Posts Tagged dollar
U.S. Economy Quickens on Gains in Spending, Exports
Posted by Oksana Grebenjuk in Trading Markets on Февраль 9th, 2011
The U.S. economy accelerated in the fourth quarter of 2010 as consumer spending climbed by the most in more than four years.
Gross domestic product grew at a 3.2 percent annual rate, Commerce Department figures showed today in Washington, falling short of the 3.5 percent median forecast of 85 economists surveyed by Bloomberg News because of a slowdown in inventories. Excluding stockpiles, the economy rose at a 7.1 percent pace, the most since 1984.
“The consumer really drove the economy in the fourth quarter,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who accurately forecast the rate of growth. “The economy has moved beyond recovery to a stable state of growth.”
The dollar advanced on expectations the revival in demand will extend into this year, boosting sales at companies including General Electric Co. and Apple Inc. At the same time, the report showed the Federal Reserve’s preferred measure of inflation climbed at the slowest pace on record, bolstering forecasts the central bank won’t raise borrowing costs until 2012.
Stocks dropped on growing concern over the unrest in Egypt and as shares of Ford Motor Co. and Amazon.com Inc. retreated. The Standard & Poor’s 500 Index fell 1.8 percent to 1,276.34 at the 4 p.m. close in New York. The dollar advanced against the euro for the first time in nine days, strengthening to $1.3611 per euro from 1.3734 late yesterday. Read the rest of this entry »
Facebook Is Overvalued at $50 Billion in Global Poll Signaling Tech Bubble
Posted by Oksana Grebenjuk in Business, Favourites on Февраль 8th, 2011
Facebook Inc. isn’t worth $50 billion, according to a poll of global investors that shows skepticism about Goldman Sachs Group Inc.’s recent estimate of the largest social-networking site’s value and concern that a bubble may be forming in the technology sector.
Sixty-nine percent of investors say Facebook is overvalued after Goldman Sachs invested $450 million in a deal that put the company’s worth at $50 billion, according to the quarterly poll of 1,000 Bloomberg customers who are investors, traders or analysts. Only 10 percent of respondents say Facebook’s valuation is appropriate; 4 percent say it’s worth more.
The Bloomberg Global Poll conducted Jan. 21-24 shows that investors disagree with Goldman Sachs’ assessment that Facebook is worth more than Web pioneers such as Yahoo! Inc., the biggest web portal, and EBay Inc., owner of the biggest online retail marketplace. Palo Alto, California-based Facebook surpassed Yahoo! in October as the third most visited website in the world.
“Those investing in Facebook, expecting it to be the next Google, might be in for some bad news along the way,” says poll respondent John J. Lee, a portfolio manager at PGB Trust & Investments in Morristown, New Jersey. Mountain View, California-based Google went public in August 2004 and the shares more than tripled in the first year to $279.99 from $85. The stock price averaged $617.2 this month. Read the rest of this entry »
Brazil’s Rousseff criticizes currency protectionism
Posted by Oksana Grebenjuk in Currency, Favourites on Февраль 3rd, 2011
Emerging market countries such as Brazil and Argentina must take a stronger position against «competitive depreciations,» Brazilian President Dilma Rousseff told Argentine newspaper Pagina 12 on Sunday.
Rousseff, who is due to visit the neighboring country on Monday in her first foreign visit as president, said multilateral bodies should tackle currency issues and developed countries must «assume their responsibility.»
The Brazilian real currency BRBYBRL= has gained more than a third against the dollar in just over two years, and the finance minister has blamed the rally on the developed world, slamming the United States for keeping interest rates low and the dollar weak through its quantitative easing policy.
«It’s well known that Brazil and Argentina suffer, that all emerging market countries suffer, as a result of the depreciation policy practiced by the countries in question,» Rousseff said when asked about the role of the United States and of China.
«Our position in the G20 needs to be one of increasing reaction against these depreciations, which always lead to difficult situations in the world. I’m talking about the so-called competitive depreciations,» she added. Read the rest of this entry »
Don’t Bank on It
Posted by Oksana Grebenjuk in Banks on Январь 26th, 2011
Disappointing earnings, shrinking revenues and optimism that somehow the economy is improving despite an ongoing housing hangover — this is what America’s biggest banks offered as they released year-end financial results last week.
«Last year was a necessary repair and rebuilding year,» Bank of America CEO Brian Moynihan said Friday. Yes, we know. The shards of our broken economy remain scattered on the ground and we’re gluing them back together. What else could Mr. Moynihan say as he announced a 2010 loss of $2.2 billion?
«We enter 2011…against a backdrop of an improving economy,» he said. But then he qualified: «Full economic recovery depends on housing-market stability.»
And until we can return to housing-market stability, banks can borrow for next to nothing and lend at rates once charged only by Mafia loan sharks.
Banks enjoy guarantees not to fail unless the U.S. government goes down with them. They remain more or less free from regulations that might significantly curb their reckless risk-taking. And they continue to pay their executives better than rock stars or baseball players. Read the rest of this entry »
Strong Stocks and Euro, Weak Dollar on GE’s Earnings
Posted by Oksana Grebenjuk in Fund Markets on Январь 25th, 2011
After a weak 2 days, stocks bounced back. Strong euro is on its 8-week high versus the dollar and against 14 more out of 16 currencies. Companies’ earnings such as General Electric Co.’s are higher than estimates while commodities gain is led by sugar and cotton and German business confidence increased.
The S&P 500 Index was at 1,283.35 (0.2%) in New York at 4p.m. Stoxx Europe rose 0.7%. Credit-default swaps that support Europe’s indebted nations went to largest 2-week drop. 10-year treasuries yield dipped 4 basis points (3.41%).
GE’s 1st increase in 2 years encouraged earning season’s optimism. Since Jan. 10, out of 57 companies, 42 topped per share profit. Fiduciary Trust Co.’s Michael Mullaney said the strong earning season shows sustainable economic recovery and that good sales momentum is promising for the stock market.
S&P 500’s 43 companies in 57 reported 8.4% increase. GE, since March 2009 rallied at 7.1% whose CEO, Jeffrey Immelt, incidentally, will be named by President Obama as outside economic advisers panel head.
Bank of America Corp. was down 2% after $1.24 billion 4th quarter loss report.
Europe’s Stoxx 600 showed 2 gained for every stock decline while Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA were 3.3% up. Following UK bank discussion report on Financial Times, Royal Bank of Scotland Group Plc surged 6.5%. Read the rest of this entry »
Bernanke Plays Politics, Loses
Posted by Oksana Grebenjuk in Budget on Декабрь 14th, 2010
The BABs story has gone political. And now the Fed is tossing information into the hopper that just does not pass the smell test. The question is; «Why is the Fed doing this?»
The real story on BABs is that Republicans want to nix the program as it provides a very clear benefit to the three biggest blue states, CA, NY and Il. The opposition does not want to really show their hand as being purely political so they are attacking the extension on the merits. The strongest reason to appose the extension is that it is a federal subsidy that costs the taxpayers money and adds to the deficit. But the problem all along is that no one in D.C. really has a clue how much this is actually costing.
BABs was first sold as being revenue neutral at the federal level. The talk was that the 35% interest subsidy paid by D.C. would be offset by tax dollars created when the bondholders pay federal income on their interest income. It never worked like that at all. The BABs bonds went to tax exempt holders. 401k/501c accounts, foreign banks and other tax-exempts bought the BABs bonds. In my opinion the Treasury is lucky if it gets back 15% of the 35% they are paying out as a result of the tax arbitrage that has been created.
I have consistently heard that some big takers of the BABs were foreign banks. That makes perfect sense. Prior to BABs they had no ability to build up state assets as they had no tax base to offset. But with BABs that issue went away and an attractive asset class with a desirable fixed coupon and long duration was created. The NYT had this to say about foreign bank participation in BABs: Read the rest of this entry »
Bernanke Threatens Extension Of QE Past $600 Billion
Posted by Oksana Grebenjuk in Favourites, Fund Markets on Декабрь 7th, 2010
Bernanke the chairman of the federal reserve has said that the US might need to extend bond purchases past the the $600 billion announced last month to spur on economic growth. The argument for this extension is based upon fears that the US economy is expanding at a bairly sustainable pace and ongoing fears that the employment sector is still faltering after Non Farms last week. The unemployment rate last month rose to 9.8 percent and surprised the markets after a previous string of positive news, this is the highest level since April and has dampened economic sentiment significantly.
Bernanke appeared on CBS Corp’s ’60 Minutes’ program and defended the Fed’s efforts to prop up the US recovery. He argued thatthe economy was clearly still very weak and that just 39,000 jobs were created in November. He stated that the potential for the purchase of more bonds than previously planned last month is «certainly possible,»; dependant on the outlook for inflation and the US economy over the coming months. Bernanke went on to say that although growth looks set to continue at a slow pace, a return to recession ‘seems unlikely’.
The Fed’s decision to undertake a new bond purchasing program, known as quantitative easing, has been criticized heavily by the worlds finance officials, amidst fears of a global currency war and competitive devaluation. Policy makers in emerging markets have expressed concern that this kind of devaluation could drive down the dollar and cause a re-surgence of capital abroad.
Today has been a relatively quiet day in the currency markets. The week ahead is likely to continue to be dominated by the European sovereign debt crisis. The much awaited budget for 2011 will be a key release for the Euro tomorrow as traders speculate on the austerity measures set to reign in €6bln (3.7%) of GDP. Two thirds of the planned austerity will come from spending cuts with one third from higher taxes. Read the rest of this entry »
Is The United States Making The Emerging Nations Stronger?
Posted by Oksana Grebenjuk in Trading Markets on Декабрь 3rd, 2010
Why is the rate of inflation so low in the United States when the government has pumped huge amounts of debt into the country and the Federal Reserve has loaded the financial system with large amounts of liquidity?
The same question was asked in the 1990s. Where was the United States inflation?
The answer for the 1990s…and for the present time period…is that the United States has exported inflation to the rest of the world…more specifically…Asia. As the accompanying chart shows, inflation seems to be heading up in Asia…as it is also heading up in many other emerging nations.
As reported in the LEX column of the Financial Times yesterday, global inflation has seemingly bifurcated. In the developed countries the current inflation rate is below 2 percent (Australia and the UK are exceptions). Morgan Stanley expects a 1.5 percent rate of growth for the wealthier countries in 2010. «By contrast, the emerging market inflation rate is about three times higher—expected at 5.4 percent in 2010…»
The post-financial crisis stimulus is now feeding the inflation in the emerging countries. «A significant portion of the river of cheap money flowed into commodity markets. The initial price recovery caused no problems, but the trend now threatens to create a vicious circle.»
There is also the «carry trade» which takes United States dollars throughout the world seeking higher interest rates. This flow is certainly not insignificant.
In these days, it seems like it is very difficult to contain the international flows of capital. Maybe policy makers need to give this a little more weight in their policy discussions. Read the rest of this entry »
What The Fed Does not Want You To Know
Posted by Oksana Grebenjuk in Budget on Ноябрь 17th, 2010
Yesterday gold and silver staged a sharp reversal day after first making new highs for the year intra-day. There were a couple of reasons for the sharp pullback. The first was the stronger U.S. Dollar Index and the second was the sudden increase in margin requirements for silver. While we are not sure why the margin requirements increased for silver so suddenly we do know why the U.S. Dollar Index traded higher.
The U.S. Dollar Index caught a bid yesterday due to the fact that Ireland and Portugal bunds spreads are the widest they have ever been. In other words these two countries are in serious trouble. Other European Union countries remain in trouble and could soon face defaults as well.
In March, April, May, and June of this year gold and the U.S. Dollar Index actually rallied higher together. So please understand that gold does not just trade inverse to the U.S. Dollar Index. Gold and silver are now being viewed by the investor community as the only true form of currency.
While many say gold is in a bubble this simply does not hold any merit. A bubble occurs when everyone owns something such as a tech stock in 1999 or a house in 2005. Ask your next door neighbor if they own any gold outside of their jewelry and the answer is likely to be ‘no’. If gold was not so important the government would not want to tax it as a collectible at the highest rate allowed. Read the rest of this entry »
The Fed Forcing Us Into Risk Asset?
Posted by Oksana Grebenjuk in Fund Markets on Ноябрь 10th, 2010
By signalling its intention to purchase another $600bn of longer-term Treasury securities by the end of June 2011, the Fed hopes its injections of cash will lower interest rates, bolster asset prices, increase wealth and encourage households and companies to spend and hire. Moreover, by noting the possibility of doing more if the data disappoint, it is also hoping that markets could price in the institution’s future asset purchases, turbo-charging the direct policy impact before those purchases have even been specified.
For a little more color you can check in with Cullen Roche, aka Pragmatic Capitalism who has been writing about this in a lot of detail. My focus has been to be more concerned with portfolio implications as this is my job, not trying to solve the world’s problems.
However, it is important to be cognizant of what I will call a malignancy in the US stock and bond markets being unleashed by Ben Bernanke and his Federal Reserve Posse. Between all of the commentary on what the Fed is doing and Bernanke’s op-ed in the Washington Post you should realize that policy is now targeting asset prices. If you do some blog reading you will find comments saying that the Fed is making it so that just holding cash is stupid, that by keeping interest rates so low investors are forced into buying risk assets. To the extent this is true it is heinous.
It is heinous for what could be several different bad outcomes, outcomes that could be worse than what is trying to be fixed. While I don’t know if that will be the outcome this is one conclusion to draw from keeping interest rates at 1% for too long seven or eight years ago (although this was only one factor and not the biggest factor). If the rally in US equity prices we have enjoyed for the last few months has nothing but air under it then the consequence could be another painful decline—this would not be unprecedented obviously but could push any non-government induced recovery further down the road if the wealth effect actually does matter. Read the rest of this entry »
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