Saturday, October 30, 2010

The Economist - 30th October - 05th November 2010

The Economist is a global weekly magazine written for those who share an uncommon interest in being well and broadly informed. Each issue explores the close links between domestic and international issues, business, politics, finance, current affairs, science, technology and the arts.
In addition to regular weekly content, Special Reports are published approximately 20 times a year, spotlighting a specific country, industry, or hot-button topic. The Technology Quarterly, published 4 times a year, highlights and analyzes new technologies that will change the world we live in.

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Rice Advances for a 13th Day, Longest Winning Streak Since at Least 1989

Rice rose for a 13th day in Chicago, the longest winning streak since at least 1989, after the Philippines said storms caused 523,013 metric tons of crop losses.

The Philippines, the world’s biggest rice buyer, last year produced 9.8 million tons of the grain and imported 2.2 million tons, according to data from the U.S. Department of Agriculture. Rice has added 17 percent since Oct. 11, the last time futures fell. The current streak of gains is the longest for data compiled by Bloomberg going back to 1989.

Rough rice for January delivery climbed 7.5 cents, or 0.5 percent, to $15.245 per 100 pounds at 1:13 p.m. London time on the Chicago Board of Trade, the highest price for the most- active contract since Jan. 4. The grain has jumped 57 percent since the end of June as hot weather in the U.S., last year’s fourth-largest exporter, curbed production. (more)

Dividend Stocks for the Next Decade

Some of the best dividend stocks in the world are characterized by strong competitive advantages, which have allowed them to charge premium prices for their recognizable brands, which in turn have translated into rising profits. Most of those companies are also characterized by high returns on invested capital, which means that they generate more capital than they could successfully reinvest back into the business and still retain their high returns. As a result these companies manage to provide an ever increasing stream of dividend income to their long-term shareholders. While stock prices move higher during bubbles and lower during recessions, investors keep getting paid for holding their stocks. In fact, because dividends keep getting increased, some early investors in companies such as Abbott (ABT) have managed to generate mind-boggling yields on cost of their original investments. These early investors understood very well that a dividend payment should not come at the expense of growing the business and vice versa. While their stocks have typically been characterized by yields similar to those of the market, their dividend growth component has more than paid back for itself.

While dividend growth investing has been hugely successful for many investors, it is very important to understand that it could be profitable for future investors as well. The stocks which have had long histories of rising dividend payments are frequently found in such lists as the S&P Dividend Aristocrats or Mergent's Dividend Achievers. These stocks are a strong example of Newton’s law of physics that a body in motion keeps getting in motion.

The following six stocks have not only delivered consistent annual dividend increases to shareholders, but also above average capital gains over the past decade as well. The companies include: (more)

Baby Boomers: Get Out of the Stock Market Now, the Rug is Being Pulled Out By Insiders

If you're a baby boomer who still believes in the stock market since the financial collapse of 2008, listen up. The floor of this Ponzi scheme is about to drop out, leaving you punching a clock for some time to come and holding an empty retirement bag for your effort. The engineered crash is coming and the elite are jumping ship in droves -- you should join them and get out ASAP.

Stock market insider selling has now reached record highs. The trend has been increasing for the last several years, but now the ratios are getting beyond ridiculous. Earlier this month, Zero Hedge reported that the insider selling-to-buying ratio is 2341 to 1. Tyler Durden wrote:
After last week saw an insider selling to buying ratio of 1,411 to 1, this week the ratio has nearly doubled, hitting a ridiculous 2,341 to 1. And while Wall Street's liars and CNBC's clowns will have you throw all your money into "leading" techs like Oracle and Google, insiders in these names sold a combined $200 million in stock in the last week alone.
Today, CNBC reported that the insider selling activity at some of the largest traded companies is at an all-time high. This can't be a good sign of things to come. The article points to the analysis of Alan Newman, a market strategist who tracks insider trading: "The overwhelming volume of sell transactions relative to buy transactions by company insiders over the last six months in key leading sectors of the market is the worst . . . ever." CNBC reported that industry leaders have a staggering 3177 to 1 insider sell-to-buy ratio: (more)

Today in Commodities: Full Docket

Next week could be a game changer… four Central bank meetings, China’s Manufacturing PMI, mid-term elections and two unemployment reports. Fasten your seat belt!

Look at a daily chart of December Crude; prices remained within the ascending triangle all this week. Before we reach the apex next week we expect a break lower to $77/78. On the week prices will finish virtually unchanged. Different story in natural gas as prices are above the 20 day MA for the first time in months and 15% off their lows from Monday. Our suggestion at this time is longs in December or January futures trailing stops or bull call spreads. On the December contract we could see 50-70 cents upside from here in the coming weeks.

Indices remain rangebound with the Dow H/L this week a 230 point range and the S&P trading range just over 25 points. It will take a trade below the 20 day MA for clients to add to their small bearish ES put positions. If and when, we should see prices back off 5-8%. Traders are advised to exit their bearish plays in Treasuries today; some at a loss and some at a profit depending on your positioning. We wish not to have exposure in 30-year bonds or 10-year notes into the hectic schedule next week. (more)

Commitment Of Traders: The Speculative Treasury Bubble Pops As Dollar Longs Continue Rising

Today's CFTC Commitment of Trader data confirms that the dollar strengthening trend from last week continues: net spec commercial positions in the USD are now well off their lows from three weeks ago and are up to 5,850, after hitting a 2010 low of -1,580. At the same time, both JPY and EUR spec positions declined (by -2,727 and -6,243 positions, respectively) as the rotation into the dollar, as brief as it may end up being, accelerated. Whether this was merely momentum chasing or an expectation of a less efficient QE2 can be answered by looking at select commodity positions. A quick glance at wheat, soybeans, coffee, corn and oats shows that pretty much all 5 representative commodities saw their net long spec positions increase again. So QE2 is definitely going to manifest itself in more inflation, or so at least claim the speculators. Yet not is as it seems: a look at Treasury specs shows a combined drop across the 2, 5 and 10Y space of 123,835 contracts to 186,892, only the second largest drop in 2010, which occurred after the cumulative total hit a 2010 record of 310,727 the week prior! In other words, even as specs were discounting an increase in inflation and a potential increase in the value of the dollar, the bond bubble officially popped. (more)

75 Ways That The Government And The Financial Elite Will Be Sucking Even More Of The Life Blood Out Of The American People In 2011

The American people are experiencing financial death by a thousand cuts and most of them don't even realize it. The U.S. government, state governments, local governments and the financial elite are draining us financially in dozens upon dozens of different ways, and yet we have become so programmed to accept it that it just seems normal to us. 2011 is rapidly approaching, and a whole slate of federal taxes is scheduled to go up, state taxes are being increased from coast to coast, local governments are finding new and creative ways to stick it to us and the financial elite are becoming more predatory than ever. Meanwhile, the incomes of many average Americans are actually going down. According to the Census Bureau's annual survey of income and poverty in the United States, of the 52 largest metro areas in the nation, only the city of San Antonio did not see a decline in median household income during 2009. Tens of millions of Americans are flat broke and they are getting pissed off. According to a new poll conducted by CNBC, 92 percent of Americans believe that the U.S. economy is either "fair" or "poor". The American people desperately want someone to fix the economy, but instead our "leaders" are trying to come up with new and creative ways to drain even more money out of us.

In no particular order, the following are 75 ways that the U.S. government, state governments, local governments and the financial elite will be sucking even more of the life blood out of the American people in 2011....

#1 State governments across the U.S. are raising fees and taxes in so many different ways it is staggering. A reader named Richard recently sent me an email in which he described the shock that he experienced when he recently received his license plate renewal notice in the mail....(more)

The scary actual U.S. government debt

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes. (more)

Signs Hyperinflation Is Arriving

This post is gonna be short and sweet—and scary:

Back in late August, I argued that hyperinflation would be triggered by a run on Treasury bonds. I described how such a run might happen, and argued that if Treasuries were no longer considered safe, then commodities would become the store of value.

See, how come I don’t look as cool when I make my predictions?

Such a run on commodities, I further argued, would inevitably lead to price increases and a rise in the Consumer Price Index, which would initially be interpreted by the Federal Reserve, the Federal government, as well as the commentariat, as a good thing: A sign that “the economy is recovering”, a sign that “normalcy” was returning.

I argued that—far from being “a sign of recovery”—rising CPI would be the sign that things were about to get ugly.

I concluded that, like the stagflation of ‘79, inflation would rise to the double digits relatively quickly. However, unlike in 1980, when Paul Volcker raised interest rates severely in order to halt inflation, in today’s weakened macro-economic environment, that remedy is simply not available to Ben Bernanke. (more)

Bloomberg Businessweek – 01 November 2010

Bloomberg Businessweek - World's leading business magazine.
Timely, useful, provocative, innovative. Each issue of Businessweek features in-depth perspectives on the financial markets, industries, trends, technology and people guiding the economy. Draw upon Businessweek's timely incisive analysis to help you make better decisions about your career, your business, and your personal investments.

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John Taylor: "November Will See The Flash Point That Begins The Market's Reversal"

John Taylor, who has not made any friends at the administration with his recent comparison of Ben Bernanke to Hitler, has released his latest letter whose purpose is to disabuse what Traxis flip flopper extraordinaire Barton Biggs (or rather is praying, due to his high single digit negative YTD P&L), as well as many others believe, will be a 10% boom in stocks prices following November 3. Wrong. As this whole rally has been liquidity driven, all that will take to reverse it, is for someone to step between the Chairman and his favorite Hewlett Packard. That someone: anti-Fed crusader Ron Paul, who will see this as his last mandate (and chance) to leave a memorable mark on the Fed's modus operandi: "After the Republican victory things will change. The Fed will be hamstrung, as Ron Paul, a conservative standard-bearer and harsh critic of the Fed, will head the sub-committee overseeing its actions. Liquidity expansion or new programs will probably drop sharply under his watch. Paul would argue that the Fed’s unfettered ability to “debase” the currency is about to come to an end" Which is why all those who believe "more of the same" will continue indefinitely, may be wise to hedge their bets. Taylor also looks at the game theory between the Fed and the ECB: "As the US authorities turn to a tighter monetary and fiscal policy, driving the country into a recession, causing the US and its banking system to withdraw liquidity forcing the dollar higher, the ECB will be forced to be more accommodative. Our analysis argues that the month of November will see the flash point that begins to reverse the markets’ optimistic course." (more)