Who finances the U.S.’s debt and deficits? Largely, it is the world; namely China and Japan. I wrote about this "Just Who “Owns” the USA anyways?" http://saveriomanzo.blogspot.com/2009/07/just-who-owns-usa-anyways.html
What if the “world” chose to stop buying American government debt? Well, that would be a scary thought for the U.S. dollar, and eventually to America, their economy and standard of living.
More and more we read of reports of countries that are big buyers and holders of the U.S. “paper” are becoming concerned, buying less, and looking for ways to diversify away from their large dollar holdings. (A good argument for gold?)
Discussion of this is difficult to find in “local” news papers and is more prevalent when looking at foreign business papers. However, just recently I found this in the WSJ:
Bond Worry: Will China Keep Buying?
“Shaky auctions of Treasury notes this week reignited concerns about whether the government can attract buyers from China and elsewhere to soak up trillions in new debt.
A fuse was lit this week when traders noted China's apparent absence from direct participation in two Treasury bond auctions. While China may have bought Treasurys just before the auctions, market participants read the country's actions as a worrying sign that China and other foreign investors may be ratcheting back purchases at a time when the U.S. is seeking to fund a $1.8 trillion budget deficit.”
Source: WSJ, July 31, 2009
http://online.wsj.com/article/SB124896282178793797.html
Saverio Manzo
Friday, July 31, 2009
Thursday, July 30, 2009
Who dare blame the U.S. Consumer?
Is it just me or do you too get the impression that the entire world seems to be blaming the US – specifically the US consumer – for the 'mishandling' of their own personal and public finances? I’m not speaking about the past couple of years; this was the global impression of Americans for the past couple of decades.
Yes, it is true: Americans and their fearless government leaders have overspent, borrowed way too much and saved/invested far too little? (Do I really need a news article reference to back this claim?)
Now although we humans are creatures of habit, it is in times of ‘shock and awe’ that we are shaken from our old routines and way of life in to accepting and dealing with what is at hand. With that, circumstances are changing rather rapidly these days as we have seen “the great unwind” of eliminating personal and corporate debts, personal and corporate spending plummet to buying items out of necessity, and savings rates escalate to levels not seen in the US in twenty years.
In fact, this theme is highlighted by well known economist David Rosenburg of G.S. in a recent paper titled “Getting small" is going to imply for the trend in U.S. consumer spending.”
With job losses, home and portfolio values depressed, this new trend will continue to change for even the “better” as Boomers facing retirement are wholly unprepared to do so.
However, the US situation is not as bad as we are led to believe, for there are others in the G-8 in far worse shape. For example, the British are far worse apparently; have been worse than in the US for a very long while, and they are worsening at a swift and heady pace.
They’ve continued to spend their way into personal fiscal oblivion, taking the ratio of household debt as a percentage of disposable income to just under 170%! Compared the US at 140%.
Saverio Manzo
Yes, it is true: Americans and their fearless government leaders have overspent, borrowed way too much and saved/invested far too little? (Do I really need a news article reference to back this claim?)
Now although we humans are creatures of habit, it is in times of ‘shock and awe’ that we are shaken from our old routines and way of life in to accepting and dealing with what is at hand. With that, circumstances are changing rather rapidly these days as we have seen “the great unwind” of eliminating personal and corporate debts, personal and corporate spending plummet to buying items out of necessity, and savings rates escalate to levels not seen in the US in twenty years.
In fact, this theme is highlighted by well known economist David Rosenburg of G.S. in a recent paper titled “Getting small" is going to imply for the trend in U.S. consumer spending.”
With job losses, home and portfolio values depressed, this new trend will continue to change for even the “better” as Boomers facing retirement are wholly unprepared to do so.
However, the US situation is not as bad as we are led to believe, for there are others in the G-8 in far worse shape. For example, the British are far worse apparently; have been worse than in the US for a very long while, and they are worsening at a swift and heady pace.
They’ve continued to spend their way into personal fiscal oblivion, taking the ratio of household debt as a percentage of disposable income to just under 170%! Compared the US at 140%.
Saverio Manzo
Wednesday, July 29, 2009
Are The Chinese Really coming?
If you live in Canada and particularly of you live in on of Canada’s oil-rich provinces, you have heard for years of the coming Chinese take-over of our resources. Ok that might be a bit of a stretch, but there is some truth to it. The question is whether this buying will pick up anytime soon? We all know that the Chinese are very strategic in their thinking, planning and thus their ‘buying’. One only has to have a look around the world to see that over the past few month the Chinese have acquired large resource assets in Australia and throughout South America – including a deal with Venezuela.
Look at the numbers: Canada has the world's third largest oil resource base with approximately 600 Billion barrels of recoverable oil - dwarfing China's oil resources and a population of about 1.3 billion (compared to Canada's 31 million).
“The first, and most obvious, is energy security. On a comparative basis, relative to the size of their economy, they are not blessed with that many natural resources themselves, so they want to get access themselves to the physical barrels, if possible.
The second thing, which drives the importance to the Chinese, is their own view that the industry is running short of natural resources and so it would be a good long-term investment, in and of itself.
The third thing that is really driving the importance of the Chinese market is the fact that that they've got the money They can finance these deals and, particularly in today's marketplace where raising capital is more difficult than it was a year ago, this ends up being a critical factor in deciding if you're a seller that we want to do business with.
We don't have the depth of capital markets to fully develop our own natural resources: the total amount of capital that's going to be required to be able to develop the oil sands business is well over $100-billion over the next 15-20 years; it'll be by far the largest capital expenditure program in a single sector in Canadian history. The Canadian capital markets are simply not deep enough to be able to finance that, so we have to be prepared to welcome foreign investment if we want to be able to develop this important strategic globally admired resource.”
Source: The G&M: Karl Moore of the Desautels Faculty for The Globe and Mail interviewing Adam Waterous, Scotia Waterous.
Saverio Manzo
Look at the numbers: Canada has the world's third largest oil resource base with approximately 600 Billion barrels of recoverable oil - dwarfing China's oil resources and a population of about 1.3 billion (compared to Canada's 31 million).
“The first, and most obvious, is energy security. On a comparative basis, relative to the size of their economy, they are not blessed with that many natural resources themselves, so they want to get access themselves to the physical barrels, if possible.
The second thing, which drives the importance to the Chinese, is their own view that the industry is running short of natural resources and so it would be a good long-term investment, in and of itself.
The third thing that is really driving the importance of the Chinese market is the fact that that they've got the money They can finance these deals and, particularly in today's marketplace where raising capital is more difficult than it was a year ago, this ends up being a critical factor in deciding if you're a seller that we want to do business with.
We don't have the depth of capital markets to fully develop our own natural resources: the total amount of capital that's going to be required to be able to develop the oil sands business is well over $100-billion over the next 15-20 years; it'll be by far the largest capital expenditure program in a single sector in Canadian history. The Canadian capital markets are simply not deep enough to be able to finance that, so we have to be prepared to welcome foreign investment if we want to be able to develop this important strategic globally admired resource.”
Source: The G&M: Karl Moore of the Desautels Faculty for The Globe and Mail interviewing Adam Waterous, Scotia Waterous.
Saverio Manzo
Tuesday, July 28, 2009
Love-lives, ‘pets’ and retirement plans suffer
Economists, strategists and many analysts are having their input on what the recession’s effect will have on people’s spending and saving, retirement plans and on their love lives.
“The economic recession has not only crippled the savings of many, but it is also straining their marriages or relationships.
According to a new global survey commissioned by ING DIRECT, 23% of Canadians and 40%of Americans say the recession will cause them to retire later, with 34% thinking they will have to work for at least 10 more years than originally planned. Also, nearly three in ten (29%) say the recession has “added stress to,” “strained” or “ruined” their marriage/relationship.
While food is the last thing people are willing to sacrifice, Canadians and Americans also put a premium on their cars and their pets.
Forty-six percent of those surveyed said they are avoiding credit card purchases to save money.
People are also cooking at home and bringing their lunch to work in order to save money, with Americans (51%), Canadians (44%).
Many surveyed also said that having a financial buffer in case of an emergency is their most important savings goal.”
Source: ING DIRECT USA, Recession Strains Americans’ Love Lives and Finances
By Paul Menchaca, July 27, 2009
Saverio Manzo
“The economic recession has not only crippled the savings of many, but it is also straining their marriages or relationships.
According to a new global survey commissioned by ING DIRECT, 23% of Canadians and 40%of Americans say the recession will cause them to retire later, with 34% thinking they will have to work for at least 10 more years than originally planned. Also, nearly three in ten (29%) say the recession has “added stress to,” “strained” or “ruined” their marriage/relationship.
While food is the last thing people are willing to sacrifice, Canadians and Americans also put a premium on their cars and their pets.
Forty-six percent of those surveyed said they are avoiding credit card purchases to save money.
People are also cooking at home and bringing their lunch to work in order to save money, with Americans (51%), Canadians (44%).
Many surveyed also said that having a financial buffer in case of an emergency is their most important savings goal.”
Source: ING DIRECT USA, Recession Strains Americans’ Love Lives and Finances
By Paul Menchaca, July 27, 2009
Saverio Manzo
Monday, July 27, 2009
Is 57 enough to make a headline: More Regional Banks Fail
The FDIC is having an incredibly busy year, having to close and deal with a total of 57 failed banking institutions. Seventeen institutions have now failed over the last three weeks alone, and the pace- and trend – doesn’t appear to be easing any time soon. That adds up to Billions of additional government dollars to fork out to insured deposit holders.
Failed Regional Banks are too small to make headlines, especially on page ‘one' of most newspapers, but many believe that they represent the average Joe-working class.
But is 57 enough to make a headline?
The Federal Deposit Insurance Corp. (FDIC) is the insurance arm of the government designed to protect depositors from failing financial institutions.
Four More Bank Failures Hit Industry
"Closures bring an estimated cost of $1.1 billion to the FDIC.
Two Southern California banks — totalling over $3 billion in assets — succumbed to construction loan losses Friday evening, and the Federal Deposit Insurance Corp. endured another busy night.
Vineyard Bank, with $1.9 billion in assets, was closed after a deal for the Rancho Cucamonga-based institution fell through in late May. Regulators also closed $1.5 billion-asset Temecula Valley Bank, in Temecula, after investors had similarly backed away from saving it.
The failures — along with two closures of smaller institutions earlier in the night — brought an estimated cost of $1.1 billion to the FDIC."
By Joe Adler, American Banker
Saverio Manzo
Failed Regional Banks are too small to make headlines, especially on page ‘one' of most newspapers, but many believe that they represent the average Joe-working class.
But is 57 enough to make a headline?
The Federal Deposit Insurance Corp. (FDIC) is the insurance arm of the government designed to protect depositors from failing financial institutions.
Four More Bank Failures Hit Industry
"Closures bring an estimated cost of $1.1 billion to the FDIC.
Two Southern California banks — totalling over $3 billion in assets — succumbed to construction loan losses Friday evening, and the Federal Deposit Insurance Corp. endured another busy night.
Vineyard Bank, with $1.9 billion in assets, was closed after a deal for the Rancho Cucamonga-based institution fell through in late May. Regulators also closed $1.5 billion-asset Temecula Valley Bank, in Temecula, after investors had similarly backed away from saving it.
The failures — along with two closures of smaller institutions earlier in the night — brought an estimated cost of $1.1 billion to the FDIC."
By Joe Adler, American Banker
Saverio Manzo
Long Standing Dow Theory says "hello" to new bull market
The long-awaited Dow Theory bull market signal finally arrived. This came about as a result of the Dow Jones Industrial Average and the Dow Jones Transportation Average both breaking through their previous rally peaks (registered on 12 and 11 June respectively).
The Dow theory, developed by Charles Dow, has been around for almost 100 years, yet even in today's volatile and technology-driven markets, the basic components of Dow theory still remain valid. However, it has been criticized for being too late a signal. The trend does not change from bearish to bullish until the previous reaction high has been surpassed.
The goal of Dow was to identify the primary trend and catch the big moves. They understood that the market was influenced by emotion and prone to over-reaction both up and down. With this in mind, it is concentrated on identification and following: identify the trend and then follow the trend. The trend is in place until proved otherwise. That is when the trend will end, when it is proved otherwise.
Although the breakouts provide confirmation of the nascent uptrends, one may question the relevance of the Averages as representative benchmarks in the modern economy. Also, most indices are quite overbought after very sharp moves over the last 12 days.
"In my opinion, it could be dangerous to blindly put one’s faith only in Dow Theory and investors should at all times rather base their decisions on a combination of fundamental and technical indicators."
While Dow Theorists delight in the bull signal, it is appropriate not to lose sight of the economic picture. It remains relatively bleak.
Reading the markets is an empirical science. As such there will be exceptions to the theorems put forth by Dow and others. They believed that success in the markets required serious study and analysis that would be fraught with successes and failures. Success is a great thing, but don't get too smug about it. Failures, while painful, should be looked upon as learning experiences. Technical analysis is an art form and the eye grows keener with practice. Study both successes and failures with an eye to the future.
We live in interesting times indeed!
July 24th, 2009 by Prieur du Plessis, Investment Postcards from Cape Town
Saverio Manzo
The Dow theory, developed by Charles Dow, has been around for almost 100 years, yet even in today's volatile and technology-driven markets, the basic components of Dow theory still remain valid. However, it has been criticized for being too late a signal. The trend does not change from bearish to bullish until the previous reaction high has been surpassed.
The goal of Dow was to identify the primary trend and catch the big moves. They understood that the market was influenced by emotion and prone to over-reaction both up and down. With this in mind, it is concentrated on identification and following: identify the trend and then follow the trend. The trend is in place until proved otherwise. That is when the trend will end, when it is proved otherwise.
Although the breakouts provide confirmation of the nascent uptrends, one may question the relevance of the Averages as representative benchmarks in the modern economy. Also, most indices are quite overbought after very sharp moves over the last 12 days.
"In my opinion, it could be dangerous to blindly put one’s faith only in Dow Theory and investors should at all times rather base their decisions on a combination of fundamental and technical indicators."
While Dow Theorists delight in the bull signal, it is appropriate not to lose sight of the economic picture. It remains relatively bleak.
Reading the markets is an empirical science. As such there will be exceptions to the theorems put forth by Dow and others. They believed that success in the markets required serious study and analysis that would be fraught with successes and failures. Success is a great thing, but don't get too smug about it. Failures, while painful, should be looked upon as learning experiences. Technical analysis is an art form and the eye grows keener with practice. Study both successes and failures with an eye to the future.
We live in interesting times indeed!
July 24th, 2009 by Prieur du Plessis, Investment Postcards from Cape Town
Saverio Manzo
Friday, July 24, 2009
Recent market rally: Skewed glasses?
Investors have been propelling the stock market higher. Justifiably?
"While the earnings announcements thus far have been impressive at the headline level, the reports become less striking once one digs a bit deeper to discover that the earnings numbers often only beat estimates due to cost-cutting. And, at the top line revenues are still deflating, indicating no pricing power."
Chart of the Day provides some perspective on the current earnings environment by highlighting how 12-month “as reported” earnings are expected (38% of S&P 500 companies have reported for Q2 2009) to have declined over 98% since peaking in Q3 2007. This makes it by far the largest decline on record (the data goes back to 1936). “In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative,” said Chart of the Day. This provides a sobering picture indeed, causing concern that in a number of instances a disparity is developing between stock prices and fundamental reality.
Source: Chart of the Day, July 24, 2009.
Saverio Manzo
"While the earnings announcements thus far have been impressive at the headline level, the reports become less striking once one digs a bit deeper to discover that the earnings numbers often only beat estimates due to cost-cutting. And, at the top line revenues are still deflating, indicating no pricing power."
Chart of the Day provides some perspective on the current earnings environment by highlighting how 12-month “as reported” earnings are expected (38% of S&P 500 companies have reported for Q2 2009) to have declined over 98% since peaking in Q3 2007. This makes it by far the largest decline on record (the data goes back to 1936). “In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative,” said Chart of the Day. This provides a sobering picture indeed, causing concern that in a number of instances a disparity is developing between stock prices and fundamental reality.
Source: Chart of the Day, July 24, 2009.
Saverio Manzo
Real-Life Sopranos? Politicians and Rabbis nailed
Why am I still shocked when I hear of this happening?
Crime, corruption, scheming, arrogance, the taking of bribes and a shocking betrayal of the public trust…all caught on video and audio tape.
44 charged, 29 of which are public officials.
“Corruption was a way of life. They existed in an ethics-free zone, exploiting giant loop holes."
Cuffing Rabbi’s who acted as “crime bosses” in money laundering schemes, in a criminal network that operated from the U.S. to Israel. Laundering tens of millions of dollars through charities controlled by Rabbis. One defendant even got somebody to donate a kidney for $10,000 and then sold the kidney for $160,000!
"I have at least $100,000 a month coming from money I 'schnookied' from banks for bad loans."
Mr. Dwek gave one of the alleged co-conspirators a box of Apple Jacks cereal stuffed with $97,000 cash.
"Did you get the money from [Mr. Dwek] when we saw him the other day?"
Mr. Catrillo replied: "Yeah, I took care of that. Yeah."
"Business is very good. Prada, Gucci, boom, boom, boom," Mr. Dwek boasted at one point, according to court papers.
Source: WSJ, July 24, 2009
http://online.wsj.com/article/SB124835404608875685.html
Saverio Manzo
Crime, corruption, scheming, arrogance, the taking of bribes and a shocking betrayal of the public trust…all caught on video and audio tape.
44 charged, 29 of which are public officials.
“Corruption was a way of life. They existed in an ethics-free zone, exploiting giant loop holes."
Cuffing Rabbi’s who acted as “crime bosses” in money laundering schemes, in a criminal network that operated from the U.S. to Israel. Laundering tens of millions of dollars through charities controlled by Rabbis. One defendant even got somebody to donate a kidney for $10,000 and then sold the kidney for $160,000!
"I have at least $100,000 a month coming from money I 'schnookied' from banks for bad loans."
Mr. Dwek gave one of the alleged co-conspirators a box of Apple Jacks cereal stuffed with $97,000 cash.
"Did you get the money from [Mr. Dwek] when we saw him the other day?"
Mr. Catrillo replied: "Yeah, I took care of that. Yeah."
"Business is very good. Prada, Gucci, boom, boom, boom," Mr. Dwek boasted at one point, according to court papers.
Source: WSJ, July 24, 2009
http://online.wsj.com/article/SB124835404608875685.html
Saverio Manzo
Thursday, July 23, 2009
David Walker’s Wake-Up Tour
A while ago a friend introduced me to the message of a guy named David Walker. At the time I listened, found what he had to say shocking, but didn't react much beyond this. Fast forward to today and now I hear and see many pundits preaching a variation of what Mr. Walker has been saying all along.
Whats truly scary is that Walker’s message came to us before this economic meltdown and massive monetary infusion by governments.
David Walker, former comptroller general of the U.S., The U.S. Government's accountability office (GAO) which audits the government's books, totaled up the U.S. government's income, liabilities and future obligations. He concluded the numbers don't add up.
78 million baby boomers just entering in to retirement, over the next twenty years, which means they are pensioners, eligible for social benefits and medical dependants of the U.S. taxpayer.
The two biggest future financial burdens of the U.S.: health care and social security benefits. But, by and large, the health care problem is the killer. It is five times greater than the social security problem. Why? Because people keep living longer and medical costs keep rising.
“The U.S. has spent, promised and borrowed itself in to a hole that it will be unable to climb out of unless it acts now."
"The most serious threat to the USA is not someone hiding in a cave, but its own fiscal irresponsibility. Its not an immediate problem, so people don’t see it in their face. It is a fiscal cancer growing within us."
"If nothing changes, and no action is taken, the U.S. government won't be able to do much more than pay interest on the mounting debt. It won't have money left for anything else…national defense, homeland security, education…you name it. The system is unsustainable. If not dealt with, it could bankrupt America."
Fed Chair Dr. Ben Bernanke validated Walkers take: “Economic growth alone is unlikely to solve the nations pending fiscal problems.”
http://www.youtube.com/watch?v=QxoP_9W6FC8&feature=related
http://www.cnbc.com/id/15840232?video=1191052938&play=1
Saverio Manzo
Whats truly scary is that Walker’s message came to us before this economic meltdown and massive monetary infusion by governments.
David Walker, former comptroller general of the U.S., The U.S. Government's accountability office (GAO) which audits the government's books, totaled up the U.S. government's income, liabilities and future obligations. He concluded the numbers don't add up.
78 million baby boomers just entering in to retirement, over the next twenty years, which means they are pensioners, eligible for social benefits and medical dependants of the U.S. taxpayer.
The two biggest future financial burdens of the U.S.: health care and social security benefits. But, by and large, the health care problem is the killer. It is five times greater than the social security problem. Why? Because people keep living longer and medical costs keep rising.
“The U.S. has spent, promised and borrowed itself in to a hole that it will be unable to climb out of unless it acts now."
"The most serious threat to the USA is not someone hiding in a cave, but its own fiscal irresponsibility. Its not an immediate problem, so people don’t see it in their face. It is a fiscal cancer growing within us."
"If nothing changes, and no action is taken, the U.S. government won't be able to do much more than pay interest on the mounting debt. It won't have money left for anything else…national defense, homeland security, education…you name it. The system is unsustainable. If not dealt with, it could bankrupt America."
Fed Chair Dr. Ben Bernanke validated Walkers take: “Economic growth alone is unlikely to solve the nations pending fiscal problems.”
http://www.youtube.com/watch?v=QxoP_9W6FC8&feature=related
http://www.cnbc.com/id/15840232?video=1191052938&play=1
Saverio Manzo
Wednesday, July 22, 2009
The Technical Case for the “BRIC”
I’m a big fan of technical analysis, but to be honest with you my studies suggest that aside from a handful of individuals most technicians are on the right side of a trade only 50% of the time. So why not flip a coin instead?
The Kondratiev Wave and the Elliott Wave have proven to been accurate long-term predictors of economic and market cycles. I think that’s the basis for this intriguing article on the future expectations of emerging markets globally.
Albeit there are a plethora of economists predicting the same underlying theme - this time it was nice to see a different spin on it.
Emerging Markets Mirror U.S. Post-War Boom: Technical Analysis
July 21 (Bloomberg) -- Emerging-market stocks are in the midst of a “long-term secular bull market” that resembles the boom in U.S. equities during the post-World War II era, according to Louise Yamada Technical Research Advisors LLC.
The secular bull market in U.S. stocks between 1942 and 1966 was the second-longest ever as increased consumer spending buoyed the economy and helped more Americans join the middle class, Jonathan Lin, a New York-based senior analyst, said in a phone interview. Emerging markets such as China and Brazil may be on a similar trajectory, according to Lin, who works with Louise Yamada, the top-ranked technical analyst in Institutional Investor magazine’s annual survey from 2001 through 2004.
“Based on chart patterns and demographic trends, the MSCI Emerging Markets index looks like the Dow Jones Industrial Average during the post-World War II period,” said Lin, who defines a secular market trend as one that lasts for years to decades. “This boom could last another 10 years.”
The MSCI Emerging Markets Index has surged 43 percent this year on speculation interest-rate cuts and stimulus packages from countries including India, China and Brazil will spark a recovery in economic growth. The index gained more than 20 percent for five straight years before tumbling 55 percent in 2008 as recessions in the U.S., Japan and Europe curbed demand for developing nations’ exports.
In technical analysis, investors and analysts study charts of trading patterns and prices to make market predictions.
The secular bull market for emerging markets varies by country, with Brazil’s “uptrend” starting in the mid-1990s and China’s developing around 2000, Lin said.
“We like China and Brazil,” Lin said. “For the uptrend to continue, economic growth is most important. We’re not as comfortable with Russia from a structural chart perspective.”
Higher commodity prices will be needed to sustain Brazil’s trend, while China’s rally will depend on whether the nation’s economic gains spread to its poorer industrial regions, Lin said.
July 21, 2009 by Allen Wan
http://www.bloomberg.com/apps/news?pid=20601057&sid=aO8oB9Mzn3UI#
Saverio Manzo
The Kondratiev Wave and the Elliott Wave have proven to been accurate long-term predictors of economic and market cycles. I think that’s the basis for this intriguing article on the future expectations of emerging markets globally.
Albeit there are a plethora of economists predicting the same underlying theme - this time it was nice to see a different spin on it.
Emerging Markets Mirror U.S. Post-War Boom: Technical Analysis
July 21 (Bloomberg) -- Emerging-market stocks are in the midst of a “long-term secular bull market” that resembles the boom in U.S. equities during the post-World War II era, according to Louise Yamada Technical Research Advisors LLC.
The secular bull market in U.S. stocks between 1942 and 1966 was the second-longest ever as increased consumer spending buoyed the economy and helped more Americans join the middle class, Jonathan Lin, a New York-based senior analyst, said in a phone interview. Emerging markets such as China and Brazil may be on a similar trajectory, according to Lin, who works with Louise Yamada, the top-ranked technical analyst in Institutional Investor magazine’s annual survey from 2001 through 2004.
“Based on chart patterns and demographic trends, the MSCI Emerging Markets index looks like the Dow Jones Industrial Average during the post-World War II period,” said Lin, who defines a secular market trend as one that lasts for years to decades. “This boom could last another 10 years.”
The MSCI Emerging Markets Index has surged 43 percent this year on speculation interest-rate cuts and stimulus packages from countries including India, China and Brazil will spark a recovery in economic growth. The index gained more than 20 percent for five straight years before tumbling 55 percent in 2008 as recessions in the U.S., Japan and Europe curbed demand for developing nations’ exports.
In technical analysis, investors and analysts study charts of trading patterns and prices to make market predictions.
The secular bull market for emerging markets varies by country, with Brazil’s “uptrend” starting in the mid-1990s and China’s developing around 2000, Lin said.
“We like China and Brazil,” Lin said. “For the uptrend to continue, economic growth is most important. We’re not as comfortable with Russia from a structural chart perspective.”
Higher commodity prices will be needed to sustain Brazil’s trend, while China’s rally will depend on whether the nation’s economic gains spread to its poorer industrial regions, Lin said.
July 21, 2009 by Allen Wan
http://www.bloomberg.com/apps/news?pid=20601057&sid=aO8oB9Mzn3UI#
Saverio Manzo
Tuesday, July 21, 2009
Lessons from the best of the best: Ben Graham
In my last musing, I discussed the notion of a great contrarian indicator; magazine cover-page stories. Keeping with this theme, I ran across this article that seems very applicable today, about, arguably, the best contrarian of all time.
“It is sometimes said that to be an intelligent investor, you must be unemotional. That isn’t true; instead, you should be inversely emotional. You can’t turn off your feelings, of course. But you can, and should, turn them inside out.
Mr. Graham worked diligently to resist being swept up in the mood swings of ‘Mr. Market’ - his metaphor for the collective mind of investors, euphoric when stocks go up and miserable when they go down.
He almost invariably read the enthusiasm of others as a yellow caution light, and he took their misery as a sign of hope.
His knack for inverting emotions helped him see when markets had run to extremes. In late 1945, as the market was rising 36%, he warned investors to cut back on stocks; the next year, the market fell 8%. As stocks took off in 1958-59, Mr. Graham was again pessimistic; years of jagged returns followed. In late 1971, he counseled caution, just before the worst bear market in decades hit.”
Who is Ben Graham? The author of The Intelligent Investor. Warren Buffet was the Protégé of Mr. Graham.
Source: Jason Zweig, The Wall Street Journal, May 26, 2009.
Saverio Manzo
“It is sometimes said that to be an intelligent investor, you must be unemotional. That isn’t true; instead, you should be inversely emotional. You can’t turn off your feelings, of course. But you can, and should, turn them inside out.
Mr. Graham worked diligently to resist being swept up in the mood swings of ‘Mr. Market’ - his metaphor for the collective mind of investors, euphoric when stocks go up and miserable when they go down.
He almost invariably read the enthusiasm of others as a yellow caution light, and he took their misery as a sign of hope.
His knack for inverting emotions helped him see when markets had run to extremes. In late 1945, as the market was rising 36%, he warned investors to cut back on stocks; the next year, the market fell 8%. As stocks took off in 1958-59, Mr. Graham was again pessimistic; years of jagged returns followed. In late 1971, he counseled caution, just before the worst bear market in decades hit.”
Who is Ben Graham? The author of The Intelligent Investor. Warren Buffet was the Protégé of Mr. Graham.
Source: Jason Zweig, The Wall Street Journal, May 26, 2009.
Saverio Manzo
Monday, July 20, 2009
Cover Stories – The Ultimate Contrarian?
I have been fascinated for some time of the notion that all markets are irrational, emotional, bi-polar, living, evolving beings. Yes, fundamentals of supply and demand must take hold in the long run, as economic fact in history has proven out, but during short and intermediate periods fundamentals have almost no place. Sentiment, mood and feelings are all in play and the concept of the pendulum is in full “swing” and that, yes, it tends to overreact.
This point was again spelled out to me in a recent article I read, “The death of equities.” Contrarian indicators from front page stories. The study covered 20 years worth of cover stories from BusinessWeek, Fortune, and Forbes Magazines.
“Headlines from featured stories in Business Week, Fortune, and Forbes were collected for a 20-year period to determine whether positive stories are associated with superior future performance and negative stories are associated with inferior future performance for the featured company. “Superior” and “inferior” were determined in comparison with an index or another company in the same industry and of the same size. Statistical testing implied that positive stories generally indicate the end of superior performance and negative news generally indicates the end of poor performance.”
Financial Analysts Journal
http://www.cfapubs.org/doi/abs/10.2469/faj.v63.n2.4520
Saverio Manzo
This point was again spelled out to me in a recent article I read, “The death of equities.” Contrarian indicators from front page stories. The study covered 20 years worth of cover stories from BusinessWeek, Fortune, and Forbes Magazines.
“Headlines from featured stories in Business Week, Fortune, and Forbes were collected for a 20-year period to determine whether positive stories are associated with superior future performance and negative stories are associated with inferior future performance for the featured company. “Superior” and “inferior” were determined in comparison with an index or another company in the same industry and of the same size. Statistical testing implied that positive stories generally indicate the end of superior performance and negative news generally indicates the end of poor performance.”
Financial Analysts Journal
http://www.cfapubs.org/doi/abs/10.2469/faj.v63.n2.4520
Saverio Manzo
Saturday, July 18, 2009
Just Who “Owns” the USA anyway?
With record debt levels, deficits still climbing, unemployment levels twice the level of what it was not so long ago and the US economy still suffering – the US Dollar is at the same level today as it was about two years ago. If it were not for a so called “flight to quality” the greenback would very likely be much lower against most major global currencies. Hmm, doesn’t look to promising for the greenback’s future.
US dollar – a currency in decline
“Foreigners own roughly half of the US government’s publicly traded debt, or $3.47-trillion, representing nearly 25% of the size of the US economy - the highest level in history. If foreign lenders were to significantly reduce their purchases of US Treasury notes, without even dumping their current holdings, US long-term interest rates could zoom higher and the US dollar could crumble.
That would be a double whammy for the US economy. Higher yields on Treasury debt could translate into higher mortgage borrowing rates for homebuyers, which would weigh on the housing market, while a weaker US dollar could lift the price of crude oil to above $70 per barrel, resulting in an “oil shock” to the world economy. This nightmare scenario has been relegated to the den of doomsayers and fear mongers, yet is starting to become an increasingly realistic proposition.
Some of the biggest foreign lenders to the US Treasury, such as Brazil, China, India, Russia and Qatar, are grumbling aloud about the endless string of trillion dollar US budget deficits projected in the years ahead. Lenders are crying foul over the Federal Reserve’s radical experiment with “quantitative easing” (QE) - the printing of vast quantities of US dollars, and monetizing the US government’s debt.
The CBO sees the US deficits between 2010 and 2019 totalling $9.1 trillion, thereby raising doubts about America’s ability to finance its debt at low interest rates, and whether it can maintain its top-tier AAA credit rating.”
Source: Peter Greene, Fusion IQ, July 15, 2009.
Saverio Manzo
US dollar – a currency in decline
“Foreigners own roughly half of the US government’s publicly traded debt, or $3.47-trillion, representing nearly 25% of the size of the US economy - the highest level in history. If foreign lenders were to significantly reduce their purchases of US Treasury notes, without even dumping their current holdings, US long-term interest rates could zoom higher and the US dollar could crumble.
That would be a double whammy for the US economy. Higher yields on Treasury debt could translate into higher mortgage borrowing rates for homebuyers, which would weigh on the housing market, while a weaker US dollar could lift the price of crude oil to above $70 per barrel, resulting in an “oil shock” to the world economy. This nightmare scenario has been relegated to the den of doomsayers and fear mongers, yet is starting to become an increasingly realistic proposition.
Some of the biggest foreign lenders to the US Treasury, such as Brazil, China, India, Russia and Qatar, are grumbling aloud about the endless string of trillion dollar US budget deficits projected in the years ahead. Lenders are crying foul over the Federal Reserve’s radical experiment with “quantitative easing” (QE) - the printing of vast quantities of US dollars, and monetizing the US government’s debt.
The CBO sees the US deficits between 2010 and 2019 totalling $9.1 trillion, thereby raising doubts about America’s ability to finance its debt at low interest rates, and whether it can maintain its top-tier AAA credit rating.”
Source: Peter Greene, Fusion IQ, July 15, 2009.
Saverio Manzo
Friday, July 17, 2009
Blow to Mom and Pop shops across America
For some reason I feel this whole story is really being underplayed. Is it that we have had enough depressing bank bail-out news and not much phases us any longer?
Digging deeper in to the fate of CIT Group, Inc., one of the largest lenders to U.S. small businesses, the heart of the economy of the US, by the way, we see greater negative impact then news clips reveal.
So Goldman’s employees raking in the cash (indirectly from the US bail-out and US taxpayer) and small-bizz lender allowed to go under. Wow.
“Alone, Rick Rush is small enough to fail. The problem is he probably wouldn't go down alone.
Mr. Rush owns a light industrial company called MetFin in Suffield, Conn. MetFin makes abrasive blast cleaning equipment used for metal fabrication. MetFin doesn't borrow from CIT Group Inc., it borrows from a rival. When cash flow is tight, Mr. Rush draws on his credit line to keep the bills paid and meet payroll.”
“Worries about the fate of CIT Group Inc. cascaded through the retail and manufacturing industries on Thursday, as companies stopped shipments and businesses worried about cash being tied up at the lender should it file for bankruptcy-court protection.”
A Tale of Two Bailouts
Goldman's profits, CIT's trouble, and 'too big to fail.'
“Goldman will surely deny that its risk-taking is subsidized by the taxpayer -- but then so did Fannie Mae and Freddie Mac, right up to the bitter end.”
“We like profits as much as the next capitalist. But when those profits are supported by government guarantees or insured deposits, taxpayers have a special interest in how the companies conduct their business. Ideally we would shed those implicit guarantees altogether, along with the very notion of too big to fail.”
http://online.wsj.com/article/SB124762129423442667.html
The System at Risk in a CIT Failure
Small Business Collateral At Risk With CIT
“CIT Group, Inc., one of the largest lenders to U.S. small businesses, is clearly in a distressed state. But a successful rescue requires a deep understanding of how commercial finance contracts work.
The failure of CIT would have catastrophic consequences for small businesses globally, making regulatory intervention unavoidable.
Therein lies the Catch-22: if CIT fails, there could be systemic risks as small businesses file for bankruptcy and cannot pay their obligations to their suppliers and employees. To forestall failure by asking government assistance may require that CIT explain the total risk exposure.
According to CreditSights, the total exposure of CIT client trade and vendor finance balances, which include those of small business clients, exceeds $6 billion.’
Source: The Wall Street Journal, July 17, 2009
http://online.wsj.com/article/SB124779123756354885.html
http://online.wsj.com/article/SB124774724987851145.html
http://online.wsj.com/article/SB124757917744938883.html
saverio manzo
Digging deeper in to the fate of CIT Group, Inc., one of the largest lenders to U.S. small businesses, the heart of the economy of the US, by the way, we see greater negative impact then news clips reveal.
So Goldman’s employees raking in the cash (indirectly from the US bail-out and US taxpayer) and small-bizz lender allowed to go under. Wow.
“Alone, Rick Rush is small enough to fail. The problem is he probably wouldn't go down alone.
Mr. Rush owns a light industrial company called MetFin in Suffield, Conn. MetFin makes abrasive blast cleaning equipment used for metal fabrication. MetFin doesn't borrow from CIT Group Inc., it borrows from a rival. When cash flow is tight, Mr. Rush draws on his credit line to keep the bills paid and meet payroll.”
“Worries about the fate of CIT Group Inc. cascaded through the retail and manufacturing industries on Thursday, as companies stopped shipments and businesses worried about cash being tied up at the lender should it file for bankruptcy-court protection.”
A Tale of Two Bailouts
Goldman's profits, CIT's trouble, and 'too big to fail.'
“Goldman will surely deny that its risk-taking is subsidized by the taxpayer -- but then so did Fannie Mae and Freddie Mac, right up to the bitter end.”
“We like profits as much as the next capitalist. But when those profits are supported by government guarantees or insured deposits, taxpayers have a special interest in how the companies conduct their business. Ideally we would shed those implicit guarantees altogether, along with the very notion of too big to fail.”
http://online.wsj.com/article/SB124762129423442667.html
The System at Risk in a CIT Failure
Small Business Collateral At Risk With CIT
“CIT Group, Inc., one of the largest lenders to U.S. small businesses, is clearly in a distressed state. But a successful rescue requires a deep understanding of how commercial finance contracts work.
The failure of CIT would have catastrophic consequences for small businesses globally, making regulatory intervention unavoidable.
Therein lies the Catch-22: if CIT fails, there could be systemic risks as small businesses file for bankruptcy and cannot pay their obligations to their suppliers and employees. To forestall failure by asking government assistance may require that CIT explain the total risk exposure.
According to CreditSights, the total exposure of CIT client trade and vendor finance balances, which include those of small business clients, exceeds $6 billion.’
Source: The Wall Street Journal, July 17, 2009
http://online.wsj.com/article/SB124779123756354885.html
http://online.wsj.com/article/SB124774724987851145.html
http://online.wsj.com/article/SB124757917744938883.html
saverio manzo
'Dr Doom' says worst of crisis over
I had to read this article twice to make sure that I understood exactly what Dr. Doom Nouriel Roubini was saying. Was he really turning the corner and being somewhat positive? This was – and is- to many - the most pessimistic of all economists throughout this economic crisis. Until now when reading or listening to him I had to take a warm shower just to shake off the chill from his words. This is a huge step for him and all of us should take note.
But what did he really say?
Mr. Roubini said the U.S. is no longer in "free fall" and is likely to recover by the end of the year...and that a recovery wouldn't come until 2010.
WSJ: http://online.wsj.com/article/SB124778518062154527.html
• Pessimistic economist predicted crisis
• Sees "light at the end of the tunnel"
• But jobless to rise, more stimulus needed
"There is light at the end of the tunnel, there is a bottoming out of the US and of the global economy.
"And the light at the end of the tunnel for once is not an incoming train," Dr Roubini told investors at an event in New York.
"In many ways, the worst is behind us in terms of economic and financial conditions."
Stock markets rallied after some news reports quoted Dr Roubini as saying the recession will be over this year and that his economic outlook had improved.
Source: Reuters, July 17, 2009
http://www.news.com.au/business/story/0,27753,25795323-462,00.html
Saverio Manzo
But what did he really say?
Mr. Roubini said the U.S. is no longer in "free fall" and is likely to recover by the end of the year...and that a recovery wouldn't come until 2010.
WSJ: http://online.wsj.com/article/SB124778518062154527.html
• Pessimistic economist predicted crisis
• Sees "light at the end of the tunnel"
• But jobless to rise, more stimulus needed
"There is light at the end of the tunnel, there is a bottoming out of the US and of the global economy.
"And the light at the end of the tunnel for once is not an incoming train," Dr Roubini told investors at an event in New York.
"In many ways, the worst is behind us in terms of economic and financial conditions."
Stock markets rallied after some news reports quoted Dr Roubini as saying the recession will be over this year and that his economic outlook had improved.
Source: Reuters, July 17, 2009
http://www.news.com.au/business/story/0,27753,25795323-462,00.html
Saverio Manzo
Thursday, July 16, 2009
Gartman on Gold, Stocks and more
Gartman on Gold, Stocks and more
Dennis Gartman, much followed editor of the Gartman letter, in an interview shares his views on a number of items. Worth a read, this guys usually gets it right.
“Trading guru Dennis Gartman, author of the influential Gartman Letter, took your investment strategy questions…
Yes, I do indeed still believe that the Canadian dollar will trade to parity… and beyond… with the US dollar.
Yes, I am still bullish on the currencies and the stock markets of Canada, Brazil and Australia relative to the US dollar and stock market. Canada, Brazil and Australia are net exporters of “stuff,” and the world will need these things: grain; energy; water; et al
The outlook for nat gas is strong, but supplies are even stronger. The trend is down, and until the trend changes…. And with a demonstrably cooler summer it is not likely to change soon since the demand for air conditioning is lower than last year… those who are bullish shall have to wait for the winter.
I’d buy raw materials manufacturers and miners: steel; copper; zinc; grain growers; water… these are where I’d put my money… with stops on everything. I want to own the movers and makers of “stuff.” Grains; water; base metals… that sort of thing.”
Source: The Globe and Mail
http://www.theglobeandmail.com/globe-investor/investment-ideas/ask-dennis-gartman/article1179697/
Saverio Manzo
Dennis Gartman, much followed editor of the Gartman letter, in an interview shares his views on a number of items. Worth a read, this guys usually gets it right.
“Trading guru Dennis Gartman, author of the influential Gartman Letter, took your investment strategy questions…
Yes, I do indeed still believe that the Canadian dollar will trade to parity… and beyond… with the US dollar.
Yes, I am still bullish on the currencies and the stock markets of Canada, Brazil and Australia relative to the US dollar and stock market. Canada, Brazil and Australia are net exporters of “stuff,” and the world will need these things: grain; energy; water; et al
The outlook for nat gas is strong, but supplies are even stronger. The trend is down, and until the trend changes…. And with a demonstrably cooler summer it is not likely to change soon since the demand for air conditioning is lower than last year… those who are bullish shall have to wait for the winter.
I’d buy raw materials manufacturers and miners: steel; copper; zinc; grain growers; water… these are where I’d put my money… with stops on everything. I want to own the movers and makers of “stuff.” Grains; water; base metals… that sort of thing.”
Source: The Globe and Mail
http://www.theglobeandmail.com/globe-investor/investment-ideas/ask-dennis-gartman/article1179697/
Saverio Manzo
Executive Pay on the backs of the US taxpayer. When will it end?
Why do we stand for this?
Goldman Sachs average employee pay thus far: $370,000
Yesterday Goldman Sachs announced much better than expected quarterly earning of $3.44 billion. The Company also announced that it is setting aside $11.36 billion for its compensation pool through mid 2009 which includes annual bonuses. THAT WORKS OUT TO NEARLY $385,000 PER EMPLOYEE… (for each of its 29,400 employees and temporary workers) …FOR THE FIRST 6 MONTHS OF THE YEAR. That works out to an annual income of about $770,000 per employee, if this pace keeps hold. Last year (2008) at this time the compensation pool was $8.52 billion. This year’s compensation pool is almost the same as in mid 2007 when the market was still booming.
$11.36 Billion compensation pool. All from hard-working, trying-to-make-ends-meet US citizens. OOPS!, I meant to say from US government bailout funds. Now I am all for free-markets and capitalism, but this is abuse.
Source: New York Times
With Big Profit, Goldman Sees Big Payday Ahead
http://www.nytimes.com/2009/07/15/business/15goldman.html?_r=1&scp=1&sq=goldman&st=cse
Bloomberg. http://www.bloomberg.com/apps/news?pid=20601103&sid=axo2pKtl0rts
Here’s an angry guy that makes his point. Its over the top yet entertaining:
Merrill Exec pay:
http://www.youtube.com/watch?v=B-lXOQ4L8jQ
saverio manzo
Goldman Sachs average employee pay thus far: $370,000
Yesterday Goldman Sachs announced much better than expected quarterly earning of $3.44 billion. The Company also announced that it is setting aside $11.36 billion for its compensation pool through mid 2009 which includes annual bonuses. THAT WORKS OUT TO NEARLY $385,000 PER EMPLOYEE… (for each of its 29,400 employees and temporary workers) …FOR THE FIRST 6 MONTHS OF THE YEAR. That works out to an annual income of about $770,000 per employee, if this pace keeps hold. Last year (2008) at this time the compensation pool was $8.52 billion. This year’s compensation pool is almost the same as in mid 2007 when the market was still booming.
$11.36 Billion compensation pool. All from hard-working, trying-to-make-ends-meet US citizens. OOPS!, I meant to say from US government bailout funds. Now I am all for free-markets and capitalism, but this is abuse.
Source: New York Times
With Big Profit, Goldman Sees Big Payday Ahead
http://www.nytimes.com/2009/07/15/business/15goldman.html?_r=1&scp=1&sq=goldman&st=cse
Bloomberg. http://www.bloomberg.com/apps/news?pid=20601103&sid=axo2pKtl0rts
Here’s an angry guy that makes his point. Its over the top yet entertaining:
Merrill Exec pay:
http://www.youtube.com/watch?v=B-lXOQ4L8jQ
saverio manzo
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