was the raised guid­ance out of UPS and Fedex, which has sup­ported the view that the expan­sion in global trade flows was not derailed by the recent debt flare-up in Europe.

In another sign that risk-tolerance is back, the high-yield mar­ket (which we like) has gen­er­ated a total return (in the U.S.A.) of 3% so far this month and there are still three days to go (retail inflows into high-yield funds have totalled $2 bil­lion in the past two weeks)! Credit default swaps on the largest global banks have receded to their low­est level in 12 weeks to boot; over­all cor­po­rate default risks are being repriced to 10-week lows as well. Emerg­ing mar­ket bond spreads have tight­ened to 279 bps from 359 bps at the end of May – and are still 50 bps wider com­pared to the mid-April lows.

And there has been a sus­tained nar­row­ing in Club Med bond spreads too (Span­ish spreads tight­ened 11 bps to 129 bps.). This is despite the fact that the stress tests did not really deal with the major chal­lenge, which is a sov­er­eign debt default and if one thinks the odds of such an event are triv­ial, then it may pay to look into the future at the mas­sive amount of refi­nanc­ings these coun­tries con­front in the next few years (in a word, daunt­ing). Calm has been restored, at least for now. With the equity short-long ratio down to a two-year low (the mar­ket is really over­bought here) accord­ing to Data Explor­ers, it will be inter­est­ing to see how much more upside there is now that the bears have gone back into hibernation.

Let's remind our­selves that the U.S. econ­omy is still oper­at­ing with a need to have job­less ben­e­fits extended for 99 weeks. This would make sea­sonal work­ers in New­found­land blush. Here we are with a near-10% deficit/GDP ratio and a debt/GDP ratio a year away from hit­ting 100% – talk about a game-changer. Both the FT and the WSJ run with arti­cles today high­light­ing the debate in the eco­nom­ics com­mu­nity over the effec­tive­ness of U.S. fis­cal policy.

What an indict­ment. This is an econ­omy hang­ing on by ten­ter­hooks because the Fed was sup­posed to have enough con­fi­dence in the econ­omy to begin to stand on its own two feet so that the cen­tral bank's preg­nant bal­ance sheet was sup­posed to have been in the unwind­ing phase by now. Instead, the Fed has pledged to do even more quan­ti­ta­tive eas­ing, if war­ranted by the cir­cum­stances. And both news­pa­pers also dis­cuss today the con­tin­ued fis­cal crunch in the State & Local gov­ern­ment sec­tor, which rep­re­sents 13% of GDP or dou­ble the share of busi­ness cap­i­tal spending.

MARKET COMMENT ... WE'RE ALL CHARTISTS NOW

We’re 142 trad­ing days into the year – 52 days (37%) have seen 1% or greater moves. And the S&P 500 is now flat as a beaver’s tail on the year. I call this the meat-grinder mar­ket. Again, a huge rally into yesterday’s close – and now the S&P 500 is sit­ting right at the 200-day mov­ing aver­age. This is start­ing to get inter­est­ing. Again, the lack of rat­i­fi­ca­tion from Mr. Bond as the 10-year note yield came back and closed the day a smidgen below 3%.

Tags: Chartists, Chief Market, Commodities, Consumer Confidence, Credit Default Swaps, David Rosenberg, Dxy, Earnings News, Emerging Market Bond Spreads, European Bourses, Fx Market, Global Banks, High Yield Funds, Investor Optimism, Market Economist, Risk Tolerance, Runup, Safe Havens, Swiss Franc, Treasury Market, Ups And Fedex
Posted in Bonds, China, Commodities, Markets, Outlook, US Stocks | Comments Off