Friday, July 16, 2010
The global economy is at risk of folding in on itself unless policy makers face up to the threat of inflation and exchange rate inflexibility, according to Arun Motianey, director of fixed income strategy at Roubini Global Economics.
A Japan-like outcome is a big risk for the developed world with deflation a big danger, he said.
Recent figures show that the recovery is sputtering in the US while China's booming growth has slowed down slightly, as Beijing unwinds stimulus measures.
The Bank of Japan revised upwards is economic forecast but reiterated it will maintain its easy money policy.
In his new book "SuperCycles" Motianey says the world has managed to recover from a number of shocks since the Latin American debt crisis, but getting over the financial crisis will be much harder. (more)
As of my last article, in early June-10, my recommended sales level for the 2009 corn crop was at 85%, with an average price of $4.50 basis the July-10 futures. At that time I had advised clients to roll any hedges they had remaining in the July-10 contract to Sept-10 when July-10 was $.11 under. This recommendation was changed to $.09, which was executed in mid June-10. I had also advised my farmer clients to remain patient and sell the remaining 15% when Sept-10 futures reached $4.25. To date this level has not been hit; therefore 2009 sales remain at 85%, at roughly $4.58 basis Sept-10 futures. In early June my recommended sales level for the 2010 crop was 10% at an average price of $4.40 basis the Dec-10 contract. At that point I had also advised clients to make additional sales of 5% at $3.85, $3.90, $3.95 and $4.15 also basis the Dec-10 contracts. To date the first three targets have been hit bringing 2010 sales to 25% at an average price of $4.10 basis the Dec-10 contract. At this point, I think it would be a good time to reexamine the fundamental factors which are driving corn prices and to review our marketing plan going forward. (more)
Foreclosure filings were reported on 313,841 U.S. properties in June, a decrease of nearly 3 percent from the previous month and a decrease of nearly 7 percent from June 2009. June was the sixteenth straight month where the total number of properties with foreclosure filings exceeded 300,000.
Foreclosure filings were reported on 895,521 U.S. properties during the second quarter, a decrease of nearly 4 percent from the previous quarter and an increase of less than 1 percent from the second quarter of 2009. Default and auction notices were down on a quarter-over-quarter and year-over-year basis in the second quarter, but bank repossessions (REOs) increased 5 percent from the previous quarter and 38 percent from Q2 2009 to 269,962 — a new quarterly high for the report. (more)
After living through the Great Financial Crash of 2008, just about everybody recognizes that megabanks screwed the economy hard and were rewarded with big bailouts, which further screwed over, well, everybody, in the name of banker bonuses. But Big Finance has been waging its war on the middle class for decades, and many of its most destructive practices don't actually put the financial system in jeopardy. These tactics work because they are so effectively predatory. Banks gouge consumers and get rich—they don't create risks for the financial system, because they result in pure, risk-free profit, converting hard-earned middle-class wages into quick and easy bonuses.
One of the most pernicious of these predatory practices is the overdraft fee. It's one of the biggest revenue streams for banking behemoths today. In 2009, banks reaped over $38 billion in overdraft fees from their own customers, while posting a total combined profit of just $12.5 billion. Without overdrafts, many banks would have scored massive losses last year, and possibly gone under. Instead, they booked epic bonuses. (more)
The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.So why are we witnessing such fundamental changes? Well, the globalism and "free trade" that our politicians and business leaders insisted would be so good for us have had some rather nasty side effects. It turns out that they didn't tell us that the "global economy" would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations. The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough. (more)
If the investment choice is between mining stocks and physical bullion, it is essential to remember that these are different asset classes with entirely different risk/reward attributes. Mining stocks and bullion perform quite differently when the global economic environment is in turmoil, as is the case today. Banking crises, trillion-dollar deficits and the accelerating depreciation of many of the world’s major currencies do not create positive conditions for equity markets, which is why investors are fleeing to the safety of physical bullion. (more)
China is buying unprecedented amounts of uranium, signaling that prices are poised to rebound after three years of declines.
The nation may purchase about 5,000 metric tons this year, more than twice as much as it consumes, building stockpiles for new reactors, according to Thomas Neff, a physicist and uranium- industry analyst at the Massachusetts Institute of Technology in Cambridge. Prices will jump by about 32 percent next year, the most since 2006, RBC Capital Markets said.
India and China are leading the biggest atomic expansion since the decade after the 1970s oil crisis to cut pollution and power economies growing more than twice as fast as Europe and North America. The boom, combined with slowing supply growth, may benefit Cameco Corp., a co-owner of the world’s largest uranium mine, and Areva SA, the largest builder of reactors.
“China’s demand is insatiable,” said Dave Dai, an analyst at the Daiwa Institute of Research in Hong Kong. “They will have to take almost whatever is available.” (more)
That's obviously a giant increase, but let's take a closer look at what kind of return it is after factoring in time. The numbers can sometimes deceive, after all. Manhattan was famously purchased by the Dutch from American Indians in 1626 for goods worth just over $1,000 in today's money. (Forget the $24 figure that's often cited. It comes from a 19th century estimate, and so must be indexed for inflation.) Manhattan has 14,528 acres, and the choicest acres are probably worth $90 million as unimproved land, according to a 2008 study by the Federal Reserve Bank of New York. Even if we assume that all of Manhattan's acres are as valuable as its best ones (I assure you they're not), that yields a total value for the island's land of $1.3 trillion. That's a 5.6% annual return, compounded -- and the real figure is surely lower. In other words, the Dutch might have overpaid. (more)
Charles Nenner, who prior to founding the Charles Nenner Research Institute served as a technical analyst for Goldman for about 10 years, has been looking at charts and not seeing much to write home about. In his interview with the TechTicker, Nenner says "I expect the bear market rally to continue for 4 more years, with big upswings like in Japan before coming down again. I don't expect the market to totally fall out of bed. It is going to be very difficult few years to make some money. We will test the lows of 2009 to be tested over the next couple of years. I don't expect the economy to pick up until 2020." How charts can give him macroeconomic perspective with a 10 year bogey, we are not too sure. As to trading, he believes that as long as the S&P does not close below 1,085, the market will continue bouncing, and if 1,085 is taken out "it should be all over." For longer-term investors, Nenner suggests to wait until the Dow goes below its trendline average, with a Dow target of around 5,000. Of course, whether Brian Sack will allow stocks to drop that low is a different matter altogether. (more)
Goldman shares climbed 4.6% to $151.89 in late trading, adding to gains from Thursday's trading session, after the Securities and Exchange Commission said the bank will pay $550 million and reform its business practices to settle SEC charges that the Wall Street firm misled investors in a subprime mortgage product just as the U.S. housing market was starting to collapse. Goldman agreed to settle the charges without admitting or denying the allegations.
Google's second-quarter earnings climbed 24% as the Internet giant's advertising revenue accelerated growth, and the company noted very strong growth in its emerging businesses. Still, shares fell 4.4% to $472 in after-hours trading, as the company's earnings missed Wall Street's expectations. (more)
Calculation is median 12-month percent change in rolling one-year forecasted EPS. Rolling one-year forecasted EPS is a time-weighted average of current fiscal year’s earnings estimates and following fiscal year’s earnings estimates. Forecasted EPS based on median estimates from Zacks Investment 111 Research.