Posts Tagged interest rate
If you must buy a car now, here’s what to do
Posted by Oksana Grebenjuk in Budget, Favourites on Май 27th, 2011
Rising prices and a looming vehicle shortage make this summer one of the worst times in years to go car shopping. But if your vehicle is on its last leg or your lease is about to come due, here are some tips on how to navigate through a difficult market.
• Consider cars with incentives: Manufacturers still offer some incentives, especially for cars that are near the end of their model cycle or are slow sellers. Most of the big auto information companies, including Edmunds.com, TrueCar.Com and kbb.com (Kelley Blue Book), offer incentive data on their websites.
• Check supply: While inventories are tightening across the board, some manufacturers will have ample inventory for some vehicles, and these will have the better deals. TrueCar’s TrueTrends report offers a monthly listing of new vehicles with the shortest and longest days’ inventory. This month’s report, for example, will tell you that Hyundai dealers have only an eight-day supply of their hot-selling Elantra sedan. It’s also tough to find a Ford Explorer — only a nine-day inventory. But if you want a BMW Z4, start shopping. The Z4 is about to be replaced with a new-generation model, and BMW dealers have a fat 161-day supply — more than five months’ worth. Similarly, Hyundai dealers are sitting on a 133-day inventory of the automaker’s Azera sedan.
• Be a contrarian: For now, that means bigger. With many buyers gravitating to smaller, fuel-efficient vehicles, consider buying something that drinks a bit more gas. Yes, it will cost you more each time you go to the pump, but with small-car prices going up rapidly you might find that the price gap between a compact vehicle and something larger has narrowed considerably. Large cars and trucks have the biggest discounts this month, and that’s likely to be the case throughout the summer. Read the rest of this entry »
Best option for car shoppers: Postpone buying
Posted by Oksana Grebenjuk in Favourites, Trading Markets on Май 26th, 2011
Inventory shortages caused by the effects of Japan’s earthquake have led to rising prices for new and used vehicles, creating what one analyst describes as a ‘huge seller’s market.’ Attention all car buyers: The era of cut-rate financing, generous cash-back offers and big discounts is coming to an end.
With the effects of the earthquake in Japan rippling through the industry and causing shortages, prices are rising for both new and used cars, and fewer models and options will be available come summer, especially for the hybrids and fuel-efficient vehicles that Japan produces.
That’s prompted many experts to voice something rarely said in the sales-happy auto industry: With consumers facing the toughest market in recent memory, if you can, put off purchases until things sort out, probably early next year.
«If you don’t have an immediate need, you are probably better to wait and figure out where the market is headed,» said Jesse Toprak, an analyst with auto information company TrueCar.com. Read the rest of this entry »
Why inflation hurts more than it did 30 years ago
Posted by Oksana Grebenjuk in Budget on Март 21st, 2011
Inflation spooked the nation in the early 1980s. It surged and kept rising until it topped 13 percent. These days, inflation is much lower. Yet to many Americans, it feels worse now. And for a good reason: Their income has been even flatter than inflation.
Back in the ‘80’s, the money people made typically more than made up for high inflation. In 1981, banks would pay nearly 16 percent on a six-month CD. And workers typically got pay raises to match their higher living costs. No more.
Over the 12 months that ended in February, consumer prices increased just 2.1 percent. Yet wages for many people have risen even less — if they’re not actually frozen. Social Security recipients have gone two straight years with no increase in benefits. Money market rates? You need a magnifying glass to find them.
That’s why even moderate inflation hurts more now. And it’s why if food and gas prices lift inflation even slightly above current rates, consumer spending could weaken and slow the economy.
Consumer inflation did pick up in February, rising 0.5 percent, because of costlier food and gas. Still, looked at over the past 12 months, price increases have remained low. Problem is, these days any inflation tends to hurt. 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 »
Trichet Says Inflation Risks May Rise in Medium Term
Posted by Oksana Grebenjuk in Budget, Favourites on Январь 17th, 2011
European Central Bank President Jean-Claude Trichet comments on monetary policy, inflation and growth in the economy of the 17 nations sharing the euro. He spoke at a press conference in Frankfurt today after the ECB kept its key interest rate at a record low of 1 percent.
On today’s rate decision: “Based on its regular economic and monetary analyses, the Governing Council confirmed that the current key ECB interest rates are still remain appropriate. It therefore decided to leave them unchanged.
“Taking into account all the new information and analyses which have become available since our meeting of 2 December 2010, we see evidence of short-term upward pressure on overall inflation, mainly owing to energy prices, but this has not so far affected our assessment that price developments will remain in line with price stability over the policy-relevant medium- term horizon. At the same time, very close monitoring is warranted.
“Overall, the current monetary-policy stance remains accommodative. The stance, the provision of liquidity and the allotment modes will be adjusted as appropriate, taking into account the fact that all the non-standard measures taken during the period of acute financial-market tensions are, by construction, temporary in nature. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely. Read the rest of this entry »
Why The Market Multiple Will Be Higher In 2011
Posted by Oksana Grebenjuk in Fund Markets on Декабрь 17th, 2010
Market relationships differ depending upon the time frame. Right now, higher bond yields are bullish for stocks. This article explains why.
The most important question for equity investors relates to rising interest rates and the implications for stocks. Nearly everyone (including us) agrees that long-term rates are moving higher. That has been the recent move and it implies significant capital losses for those holding long bonds. Here is a nice analysis of the risk by John Lounsbury.
Several pundits have weighed in on the effect of an interest rate increase. Let us take a closer look.
Background
On a theoretical basis, lower interest rates are bullish for stocks. Companies can borrow more cheaply. The choice for those doing asset allocation tilts toward equities. The data support the traditional stock/bond relationship — usually.
But these are not typical times. Higher interest rates may be consistent with higher stock multiples. Abnormal Returns covers the topic and also highlights other sites on bond yields. I want to go beyond the generalized arguments and look to some strong supporting data. 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 »
Bernanke Says Buy ‘Em, Trichet Says Not So Fast
Posted by Oksana Grebenjuk in Fund Markets on Ноябрь 11th, 2010
During the credit crisis the central bankers of the world bonded together in an effort to present a united front in the battle against a problem that very easily could have caused the global banking sector to crumble. However, with most of the world now well on the way to recovery, it appears that the paths of the U.S. Fed and the ECB are diverging greatly.
On Wednesday, Ben Bernanke tried to make a statement with the FOMC decision. Our view of what the FOMC said was as follows: There is not going to be a deflationary spiral on our watch. As a renowned scholar on the causes of the Great Depression, the Fed Chairman appears determined to do whatever it takes in order to stave off the potential for a repeat of the mistakes made by Japan over the past 20 years.
On that score, it is our humble opinion that Bernanke & Co. are planning to err on the side of caution for a while. How else does one explain the committee’s citing of too little inflation as a means to provide additional stimulus? Too little inflation, really?
Don’t take that wrong as we are all for the QE II and more stimulus (the more the merrier, right!). However, the justification for additional bond buying during a period of economic expansion might be a bit of a reach at this stage of the game. And before you start sending the hate mail about the need to «do something» to help unemployment, I agree that this step will likely help – in the long run. It’s just that based on my 30+ years of Fed watching, this move is clearly a little out of the ordinary. 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 »
Who Can Print More Money — FED or BoJ?
Posted by Oksana Grebenjuk in Currency on Ноябрь 8th, 2010
Not that long ago central banks were in a race who can slash interest rates to zero first. Seems like a distant memory, but the Bank of Japan was the winner then. Now a new competition is shaping up – who can print more (funny) money. So far the FED is leading, after revealing details of the next round of QE. This time it is $600 billion, about a $100 billion more than had been previously hinted. On balance, though, it is not much of a difference. At this stage of the game, what is $100 billion, really? FED does not have neither amount and must create the money with a few keystrokes, otherwise known as «printing».
In response, the Bank of Japan announced own scheme of easing. It is smaller, at about $62 billion, but it can always be increased. However, the BoJ plans to spend it in other ways than its US counterpart. It is getting even more adventurous. Instead of simply buying bonds, the BoJ also wants to purchase Japanese real-estate investment trusts, ETF’s tracking Nikkei 225 and Topix, as well as corporate debt. Looks like weakening the Yen is not the only objective, but the central bank is also engaging in «pumping» the domestic stock market.
All moves by the FED are being mimmicked by the BoJ. To a smaller degree for now, but they are likely to increase the buying spree soon. Most would argue that so far all those efforts had no impact on the Yen. Perhaps, but while the JPY has not reversed against the Dollar, it became, for all practical purposes, pegged to the USD. Over the last three weeks, the USD-JPY has been trading in a 200 pips range in a situation similar to 2004, when it was stuck at just above 100 level. This can easily last for few more weeks, or months, until one of the central banks eventually prints enough money to completely degrade its currency. At that time we will have a dubious winner of this competition. Read the rest of this entry »
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