Wednesday, January 27, 2010

Jay Taylor: Turning Hard Times Into Good times

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Brazil at 26% Discount to Global Stocks Lures Mobius

The biggest decline in the Bovespa index in three months has turned Brazilian stocks into Latin America’s best bargain, according to Templeton Asset Management and Emerging Markets Management LLC.

The Bovespa retreated 7.4 percent from a 19-month high on Jan. 6, the most since an 11 percent decline in the second half of October. The 63-company gauge trades for 20.3 times reported earnings over the past 12 months, a 26 percent discount to the 27.5 times for the MSCI AC World Index of emerging- and developed-nation shares, according to Bloomberg data.

“The most attractive market in Latin America is Brazil,” Mark Mobius, who oversees about $34 billion of developing-nation assets as chairman of Templeton Asset Management, said in an interview in Bangkok yesterday. “Its valuation is not excessive.” (more)

Top Fed Official: Housing Is a Terrible Investment

Homeowners have been told for years that their abode represents the best investment they’ll ever make.

Karen Pence, head of the Federal Reserve’s household and real estate finance research group, begs to differ.

At a recent economic meeting she offered five reasons why homes are a miserable investment, The Wall Street Journal reports.

And Pence has her money where her mouth is: she’s been a renter for years, though her husband’s need for more space may drive her to homeownership. (more)

Commercial Real Estate and Tishman and Blackrock Walking Away from a $4.4 Billion CRE Deal. How to Lose 66 Percent on an 11,000 Unit Property

It is becoming more of a preferred strategy to systematically walk away from commercial real estate debt. We have now had two large Wall Street organizations in Morgan Stanley and Tishman and Blackrock Inc. deciding, by voluntary choice, to walk away from their contractual obligations on commercial real estate. Now much has been made regarding the commercial real estate debacle because some $3.5 trillion in commercial real estate debt is outstanding. This number is enormous and many of the bank failures that we’ll be seeing on Fridays this year will come from bad loans in the commercial sector. (more)

Economy flounders, despite the stimulus

A year after a nearly $800 billion stimulus package was passed, the U.S. economy still finds itself mired in mediocrity.

Economic growth is stagnant, unemployment remains higher than almost any time since the Great Depression and millions of Americans are upset that trillions of taxpayer dollars have been committed to numerous government bailout programs with no improvement of the economy within sight. (more)

Faber on Alex Jones - World Economy Is Doomed

Loonie will hit parity with U.S. dollar in few months: analysts

The Canadian dollar is on track to hit parity with the U.S. dollar, a rise that would underscore the strength of Canada's economy compared with that of the United States, as well as the country's vulnerability to swift changes in commodities prices.

Analysts are forecasting that the Canadian dollar will trade on equal footing with the U.S. dollar within the next few months, largely based on investor demand for assets linked to rising commodities prices.

The loonie, the nickname for the gold-colored coin that replaced the paper dollar in 1987, is now trading at 94.11 U.S cents. It would have to rise about 6% to trade at one American greenback, or at parity.

"Our forecast is for [the loonie] to hit parity by the end of the first quarter," said David Watt, currency strategist for RBC Capital Markets. "There's a chance it could hit before that." (more)

Oil slumps on expected rise in supplies, China worries

Crude oil futures finished lower Tuesday, pressured by concerns over demand from China as it attempts to cool its growth, while traders readied themselves for data expected to show rising U.S. crude supplies.

Futures had briefly come off earlier lows after a report showed U.S. consumer confidence jumped in January.

But "China is really the driving force in this market," said Dan Flynn, energy trader at PFGBest.

Crude oil for March delivery fell 55 cents, or 0.7%, to end at $74.71 a barrel at the New York Mercantile Exchange. Earlier, the contract hit an intraday low of $73.82 a barrel. (more)