...to your investment portfolio
I've briefly outlined five easy ways to invest in China below. My advice would be to give careful consideration to each strategy as a part of your overall emerging market investment objectives.
#1.) Exchange-traded funds: We've been telling you a lot about exchange-traded funds (ETFs). That's because these investments can give you a diversified stake in a particular sector, index or country in one shot.
There are several ETFs that can give you direct exposure to China and its mega-growth neighbors, but the iShares FTSE/Xinhua China 25 Index (FXI) is the most popular Chinese ETF.
#2.) Mutual Funds: ETFs are great, but don't forget about traditional, actively-managed mutual funds, either. Some of my favorites are U.S. Global's China Region Opportunity (USCOX), Fidelity's China Region (FHKCX), and T. Rowe Price's New Asia (PRASX).
#3.) Chinese companies trading on U.S. exchanges: As I pointed out earlier, more than 100 Chinese companies are listed on U.S. exchanges. What's more, they are some of the largest and most profitable companies in all of China.
#4.) Chinese companies trading on foreign exchanges: A lot of really attractive Chinese companies are listed on the Hong Kong Stock Exchange, and others can be found on the exchanges in Singapore and London.
If you've never bought a stock on a foreign stock exchange, you'll be surprised at how easy it is. All you need is a broker with an international trading desk and the ticker symbol of the stock!
#5.) U.S. companies doing big business in China: U.S. companies have been doing business in overseas markets for a long time. But these days, some American firms are getting the bulk of their revenues from outside the U.S.
For example, both Yum Brands - which runs Pizza Hut, Taco Bell, and KFC - and casino company Las Vegas Sands both garner more than half of their sales from outside the U.S. In other words, even carefully selected U.S. companies can give you a very significant stake in China!
Tuesday, April 29, 2008
Monday, April 28, 2008
Disconnects
Hundreds of thousands of utility customers are at risk of disconnections as the sagging economy drives up the number of past-due home heating bills and the amounts owed, utility companies in cold-weather states say.
Xcel Energy says 17%-19% of its 1.1 million Minnesota customers and its 280,000 Wisconsin customers are in arrears. That's about the same as a year ago, but balances owed are up 10% in Minnesota and up 20% in Wisconsin, says Pat Boland, Xcel's credit policy manager.
Xcel disconnects 600-650 customers daily, he says. "Obviously the economy is playing a very big role in the disposable income that folks have," Boland says. Another factor: Cold weather added 7%-8% to this year's bills.
The extent of the problem is becoming apparent now because most states in the Midwest and Northeast have moratoriums on disconnecting utilities in winter months. Those restrictions typically end March 31 or April 15. Companies try to work out payment plans before curtailing service, and aid is available for some low-income customers.
A record $40 million was owed by 226,670 delinquent customers of rate-regulated utilities statewide in March, says Jerry McKim of Iowa's Bureau of Energy Assistance. "What we have is a crisis that never goes away," and more federal and state assistance is needed, he says.
In March, 89,002 disconnect notices were issued, up from 86,035 in March 2007, McKim says. Iowa's moratorium applies only to customers who qualify and apply for low-income energy aid.
-USAToday
Xcel Energy says 17%-19% of its 1.1 million Minnesota customers and its 280,000 Wisconsin customers are in arrears. That's about the same as a year ago, but balances owed are up 10% in Minnesota and up 20% in Wisconsin, says Pat Boland, Xcel's credit policy manager.
Xcel disconnects 600-650 customers daily, he says. "Obviously the economy is playing a very big role in the disposable income that folks have," Boland says. Another factor: Cold weather added 7%-8% to this year's bills.
The extent of the problem is becoming apparent now because most states in the Midwest and Northeast have moratoriums on disconnecting utilities in winter months. Those restrictions typically end March 31 or April 15. Companies try to work out payment plans before curtailing service, and aid is available for some low-income customers.
A record $40 million was owed by 226,670 delinquent customers of rate-regulated utilities statewide in March, says Jerry McKim of Iowa's Bureau of Energy Assistance. "What we have is a crisis that never goes away," and more federal and state assistance is needed, he says.
In March, 89,002 disconnect notices were issued, up from 86,035 in March 2007, McKim says. Iowa's moratorium applies only to customers who qualify and apply for low-income energy aid.
-USAToday
Saturday, April 26, 2008
Another reduction coming????
Markets are assuming that Bernanke will go to 2.0, and that expectation is built into the current price of storable commodities and the dollar. If the Fed instead surprises the market with a little restraint next week, I predict that we'd see immediate adjustments in those prices.
In part those effects would result from changing the fundamentals, surprising speculators with a higher real interest rate and firmer inflation-fighting commitment from the Fed than the market is currently assuming. But it's possible in my mind that there also is a psychological component to the current commodity speculation as well, in which case the Fed has a rare opportunity right now to get some extra benefits on the inflation front by breaking that psychology. However, if the Fed waits and lets the present perceptions become more entrenched, that same psychology could turn out to be a factor that later proves to work against the Fed and make anything it tries to do more difficult.
In part those effects would result from changing the fundamentals, surprising speculators with a higher real interest rate and firmer inflation-fighting commitment from the Fed than the market is currently assuming. But it's possible in my mind that there also is a psychological component to the current commodity speculation as well, in which case the Fed has a rare opportunity right now to get some extra benefits on the inflation front by breaking that psychology. However, if the Fed waits and lets the present perceptions become more entrenched, that same psychology could turn out to be a factor that later proves to work against the Fed and make anything it tries to do more difficult.
Friday, April 25, 2008
If you don't want to get stuck with a loser, how do you invest?
It's more important than ever to do your homework. That means going beyond relying on a company's statements. Just a couple of days before Bear Stearns was rescued by JPMorgan, they swore their finances were fine. Meanwhile, plenty of people who follow Bear Stearns thought otherwise... and were making their suspicions known in blogs and the financial press. Not every rumor is true, but neither should you summarily dismiss them. Keep an open mind.
Stick with high-quality investments in sectors you trust. There's too much we still don't know about banks and their exposure to bad debt - so stay away. Big companies with solid track records, substantial overseas business, and low debt may not make you a bundle. But, these days, it pays to play it extra safe.
Stick with high-quality investments in sectors you trust. There's too much we still don't know about banks and their exposure to bad debt - so stay away. Big companies with solid track records, substantial overseas business, and low debt may not make you a bundle. But, these days, it pays to play it extra safe.
Thursday, April 24, 2008
A good rule
Never risk more than 2% of your account equity on any one investment, trade, or recommendation.
This is for any trading you do on your own. The only exceptions: Long-term core positions where you are not using any kind of leverage or margin.
But for short-term investing - day-trading and position trading - you should never risk more than 2% of your account equity on any one trade.
Why? Let's say you have $100,000 to trade with. If you risk 10% of your equity on every trade and you experience 10 losers in a row, you're wiped out. You are out of capital, and out of the game.
Even if you lose nine in a row, you've lost 90% of your equity ... you then have only one chance left to be right. And just to make back all the losses and breakeven, you have to hit one heck of a windfall profit on that 10th trade.
On the other hand, if you risk only 2% on each trade, you have twice as many opportunities to be right.
You have 20 opportunities instead of 10. And with 20 opportunities, the probability of you being right on any one trade goes up exponentially. And so does the probability of a winner that will run to full profit potential, helping to not only wipe out any losses you incurred, but to also push your account firmly into positive territory.
This is for any trading you do on your own. The only exceptions: Long-term core positions where you are not using any kind of leverage or margin.
But for short-term investing - day-trading and position trading - you should never risk more than 2% of your account equity on any one trade.
Why? Let's say you have $100,000 to trade with. If you risk 10% of your equity on every trade and you experience 10 losers in a row, you're wiped out. You are out of capital, and out of the game.
Even if you lose nine in a row, you've lost 90% of your equity ... you then have only one chance left to be right. And just to make back all the losses and breakeven, you have to hit one heck of a windfall profit on that 10th trade.
On the other hand, if you risk only 2% on each trade, you have twice as many opportunities to be right.
You have 20 opportunities instead of 10. And with 20 opportunities, the probability of you being right on any one trade goes up exponentially. And so does the probability of a winner that will run to full profit potential, helping to not only wipe out any losses you incurred, but to also push your account firmly into positive territory.
Wednesday, April 23, 2008
Invest Like a Dealmaker
When many forces are working in your favor,amplifying and reinforcing each other, you get what is called a 'lollapalooza effect.' It's like critical mass in physics. Create enough concentration of mass and you'll set off a nuclear explosion.
The average investor has the wrong idea about how the stock market works. He thinks about the price of his stock in terms of its quoted stock price. But even then... he often misunderstands what that price represents.
A stock's quoted price represents only part of the stock's underlying value: the company's equity.
You can determine the total equity of a company by taking the quoted stock price and multiplying it by the total number of shares that are trading on the stock exchange (the shares outstanding, to use the trader's term). But then you need to add to that the company's total debt. The combination of debt and equity gives you the total worth of the company - its enterprise value, as stock experts like to call it.
Most investors focus on a company's P/E ratio - the relationship between the stock's market price and its earnings per share. That gives you an idea of how enthusiastic the market is about the company's growth potential. (In general, faster-growing and less-risky companies have higher P/E ratios.)
But a better way to make investment decisions is to invest like a professional trader. You always want to compare earnings to enterprise value, because this gives you the bigger picture - the kind of picture you'd have if you were investing personally in a company.
The average investor has the wrong idea about how the stock market works. He thinks about the price of his stock in terms of its quoted stock price. But even then... he often misunderstands what that price represents.
A stock's quoted price represents only part of the stock's underlying value: the company's equity.
You can determine the total equity of a company by taking the quoted stock price and multiplying it by the total number of shares that are trading on the stock exchange (the shares outstanding, to use the trader's term). But then you need to add to that the company's total debt. The combination of debt and equity gives you the total worth of the company - its enterprise value, as stock experts like to call it.
Most investors focus on a company's P/E ratio - the relationship between the stock's market price and its earnings per share. That gives you an idea of how enthusiastic the market is about the company's growth potential. (In general, faster-growing and less-risky companies have higher P/E ratios.)
But a better way to make investment decisions is to invest like a professional trader. You always want to compare earnings to enterprise value, because this gives you the bigger picture - the kind of picture you'd have if you were investing personally in a company.
Tuesday, April 22, 2008
Invest Alongside Chinese Entrepreneurs
We still like individual stocks better than Exchange Traded Funds (ETFs) or mutual funds. Why? ETFs and mutual funds are typically packed with State Owned Enterprises, companies run by Communist Party members for the benefit of the Communist Party, and not the shareholders like you and me.
Meanwhile, you can invest right alongside the Chinese entrepreneurs that are working their butts off to grow their businesses. They get rich only if you get rich, too. I like that deal!
I'm talking about entrepreneurs like Michael Yu, a former professor at Beijing University whose company has taught English to 4.5 million Chinese students. Or Neil Shen, a Yale-educated former head of Deutsche Bank who co-founded the largest travel company in China.
But remember, no matter what you do, don't let headlines designed to sell newspapers dissuade you from taking advantage of the great investment opportunities in China!
Meanwhile, you can invest right alongside the Chinese entrepreneurs that are working their butts off to grow their businesses. They get rich only if you get rich, too. I like that deal!
I'm talking about entrepreneurs like Michael Yu, a former professor at Beijing University whose company has taught English to 4.5 million Chinese students. Or Neil Shen, a Yale-educated former head of Deutsche Bank who co-founded the largest travel company in China.
But remember, no matter what you do, don't let headlines designed to sell newspapers dissuade you from taking advantage of the great investment opportunities in China!
Monday, April 21, 2008
Economic Events Coming Up
Date
Time (ET)
Statistic
For
Market Expects
Prior
23-Apr
10:00 AM
Existing Home Sales
Mar
4.95M
5.03M
24-Apr
8:30 AM
Durable Orders
Mar
0.10%
-1.70%
24-Apr
10:00 AM
New Home Sales
Mar
585K
590K
25-Apr
10:00 AM
Mich Sentiment-Rev.
Apr
64.2
NA
Time (ET)
Statistic
For
Market Expects
Prior
23-Apr
10:00 AM
Existing Home Sales
Mar
4.95M
5.03M
24-Apr
8:30 AM
Durable Orders
Mar
0.10%
-1.70%
24-Apr
10:00 AM
New Home Sales
Mar
585K
590K
25-Apr
10:00 AM
Mich Sentiment-Rev.
Apr
64.2
NA
Saturday, April 19, 2008
Earnings
First-quarter earnings have so far been mixed, with Standard & Poors estimating reported earnings per share to fall roughly 30 percent compared to the same quarter in 2007.
An equivalent fall would see the S&P 500 index at 1100. Even if the Dow by comparison suffered only a 20 percent fall, that would take it as low as 11000.
Also bear in mind that falling employment is likely to have an increasing impact on consumption and corporate earnings over the next few quarters.
An equivalent fall would see the S&P 500 index at 1100. Even if the Dow by comparison suffered only a 20 percent fall, that would take it as low as 11000.
Also bear in mind that falling employment is likely to have an increasing impact on consumption and corporate earnings over the next few quarters.
Friday, April 18, 2008
Negative Real Rates
The Fed keeps shoving its head deeper into the sand, hoping this inflation problem will go away. We get a bunch of speeches about how policymakers are "watching inflation closely."
But when it comes down to doing anything about it, the policymakers fold. Actually, they do something worse than that - they keep cutting interest rates even lower, driving real rates more deeply into negative territory.
Is it any wonder, then, that crude oil hit a fresh, all-time high of $115 a barrel this week? Or that the prices of all kinds of commodities have gone through the roof? Or that the dollar has been falling like a rock?
It's not just strong demand. It's not just strong overseas economic growth. It's the fact that nominal rates are much lower here than elsewhere, and that real rates are hugely negative.
But when it comes down to doing anything about it, the policymakers fold. Actually, they do something worse than that - they keep cutting interest rates even lower, driving real rates more deeply into negative territory.
Is it any wonder, then, that crude oil hit a fresh, all-time high of $115 a barrel this week? Or that the prices of all kinds of commodities have gone through the roof? Or that the dollar has been falling like a rock?
It's not just strong demand. It's not just strong overseas economic growth. It's the fact that nominal rates are much lower here than elsewhere, and that real rates are hugely negative.
Thursday, April 17, 2008
Bucking the trend...
...While most banks are doing terribly, some are bucking the trend. Wells Fargo's first quarter profit only fell 11%, which was better than analysts feared.
Chief Executive John Stumpf said the quarter "was one of the best we've ever had for our mortgage business."
Chief Executive John Stumpf said the quarter "was one of the best we've ever had for our mortgage business."
Wednesday, April 16, 2008
Two Wrongs...
...Must Make a Right.
At least that's what the big bosses at Blockbuster must be thinking. Blockbuster is already losing sales and profits thanks to Netflix.
And walking into a Circuit City these days is like walking into an abandoned building. So if Blockbuster isn't doing well and neither is Circuit City, then how the heck do they expect this half-baked plan to work? It probably won't.
And with that said, you can expect shareholders to question the wisdom of this decision.
At least that's what the big bosses at Blockbuster must be thinking. Blockbuster is already losing sales and profits thanks to Netflix.
And walking into a Circuit City these days is like walking into an abandoned building. So if Blockbuster isn't doing well and neither is Circuit City, then how the heck do they expect this half-baked plan to work? It probably won't.
And with that said, you can expect shareholders to question the wisdom of this decision.
Tuesday, April 15, 2008
GE's Earnings Miss Points to Slowing U.S. Economy
GE has rarely missed its profit targets, but it delivered an unexpected 6% drop in first-quarter profits last week, mainly from sub-prime writedowns at its financial services division, but also from an overall economic malaise.
After 112 years, General Electric is the only original company remaining on the Dow.
Profits were seven cents below expectations. Before you write that off as a small number, keep in mind that GE has almost 10 billion outstanding shares!
7 cents X 10 billion = a mountain of money!
More importantly, GE warned Wall Street to tone down expectations for the rest of 2008. The company now expects to make $2.20 to $2.30 a share this year, well below the $2.43 consensus Wall Street forecast.
Those numbers mean that GE's profits will grow a measly 5% at best. And at worst, they won't grow at all. According to the company's CEO, Jeffrey Immelt,
"We are not counting on the business getting any better, vis-à-vis ... the U.S. consumer. We have actually allowed for a worsening of the U.S. consumer in our GE Money business. So I think that is the way to think about the U.S. and the U.S. economy."
Last week's numbers tend to support Immelt's argument. The University of Michigan consumer confidence index dropped to 63.2 in April, the lowest number since 1982.
After 112 years, General Electric is the only original company remaining on the Dow.
Profits were seven cents below expectations. Before you write that off as a small number, keep in mind that GE has almost 10 billion outstanding shares!
7 cents X 10 billion = a mountain of money!
More importantly, GE warned Wall Street to tone down expectations for the rest of 2008. The company now expects to make $2.20 to $2.30 a share this year, well below the $2.43 consensus Wall Street forecast.
Those numbers mean that GE's profits will grow a measly 5% at best. And at worst, they won't grow at all. According to the company's CEO, Jeffrey Immelt,
"We are not counting on the business getting any better, vis-à-vis ... the U.S. consumer. We have actually allowed for a worsening of the U.S. consumer in our GE Money business. So I think that is the way to think about the U.S. and the U.S. economy."
Last week's numbers tend to support Immelt's argument. The University of Michigan consumer confidence index dropped to 63.2 in April, the lowest number since 1982.
Monday, April 14, 2008
Facing Resistance
There's a myth that all you need to do is outline your vision and prove it's right - then, quite suddenly, people will line up and support you.
In fact, the opposite is true. Remarkable visions and genuine insight are always met with resistance. And when you start to make progress, your efforts are met with even more resistance. Products, services, career paths ... whatever it is, the forces for mediocrity will align to stop you, forgiving no errors and never backing down until it's over.
If it were any other way, it would be easy. And if it were any other way, everyone would do it and your work would ultimately be devalued. The yin and yang are clear: Without people pushing against your quest to do something worth talking about, it's unlikely it would be worth the journey. Persist.
In fact, the opposite is true. Remarkable visions and genuine insight are always met with resistance. And when you start to make progress, your efforts are met with even more resistance. Products, services, career paths ... whatever it is, the forces for mediocrity will align to stop you, forgiving no errors and never backing down until it's over.
If it were any other way, it would be easy. And if it were any other way, everyone would do it and your work would ultimately be devalued. The yin and yang are clear: Without people pushing against your quest to do something worth talking about, it's unlikely it would be worth the journey. Persist.
Saturday, April 12, 2008
Prices are Driven by the Ever-Changing...
...Perceptions of Buyers and Sellers
Conflicting ideas between traders exist at all times, everywhere. That's why it is said that markets are grounded in human nature.
And remember, it takes disagreement over value and price in order for a market to exist in the first place
Conflicting ideas between traders exist at all times, everywhere. That's why it is said that markets are grounded in human nature.
And remember, it takes disagreement over value and price in order for a market to exist in the first place
Friday, April 11, 2008
Yahoo
Yahoo Inc. said it plans to carry search advertising from Google Inc. as part of a test that could lead to a broader partnership.
The two-week test, which will be limited to U.S. traffic and no more than 3% of Yahoo's Web search queries, is designed for the two sides to evaluate the revenue potential of a broader search ad outsourcing arrangement.
They have been discussing such an arrangement as part of Yahoo's pursuit of alternatives to Microsoft Corp.'s unsolicited acquisition offer, according to people familiar with the matter.
The test, given its short time frame and limited scope, shouldn't stand in the way of any eventual sale of Yahoo to Microsoft, says a person familiar with the matter. But it could factor into the dynamics of the ongoing deal standoff, as a way for Yahoo to signal to investors its alternatives to the Microsoft deal and potentially as an irritant for Microsoft, which views Google as a major rival.
In a press release, Yahoo said "the testing does not necessarily mean that Yahoo will join the AdSense for Search program or that any further commercial relationship with Google will result.
Analysts have predicted outsourcing its search ads to Google would boost Yahoo's cash flow, since Google's system generates significantly more revenue for each search query than Yahoo does. Under such an arrangement, Yahoo would likely garner a majority of the revenue and Google keep the rest as a commission.
-WSJ.Com
The two-week test, which will be limited to U.S. traffic and no more than 3% of Yahoo's Web search queries, is designed for the two sides to evaluate the revenue potential of a broader search ad outsourcing arrangement.
They have been discussing such an arrangement as part of Yahoo's pursuit of alternatives to Microsoft Corp.'s unsolicited acquisition offer, according to people familiar with the matter.
The test, given its short time frame and limited scope, shouldn't stand in the way of any eventual sale of Yahoo to Microsoft, says a person familiar with the matter. But it could factor into the dynamics of the ongoing deal standoff, as a way for Yahoo to signal to investors its alternatives to the Microsoft deal and potentially as an irritant for Microsoft, which views Google as a major rival.
In a press release, Yahoo said "the testing does not necessarily mean that Yahoo will join the AdSense for Search program or that any further commercial relationship with Google will result.
Analysts have predicted outsourcing its search ads to Google would boost Yahoo's cash flow, since Google's system generates significantly more revenue for each search query than Yahoo does. Under such an arrangement, Yahoo would likely garner a majority of the revenue and Google keep the rest as a commission.
-WSJ.Com
Thursday, April 10, 2008
UPS spells down...
...A warning from UPS led to a down day for Wall Street yesterday.
The shipping company cited lower demand for package shipping along with higher gas prices for the cause of the warning.
If a shipping company is having issues, what does this tell you about the sales of end products?
The shipping company cited lower demand for package shipping along with higher gas prices for the cause of the warning.
If a shipping company is having issues, what does this tell you about the sales of end products?
Wednesday, April 9, 2008
DVN - Devon Energy
It continues to make new ALL TIME HIGHS on a daily basis.
The recent moves into new all time highs has sparked an interest in the stock.
Keep a close eye on it. $107.50 could be a nice resistance turned support level
in the stock. If DVN pulls back to the 107.50 level, consider taking a position
in the stock.
The recent moves into new all time highs has sparked an interest in the stock.
Keep a close eye on it. $107.50 could be a nice resistance turned support level
in the stock. If DVN pulls back to the 107.50 level, consider taking a position
in the stock.
Tuesday, April 8, 2008
Vietnam
The market getting the most recent attention is Vietnam, which has experienced 7.5% average annual GDP growth over the past decade and continues to post strong economic growth despite the U.S. slowdown.
All of this is spurring more talk about the feasibility of a Vietnam fund or even an exchange-traded fund down the road. Nguyen Tan Dung, prime minister, said Vietnam's communist government was committed to a target of 8% to 9% annual GDP growth. It also planned to boost the value of exports by 20% this year.
All of this is spurring more talk about the feasibility of a Vietnam fund or even an exchange-traded fund down the road. Nguyen Tan Dung, prime minister, said Vietnam's communist government was committed to a target of 8% to 9% annual GDP growth. It also planned to boost the value of exports by 20% this year.
Monday, April 7, 2008
Not everyone is familiar with the term "stagflation."
"Stagflation" was coined ages ago when I was still in college. It describes an economic period of both inflation and flat growth. The best description I've heard was provided by Rich Karlgaard, publisher of Forbes. He said:
"Stagflation is present when gas and grocery prices are rising faster than your paycheck is - and in an economy that is strong enough to employ you but not strong enough that you feel emboldened to ask for a raise."
There are three ways to defeat stagflation: (1) Tighten the money supply. (2) Restrict credit. (3) Lower taxes.
"Stagflation is present when gas and grocery prices are rising faster than your paycheck is - and in an economy that is strong enough to employ you but not strong enough that you feel emboldened to ask for a raise."
There are three ways to defeat stagflation: (1) Tighten the money supply. (2) Restrict credit. (3) Lower taxes.
Saturday, April 5, 2008
The price of sawdust
Sawdust Prices Soar As Supply Dwindles With Housing Downturn.
“From Maine to Oregon, the price of sawdust, along with other wood byproducts, has soared. When they can find it, sawdust buyers - dairy farmers, particleboard makers and others - are paying up to $50/ton or more, double what they paid a year ago, some say…
In Q1’08, U.S. sawmills have been shipping about 114 million board feet of lumber per day, said Henry Spelter, an economist with the U.S. Forest Service forest products laboratory in Madison, Wisconsin.
That's down from 135 million-bf/day in Q1’07, and 160 million board feet in 2006.” (Canadian Press, Apr. 2nd)
“From Maine to Oregon, the price of sawdust, along with other wood byproducts, has soared. When they can find it, sawdust buyers - dairy farmers, particleboard makers and others - are paying up to $50/ton or more, double what they paid a year ago, some say…
In Q1’08, U.S. sawmills have been shipping about 114 million board feet of lumber per day, said Henry Spelter, an economist with the U.S. Forest Service forest products laboratory in Madison, Wisconsin.
That's down from 135 million-bf/day in Q1’07, and 160 million board feet in 2006.” (Canadian Press, Apr. 2nd)
Friday, April 4, 2008
Further lending market reforms
Of all the mortgage reform programs being discussed, one in particular is gathering momentum in Congress. It's a bill that would potentially:
Provide $4 billion in grants that would allow local governments to purchase foreclosed homes.
Help fund $10 billion in tax-exempt bonds that states can sell to fund mortgage refinance programs. They're designed to get people out of bad subprime loans and into more stable financing.
Fund $100 million more in counseling programs designed to help borrowers facing foreclosure.
Give home builders a tax incentive that allows them to offset past profits with current losses in order to bolster their financial state.
Offer buyers of foreclosed or vacant homes a tax credit, possibly as much as $7,000.
Provide $4 billion in grants that would allow local governments to purchase foreclosed homes.
Help fund $10 billion in tax-exempt bonds that states can sell to fund mortgage refinance programs. They're designed to get people out of bad subprime loans and into more stable financing.
Fund $100 million more in counseling programs designed to help borrowers facing foreclosure.
Give home builders a tax incentive that allows them to offset past profits with current losses in order to bolster their financial state.
Offer buyers of foreclosed or vacant homes a tax credit, possibly as much as $7,000.
Thursday, April 3, 2008
The Federal Reserve has unlimited resources.
They can print money anytime they like....don't you wish you could!!!
The Fed's just-announced new regulatory push will help, long-term. But short-term, over the next few years, the Fed will continue to behave exactly as predicted all along for years now - pumping in liquidity and printing money like there's no tomorrow.
If Lehman Brothers, for instance, is looking like it will fail, you will see another bailout like the Bear Stearns deal. If JP Morgan goes down, the Fed will bail it out, too.
The Federal Reserve will stop at nothing to save the U.S. economy, while doing just the opposite!
That will create its own problems down the road - namely a continued long-term plunge in the dollar and much, much more inflation, maybe even hyperinflation.
Indeed, according to John Williams of Shadow Government Statistics, for the two weeks ended March 26, the seasonally-adjusted monetary base rose at an annualized rate of 20.1% from the prior two weeks. And a broader measure of the money supply is increasing at a record annual rate of over 17%!
The Fed's just-announced new regulatory push will help, long-term. But short-term, over the next few years, the Fed will continue to behave exactly as predicted all along for years now - pumping in liquidity and printing money like there's no tomorrow.
If Lehman Brothers, for instance, is looking like it will fail, you will see another bailout like the Bear Stearns deal. If JP Morgan goes down, the Fed will bail it out, too.
The Federal Reserve will stop at nothing to save the U.S. economy, while doing just the opposite!
That will create its own problems down the road - namely a continued long-term plunge in the dollar and much, much more inflation, maybe even hyperinflation.
Indeed, according to John Williams of Shadow Government Statistics, for the two weeks ended March 26, the seasonally-adjusted monetary base rose at an annualized rate of 20.1% from the prior two weeks. And a broader measure of the money supply is increasing at a record annual rate of over 17%!
Wednesday, April 2, 2008
Newsworthy?
Corporate treasurers are increasing sales of long-term investment-grade bonds for the first time in a decade, a sign they're betting U.S. borrowing costs will rise as the Federal Reserve slows the pace of interest-rate cuts.
At least 57 percent of the U.S. debt sold in the past two quarters matures in 10 years or more, compared with an average of 39 percent since 1999, according to data compiled by Bloomberg. The share at General Electric Co., the biggest U.S. corporate borrower, rose to 39 percent in the first three months of the year from 23 percent in the same period a year earlier. AT&T Corp. has sold $4.75 billion of 30-year debt since August, almost eight times more than in the previous three years combined.
Top-rated issuers are using the bonds to lock in the lowest yields in two years, taking advantage of the Fed's reductions in one of the only corners of the market where investors are still willing to extend credit. Borrowers are moving now because by yearend, they may face some of the highest costs since 2001, said Vincent Murray, a managing director at ABN Amro Inc. in New York.
Bloomberg.com
At least 57 percent of the U.S. debt sold in the past two quarters matures in 10 years or more, compared with an average of 39 percent since 1999, according to data compiled by Bloomberg. The share at General Electric Co., the biggest U.S. corporate borrower, rose to 39 percent in the first three months of the year from 23 percent in the same period a year earlier. AT&T Corp. has sold $4.75 billion of 30-year debt since August, almost eight times more than in the previous three years combined.
Top-rated issuers are using the bonds to lock in the lowest yields in two years, taking advantage of the Fed's reductions in one of the only corners of the market where investors are still willing to extend credit. Borrowers are moving now because by yearend, they may face some of the highest costs since 2001, said Vincent Murray, a managing director at ABN Amro Inc. in New York.
Bloomberg.com
Tuesday, April 1, 2008
Transparency
What transparency?.
Goldman Sachs says that leveraged losses have a long way to go. Commercial banks, investment banks, hedge funds and government outfits are less than halfway there.
The unwinding is inevitable. The only question is the speed and transparency by which it takes place.
And it looks like a long and murky road still lies ahead.
The market - as jittery as it is - won't truly rebound until it sees the unwinding in its rear-view mirror.
Goldman Sachs says that leveraged losses have a long way to go. Commercial banks, investment banks, hedge funds and government outfits are less than halfway there.
The unwinding is inevitable. The only question is the speed and transparency by which it takes place.
And it looks like a long and murky road still lies ahead.
The market - as jittery as it is - won't truly rebound until it sees the unwinding in its rear-view mirror.
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