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Archive for the ‘Economy’ Category

Keep Your Hands Inside the Coaster, We Are At The Top Of The Second Hill

Posted in Board Of Intellectual Capital, boic, Economy, tagged , , , on November 5, 2009| Leave a Comment »

Here is an interresting observation from Pravda.

“It is becoming more and more evident, to the astute observer of realistic economics, that the second dip in the “W” global recession is coming up quickly. This is of course, identical to what took place between the 1929 collapse and the 1931 final landing. The world economy fell hard, bounced high and than fell into a deep black hole, that it took it thirty years to climb out of. This time will be worse, at least for the Anglos and more specifically the Americans.

The signs are everywhere: massive government stimulus (read money printing) whose only obvious effects have been on the stock markets around the world (again, just like in 1930), continued increases in global unemployment and thus a collapse in global goods demand, instability and a free fall in the shipping indexes. That is correct, it is not just the Baltic Dry Index, which is once again in a free fall, now that the Chinese have stopped hording iron ore, but also the various other indexes, including Chinese ones.

That is a sign of real doom, not only for China, but for many others. The fact that containers of goods are not moving out of China, in September and October, regardless that the Chinese stimulus has kept its factories producing as if nothing is wrong, means that the holiday shopping season will be empty and hallow, just like the Anglo mantra of recovery. Sure, France and Germany are out of recession and Russia and Italy are both heading out too, but that is because they have done the exact opposite of the Anglos, by cutting taxes, controlling spending, putting down real hard infrastructural investments and projects without tying them in courts and hearings for years, cutting regulations while avoiding nationalizations, in other words the smart moves vs the Anglos dumb ones. The Anglos, specifically America and England and to a lesser degree, Canada, have done the opposite on all accounts, regardless of warnings. No amount of Hopy-Changy media Zombies will change the inevitable out come.”

Read the full article here.

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Warren Buffett, American Railroad Barron

Posted in Board Of Intellectual Capital, boic, Economy, Investments, Market research, Strategy, tagged , , , , , , , , on November 4, 2009| Leave a Comment »

Here is an interrestig article on Warren Buffet from Deal Zone.

“Following in the greatest of capitalist traditions, the Oracle of Omaha announced plans to buy up the shares he doesn’t already own in one of the country’s biggest railroads, Burlington Northern Santa Fe. And in an egalitarian, if unexpected, move, he said he would split his Class B stock to the tune of 50-to-1, making it possible for just about anyone to own Berkshire Hathaway’s traditionally lofty shares.

The railroad purchase is a bet on the future of America, Buffett said, and it’s his biggest acquisition ever. It values the railroad at $34 billion, and the price of $100 a share is a premium of nearly 32 percent. The premium vaults the railroad into the top spot by market cap, surpassing Union Pacific.

Buffett also owns stakes in other railroads, so it will be interesting to see if his move stirs any antitrust comments from Washington. Idiomatically, there is something profoundly rural in the Americana of Buffett’s latest bet; much more so than Berkshire Hathaway’s mainstay insurance business.”

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Mother of all carry trades faces an inevitable bust

Posted in Board Of Intellectual Capital, Economy, Gerbsman Partners, Investments, Market research, tagged , , , , , , , on November 2, 2009| Leave a Comment »

Here is a market commentary from Financial Times.

“Since March there has been a massive rally in all sorts of risky assets – equities, oil, energy and commodity prices – a narrowing of high-yield and high-grade credit spreads, and an even bigger rally in emerging market asset classes (their stocks, bonds and currencies). At the same time, the dollar has weakened sharply , while government bond yields have gently increased but stayed low and stable.

This recovery in risky assets is in part driven by better economic fundamentals. We avoided a near depression and financial sector meltdown with a massive monetary, fiscal stimulus and bank bail-outs. Whether the recovery is V-shaped, as consensus believes, or U-shaped and anaemic as I have argued, asset prices should be moving gradually higher.

But while the US and global economy have begun a modest recovery, asset prices have gone through the roof since March in a major and synchronised rally. While asset prices were falling sharply in 2008, when the dollar was rallying, they have recovered sharply since March while the dollar is tanking. Risky asset prices have risen too much, too soon and too fast compared with macroeconomic fundamentals.

So what is behind this massive rally? Certainly it has been helped by a wave of liquidity from near-zero interest rates and quantitative easing. But a more important factor fuelling this asset bubble is the weakness of the US dollar, driven by the mother of all carry trades. The US dollar has become the major funding currency of carry trades as the Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates – as low as negative 10 or 20 per cent annualised – as the fall in the US dollar leads to massive capital gains on short dollar positions.”

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Worsening job picture fuels slide in confidence

Posted in Board Of Intellectual Capital, Economy, tagged , , , , on October 29, 2009| Leave a Comment »

Here is some job news from Yahoo Finance.

CHICAGO (AP) — Consumers’ confidence about the U.S. economy fell unexpectedly in October as job prospects remained bleak, a private research group said Tuesday, fueling speculation that an already gloomy holiday shopping forecast could worsen.

The Consumer Confidence Index, released by The Conference Board, sank unexpectedly to 47.7 in October — its second-lowest reading since May.

Forecasters predicted a higher reading of 53.1.

A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

The index has seesawed since reaching a historic low of 25.3 in February and climbed to 53.4 in September.

Economists watch consumer confidence because spending on goods and services by Americans accounts for about 70 percent of U.S. economic activity by federal measures. While the reading doesn’t always predict short-term spending, it’s a helpful barometer of spending levels over time, especially for expensive, big-ticket items.

Recent economic data, from housing to manufacturing, has offered mixed signals but some evidence that an economic recovery might be slow.

But on Tuesday, the figures showed that shoppers have a grim outlook for the future, The Conference Board said, expecting a worsening business climate, fewer jobs and lower salaries. That’s particularly bad news for retailers who depend on the holiday shopping season for a hefty share of their annual revenue.

“Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays,” said Lynn Franco, director of The Conference Board’s Consumer Research Center.

Economists expect holiday sales to be at best flat from a year ago, which saw the biggest declines since at least 1967 when the Commerce Department started collecting the data.”

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S&P 500 Overvalued by 40%, Set to Fall, Smithers Says

Posted in Board Of Intellectual Capital, Economy, Market research, Uncategorized, tagged , , , , , , , on October 27, 2009| Leave a Comment »

Here is some market observations from Bloomberg.

“Oct. 26 (Bloomberg) — The U.S. Standard & Poor’s 500 Index is about 40 percent overvalued and headed for a drop as central banks pull back on securities purchases that pushed up asset prices, according to economist Andrew Smithers.

Declines are likely because banks will need to sell more shares to raise capital, the economist and president of research firm Smithers & Co. said in an Oct. 23 interview at Bloomberg’s Tokyo office. The closing price on Oct. 23 of 1,079.6 was 40 percent above 771.14, a level last seen in March, according to data compiled by Bloomberg.

“Markets are very vulnerable to an end of quantitative easing,” said Smithers, 72, who recommended avoiding stocks in 2000 just as the U.S. benchmark entered a two-year bear market. “Central banks, they’ve got to stop some time and if that happens everything will come down.”

Central banks from the Federal Reserve to the Bank of England last year embarked on unprecedented measures to flood credit markets with cash in order to rescue the global financial system from the worst crisis since the Great Depression.

Those purchases may be nearing an end, said Smithers, who worked for 27 years at S.G. Warburg & Co. where he ran the investment management business. The Fed’s emergency liquidity programs including the Term Auction Facility and commercial paper purchases have shrunk as the central bank completes the scheduled purchases of housing debt and Treasuries. Bank of England policy makers voted unanimously at their latest meeting to leave the asset purchase program unchanged, minutes showed.”

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