Posts Tagged crisis
Bounce Or New Beginning?
Posted by Tetyana Matychak in Fund Markets on August 31st, 2010
Although it was one of the last summer Friday’s, trading was surprisingly volatile. Despite the fact that most traders were likely working on their short game or vacationing with the family, there was a serious dose of data input to the game on Friday ranging from economic results, corporate guidance, and of course, some very important Fedspeak. The end result was an impressive move up in the indices, which may or may not represent a new beginning for the bull camp.
While the bears could be heard making remarks about short-covering and discussing the height to which a dead cat could actually bounce, the bulls talked about a second successful test of 1040 and a move “into the gap” that was created by Tuesday’s opening dive lower. And while no one knows for sure how much farther the bulls can run, it does appear that our heroes in horns were able to wrestle the ball away from their opponents on Friday.
There were three key inputs to the session. First, we had the first revision to the second quarter GDP in the U.S. While down significantly from the initial estimate made earlier in the month (remember, the government’s first estimate didn’t even include all the data from the final month of the quarter), the growth rate of 1.6% was actually better than the consensus for a rate of 1.3% and the whisper numbers containing a zero-handle. The takeaway from the report was that although the growth has indeed slowed, the economy does continue to grow. And in short, this is what “slowdowns” look and feel like.
The next bit of data was less upbeat as Intel (INTC) revised its revenue guidance for the third quarter – and not in a good way. Although analysts following the chipmaker suggested that the move wasn’t exactly a surprise, the computers that look for key words were able to put “Intel” and “reduced guidance” together in order to create a swift downdraft. It is also interesting to note that the Intel news was released within a couple minutes of the University of Michigan’s Confidence index, which, while not a bad report by any stretch, also came in “below consensus.” As such, the computers clearly got busy for a period of about 10 minutes Friday morning. Read the rest of this entry »
Could Your Offshore Jurisdiction Go Bankrupt? Part I
Posted by Tetyana Matychak in Investing on July 20th, 2010
Offshore centers now face a perfect financial storm. In more prosperous times, revenues from the offshore sector, along with tourism, helped fuel these countries’ economies. Their governments emulated more developed nations by borrowing heavily to build up their infrastructure. They also bought votes with social programs and bloated government payrolls.
When the global economy tanked, tourist revenues fell, along with revenues from their offshore sectors. But the social programs and bloated payrolls remained.
Blame Offshore Tax Havens! (Again)
The economic crisis also led to worldwide drop in tax revenues, with the biggest losers big industrialized countries like the United States. Politicians in these countries found a convenient scapegoat to blame for falling tax revenues: dozens of mostly tiny offshore centers.
Using the economic crisis, the world’s richest and most powerful governments had the perfect opportunity to achieve a long-term goal: forcing offshore jurisdictions to enforce their tax laws. They acted through non-governmental organizations they control, such as the Organization for Economic Cooperation and Development (OECD). The OECD has the authority to issue supposedly non-binding “best practices” guidelines. And, the OECD now decrees that “best practices” meant becoming tax collectors on behalf of these rich and powerful governments. Read the rest of this entry »
Nineteen Billion Dollars Is A Big Deal
Posted by Tetyana Matychak in Banks on July 2nd, 2010
The blogosphere is having conniptions over Scott Brown’s announcement that he won’t vote for final passage of FinReg because of the $19 billion tax on banks that was incorporated at the last minute. The recurring theme is that $19 billion is a small amount of money and that anyway it’s going to be levied on the big banks that have benefited from government efforts to keep the financial system afloat.
Here’s what Ryan Avent has to say:
The fee in question was introduced during the conference session and is designed to cover the cost of the bill, that is, to make sure it’s deficit neutral. It’s a modest amount, and it’s levied on entities that have benefitted significantly from the massive government intervention deployed to keep the financial system afloat during the financial crisis.
And Joe Weisenthal jumps on the subject with this:
This whole thing is a bit silly. $19 billion, levies across the financial system, on various players based on their size is tiny. We repeat: tiny. And beyond that, this isn’t some kind of punitive tax; it’s designed to pay for the enforcement of the bill, which presumably Scott Brown is in favor of, if he likes the rest of the bill. Read the rest of this entry »
4 Investment Ideas That Provide Income
Posted by Tetyana Matychak in Investing on July 1st, 2010
As of this moment, the S&P/TSX Composite index is down 384.58 point or -3.27% year to date. The S&P 500 is down 67.32 or -6.04% year to date. That is your market update. When the global economic outlook appears uncertain and on the brink of another recession, equity markets reflect this reality in terms of greater than normal volatility. In markets like these, what we should be looking for are non-correlated assets and managers that have demonstrated the expertise to preserve capital during uncertain times like today.
In addition, one should also be focusing their efforts on receiving some form of income while the economic climate sorts itself. The following 4 ideas should hopefully accomplish both those goals. While we cant speak to the best/worst time to buy/sell particular securities, as that depends on one’s personal circumstances, the approach we usually take, especially with closed end funds, is to purchase them when they are trading at the steeper than normal discount to their Net Asset Value (NAV). The only other thing we would like to add is that you should do you own due diligence.
Trident Performance Corp.
This closed end fund is managed by CI Investments. Its investment objective is to provide tax-efficient risk-adjusted long term rates of return by obtaining exposure to a Global Macroeconomic Portfolio, advised by Trident Investment Management. Co-Founded in 1998, by Nandu Narayanan, Trident Investment Management seeks to exploit macroeconomic trends to generate attractive risk-adjusted rates of return with low or negative correlation to traditional ‘long’ investments. This is exactly what Mr. Narayanan did during the financial crisis, when the CI Global Opportunities Fund recorded positive performance of 109% in 2007 and 42.6% in 2008. Since inception in March 1995, the fund has averaged 19.69% as of the end of May 31, 2010. Read the rest of this entry »
Is A Global Reserve Currency A Necessity?
Posted by Tetyana Matychak in Currency, Favourites on June 28th, 2010
Recently Asian Development Bank (ADB) suggested, China’s yuan could rapidly become an internationally used currency and serve as an alternative to the U.S. dollar in central bank reserves. There weren’t many takers for ADB’s suggestion. I beg to differ from ADB’s stance. If China’s yuan becomes a reserve currency then, I ask, is there a guaranty that we won’t see another global financial crisis of the present order? In the wildest of possible pollyannaism, even ADB wouldn’t say that replacement of one reserve currency (US Dollar) with another (China’s yuan) would guarantee us a world free of a future global financial crisis of the present order. At best, I guess, that would be a temporary solution.
I think it is high time we ask the fundamental question – do we need a global reserve currency? Yes of course, there are significant economic incentives in agreeing to have a global reserve currency. But, hasn’t the concept of international reserve currency outlived its usefulness? I, for one, definitely believe so.
A decade ago, in the wake of the Asian financial crisis, Malaysia’s former Prime Minister, Dr Mahathir Mohammed, called on the world to ban currency trading and outlaw hedge funds, which he blamed for spectacular declines in the value of the Malaysian ringgit. His comments focused on the fact that currency trading served no tangible economic purpose and that hedge funds were opaque beasts wielding billions of dollars in vested interests. Though, I don’t agree with his thoughts in toto, I must say his thoughts did inspire me to ask the fundamental question – do we need a global reserve currency? Whatever, one’s answer to the above question may be, there is a broad consensus in the world that the global central banks are risking too much by holding much of their reserves in dollars. The consensus is so strong; there have been a rush of proposals such as – replacing greenback with a new reserve currency system based on the IMF’s special drawing rights; or a more coordinated approach to exchange rate policy involving target zones etc. There are plusses and minuses in all those proposals. But scrapping a global trade based on the concept of international reserve currency seems to be a better idea than all those proposals. Read the rest of this entry »
ECB Governor: Rates On Hold
Posted by Tetyana Matychak in Banks on June 14th, 2010
European Central Bank governor Athanasios Orphanides indicated in an interview with Dow Jones Newswires that interest rates in the euro zone will remain on hold for many months, urging European politicians to tackle yawning inefficiencies in fiscal governance.
If Europe’s leaders fail to get their act together, then another financial crisis or debt crisis may well be around the corner, he warned.
Speaking in an interview following the ECB’s policy-setting meeting on Thursday, Mr. Orphanides said the outlook for consumer price inflation in the euro zone remains benign, despite the recent uptick in prices.
Core inflation, which excludes volatile components such as energy and food, has been trending down, he said, pointing to slack private consumption in the 16 countries that make up the euro zone.
“In light of these developments, I do not view high inflation as a concern,” said Mr. Orphanides, who was born in Cyprus and educated at the Massachusetts Institute of Technology. Read the rest of this entry »
The Fallible Mr. Buffett
Posted by Tetyana Matychak in Investing on June 10th, 2010
For years, we’ve become accustomed to hearing how no one could have seen the unfolding subprime crisis… not even, according to Warren Buffett, the credit rating agencies.
The very companies that paid millions to do efficient research could not foresee a problem of this magnitude?
What is Buffett thinking?
This is the guy that once stood up for the little guy, defending him from corporate madness.
And now he’s defending credit rating agencies — some of the very companies that took us to the edge of financial ruin, all while holding stock?
Why is he now catering to the corporate elitists that helped foster the subprime meltdown?
Why is he defending Goldman Sachs and its CEO Lloyd Blankfein — accused on fraud charges from the SEC and undergoing an alleged Justice Department investigation of criminal wrongdoing surrounding the structuring of ridiculous derivative contracts? Read the rest of this entry »
What Lies Behind ‘Disappointing’ US Economic Data?
Posted by Tetyana Matychak in Trading Markets on June 9th, 2010
Larry Summers, Director of the White House National Economic Council, has called for a new ‘mini-stimulus’ of $200 billion to attempt to pull the US economy out what he terms its ‘very deep valley’. Summers’ was clearly a response to ‘disappointing’ trends revealed in the the latest US economic data. Similar concerns lay behind the call of US Treasury Secretary Geithner, in the run up to the G20 summit, for Europe and Japan to do more to boost demand.
Certainly recent US data confirms the limited character of US economic recovery from the Great Recession. As widely reported, the overwhelming majority of new US jobs created in May were temporary ones for conducting the census – private sector job creation fell to its lowest level since January. US housing sales in key regions have fallen by 25-30% following the expiry of the government tax credit scheme. House prices, on the S&P Case-Schiller index, have been declining since last September. The revised 1st quarter 2010 US GDP figures lowered the estimate of economic growth in that quarter from an annualised 3.2% in the first estimate to 3.0% in the latest – both are a major deceleration from the 5.6% recorded in the 4th quarter of 2009.
Summers and Geithner’s concern is therefore clearly justified. US economic growth is losing momentum at a point in the business cycle, that of an early stage of recovery, when acceleration might have been anticipated. Overall US GDP is still 1.2% below its peak level of the 2nd quarter of 2008 – meaning that not only is this recession the deepest in post-World War II US economic history but recovery is also the slowest. Read the rest of this entry »
Euro-zone troubles may keep stocks on edge
Posted by Tetyana Matychak in Fund Markets on May 17th, 2010
Stocks could face more volatility this week as growing doubts about whether Europe can solve its deepening debt crisis are likely to take center stage again.
A $1 trillion rescue package unveiled at the week’s start gave only temporary relief to investors, who are increasingly worried about the impact of the crisis on the global recovery and the euro.
Wall Street also will be anxious to see the results from retailers next week, and will pay special attention to their forecasts for the rest of the year. Wal-Mart Stores (WMT.N) and Lowe’s Co (LOW.N) are among companies expected to report.
Below-par results on Friday from retailers, including Nordstrom (JWN.N) and J.C. Penney Co Inc (JCP.N), cast some doubt on the consumer’s health.
The week also brings government data on inflation, which is expected to remain tame, and on housing, a sector still struggling to recover from the country’s worst economic downturn since the 1930s.
The three major U.S. stock indexes ended Friday’s session with losses ranging from 1.5 percent to 2 percent amid worries over Europe’s debt problems. The CBOE Volatility Index .VIX or VIX, which is Wall Street’s fear gauge, jumped 17.1 percent. Commodity prices also dropped sharply, with oil sliding to a three-month low below $72 per barrel. The euro fell to an 18-month low against the dollar. Read the rest of this entry »
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Consumer Spending in U.S. Rises More Than Forecast
30 August 2010
Monetary Policy Gets No Respect
19 July 2010
Stocks May Surprise By Year-End
5 July 2010Is A Global Reserve Currency A Necessity?
28 June 2010
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