Archive for January, 2010
Wealthtrack – The intersection of stocks, politics and energy
Sunday, January 31st, 2010
This week on Consuelo Mack’s Wealthtrack: the intersection of stocks, politics and energy and what they mean for your portfolio. Consuelo sits down with Wall Street’s number one Washington analyst, ISI Group’s Tom Gallagher; five-star FPA Crescent Fund manager, Steve Romick; and Weeden & Co.’s legendary energy analyst, Charles Maxwell.
This is excellent viewing material. Click play to watch:
Note: The transcript of this interview is not available yet, but will be posted here as soon as it arrives.
Source: Wealthtrack, January 28, 2010.
Tags: Charles Maxwell, Consuelo Mack, Energy Analyst, Five Star, Fpa Crescent Fund, Intersection, Isi Group, Politics, Portfolio, Stocks, Tom Gallagher, Wall Street, Weeden
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Paul Volcker On How to Fix the Financial System
Sunday, January 31st, 2010
Paul Volcker’s Op-Ed in the NY Times:
“The phrase “too big to fail” has entered into our everyday vocabulary. It carries the implication that really large, complex and highly interconnected financial institutions can count on public support at critical times. The sense of public outrage over seemingly unfair treatment is palpable. Beyond the emotion, the result is to provide those institutions with a competitive advantage in their financing, in their size and in their ability to take and absorb risks.
As things stand, the consequence will be to enhance incentives to risk-taking and leverage, with the implication of an even more fragile financial system. We need to find more effective fail-safe arrangements.
In approaching that challenge, we need to recognize that the basic operations of commercial banks are integral to a well-functioning private financial system. It is those institutions, after all, that manage and protect the basic payments systems upon which we all depend. More broadly, they provide the essential intermediating function of matching the need for safe and readily available depositories for liquid funds with the need for reliable sources of credit for businesses, individuals and governments.
Combining those essential functions unavoidably entails risk, sometimes substantial risk. That is why Adam Smith more than 200 years ago advocated keeping banks small. Then an individual failure would not be so destructive for the economy. That approach does not really seem feasible in today’s world, not given the size of businesses, the substantial investment required in technology and the national and international reach required.”
Definitely worth reading.
Source: How to Reform Our Financial System. PAUL VOLCKER. NYT, January 30, 2010
Tags: Adam Smith, Commercial Banks, Competitive Advantage, Critical Times, Depositories, Everyday Vocabulary, Financial Institutions, Implication, Leverage, Liquid Funds, Ny Times, Nyt, Paul Volcker, Payments Systems, Public Outrage, Reliable Sources, Substantial Investment, Substantial Risk, Unfair Treatment, Worth Reading
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Which Way Now? Hard Assets or Government Bonds?
Sunday, January 31st, 2010
The debate in the market between inflationists (majority) and deflationists (minority) continues to complicate investors’ ability to make decisions about where to deploy funds.
During the course of the year, inflationists benefited from the tailwind provided by the declining value of the dollar. The rally in risk assets came thanks to Bernanke’s deflation-busting policy, and, ironically, therefore, as long as the news remained dire on GDP growth and unemployment, we could count on interest rates to remain around zero percent, and the dollar to continue lower as faithless investors ditched it.
For nine months, the dollar declined as the market put risk back “on.” At the very beginning of the rally, in March 2009, the market’s mood was very dark. The genesis of the rally was the short covering of bank stocks and financials, and the full scale launch of the dollar funded carry trade, mostly taking place in institutional and hedge fund trading rooms. Except for the wiliest, it most certainly was not driven by retail investors. The retail investor is usually late to the party once fear of missing opportunities sets in.
The rally in the dollar as of late November has confused the inflationist view as the tailwinds appear to have reversed. This has been, and remains a difficult time to make risk-based investment decisions.
by Pierre Daillie (AdvisorAnalyst.com), GlobeAdvisor.com, January 31, 2010.
http://www.globeadvisor.com/advisoranalyst/aa20100131.html
Tags: Bank stocks, Bernanke, GDP, GDP Growth, Genesis, Globeadvisor, Government Bonds, Hedge Fund, interest rates, Investment Decisions, Late November, Launch, Nine Months, Rally, Retail Investor, Retail Investors, Short Covering, Tailwind, Tailwinds, Zero Percent
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Correction Characterized by Typical Risk Aversion Patterns
Sunday, January 31st, 2010
The past week’s performance of the major asset classes is summarized in the chart below – a set of numbers indicating heightened risk aversion on the back of growing concerns about sovereign debt issues, the longevity of the global economic recovery and Chinese policy tightening. The only asset classes to end the week in the black were the US dollar (+1.5%) and Treasury Inflation-Protected Securities (TIPS) (+0.3%).
Source: StockCharts.com
The chart below, obtained from the Wall Street Journal Online, also includes the performance of a few other financial markets during the past week.
Source: Wall Street Journal Online, January 29, 2010.
On the topic of risk aversion, and more specifically as far as equity markets are concerned, a number of indicators make for interesting reading.
Stock market leadership
It is interesting that since the start of the nascent US stock market correction on January 20, cyclical sectors such as the Materials SPDR (XLB), Technology SPDR (XLI) and Energy SPDR (XLE) have been leading the market lower. Traditionally defensive sectors such as Consumer Staples SPDR (XLP), Health Care SPDR (XLV) and Utilities SPDR (XLU) also declined, but to a lesser extent than the S&P 500 Index as a whole (-6.6%) and the cyclical sectors.
Source: StockCharts.com
Emerging markets
The chart below shows the relative performance of the MSCI Emerging Markets Index versus the Dow Jones World Index. After strong outperformance by emerging markets since November 2008, the relative performance has been moving sideways for the past three months, with emerging markets underperforming since early January.
Source: StockCharts.com
Small caps
Small-cap stocks have strongly outperformed large caps since the start of the March rally (see chart below). The relative line has been volatile since October, but it would not come as a surprise if small caps are heading for a bout of underperformance (i.e. a declining line).
Source: StockCharts.com
The above are some of the patterns one would expect typically to emerge during a correction phase. These will be on my radar screen in an attempt to assess the magnitude of the nascent correction.
Tags: Asset Classes, Chinese Policy, Consumer Staples, Debt Issues, Emerging Markets, Energy Spdr, Inflation Protected Securities, Market Leadership, Msci Emerging Markets, Msci Emerging Markets Index, Outperformance, Relative Performance, Risk Aversion, Small Cap Stocks, Small Caps, Stock Market Correction, Treasury Inflation Protected Securities, Us Stock Market, Wall Street Journal, Wall Street Journal Online, Xlu
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Global Stock Markets: Performance Round-up
Sunday, January 31st, 2010
A summary of the movements of major global stock markets for the past week and various other measurement periods is given in the table below.
Click here or on the table below for a larger image.
The nascent stock market correction gained momentum over the past week on the back of growing concerns about sovereign debt issues, the sustainability of the global economic recovery and Chinese policy tightening. The MSCI World Index and the MSCI Emerging Markets Index declined by 2.6% and 3.1% respectively during the past week, taking the losses for January to 4.2% and 5.6%. Among mature markets, the Scandinavian bourses and Belgium bucked the trend, whereas Russia, Venezuela and Chile returned positive numbers among developing markets.
Top-performing indices this week were Estonia (+11.4%), Lithuania (+8.2%), Bangladesh (+5.7%), Slovakia (+3.5%) and Ukraine (+3.3%). At the bottom end of the performance rankings, countries included Luxembourg (-4.8%), South Korea (-4.7%), China (-4.5%), Japan (-3.7%) and Austria (-3.4%).
Notwithstanding the huge rally since the March lows, only the Chile Stock Market General Index – again a solid performer as a result of a positive assessment of Sebastian Pinera’s election victory – has been able to reclaim its 2007 pre-crisis peak and is now trading 8.8% higher.
As far as the US indices are concerned, Wall Street closed on a weak note, reversing gains of earlier in the week to record a third consecutive down-week. All ten economic sectors (as measured by the SPDR exchange-traded funds [ETFs]) closed lower, with the defensive sectors outperforming the cyclical ones.
The major moving-average levels for the benchmark indices are also given in the table above, with most trading below their 50-day moving averages. With the exception of the Chinese Shanghai Composite Index, all the indices are still trading above the key 200-day moving averages.
Of the 99 stock markets I keep on my radar screen, 40% recorded gains, 55% showed losses and 5% remained unchanged. The performance map below tells the past week’s rather bearish story.
Emerginvest world markets heat map
Source: Emerginvest (Click here to access a complete list of global stock market movements.)
Tags: Austria 3, China, Chinese Policy, Debt Issues, Economic Sectors, Election Victory, Emerging Markets, ETF, ETFs, Exchange Traded Funds, Global Stock Markets, Mature Markets, Moving Averages, Msci Emerging Markets, Msci Emerging Markets Index, Msci World Index, Performance Rankings, Radar Screen, Russia, Sebastian Pinera, Shanghai Composite Index, Showe, Sovereign Debt, Spdr, Stock Market Correction
Posted in Canadian Market, China, ETFs, Markets | Comments Off
Year-End/New-Year Indicators: Progress Report
Saturday, January 30th, 2010
An old stock market saw tells us if the month of January is higher, there is a good chance the year will end higher, i.e. the so-called “January Barometer”. On the other hand, every down-January since 1950 has been followed by a new or continuing bear market or a flat year. “As January goes, so goes the year,” said Jeffrey Hirsch (Stock Trader’s Almanac).
The result for January is in, and it is not a good one: The Dow Jones Industrial Index closed 3.5% down on the month and the S&P 500 Index 3.7% lower.
Also, according to Hirsch, the “December Low Indicator” says that should the Dow Jones Industrial Index close below its December low anytime during the first quarter, it is frequently an excellent warning sign. The key number to watch was the low of 10,286 (December 
– now history with the Dow down to 10,067.
Although this is not particularly scientific research, it is clear we are not seeing a good start to 2010 and should at least be mindful of these indicators.
Considering the short-term technical picture of the Nasdaq Composite Index, Adam Hewison (INO.com) provides a short analysis showing a rather negative downside break. Click here to access the presentation. (He also recently analyzed the Dow Jones Industrial Index and the S&P 500 Index. Click here and here.)
Tags: Almanac, Barometer, Bear Market, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Index, Downside, First Quarter, Good Chance, Jeffrey Hirsch, Key Number, Month Of January, Nasdaq Composite Index, New Year, Progress Report, Stock Market, Stock Trader, Warning Sign, Year End
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Picture du Jour: Gold price benefits from declining production
Saturday, January 30th, 2010
With the bullion price (temporarily?) under pressure – and it really is anybody’s guess how the short term will unfold – a long-term metric such as gold production provides an interesting perspective.
Research by Cormark Securities (via US Global Investors – Weekly Investor Alert), shows that global gold production peaked in 2001 at 2,600 metric tons. World output has been steadily declining from that point because of lower grades and higher capital costs that are making it uneconomic for producers to bring new gold onto the market.
I expect the production trend to keep heading south and thereby provide solid support to the yellow metal in the medium term.
Source: US Global Investors – Weekly Investor Alert, January 29, 2010.
Tags: Bullion Price, Cormark Securities, Global Gold, Global Investor, Global Investors, Gold, Gold Bullion, Gold Market, Gold Price, Gold Production, Guess, Investor Alert, Metric Tons, New Gold, Perspective, Producers, Production Trend, Term Source
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Chinese Stocks Break Down
Saturday, January 30th, 2010
The Chinese Shanghai Composite Index – the index that led the turnaround in global stock markets by five months – seems to be in trouble. The Index has just become the first major index to breach its key 200-day moving average, often seen as an indicator of the primary trend. In order to guard against whipsawing one would have to wait a few days for the break to be confirmed.
Source: StockCharts.com
Tags: Break, Chinese Stocks, Few Days, Five Months, Global Stock Markets, Major Index, Moving Average, Shanghai Composite Index, Turnaround
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Is a Narcissist Keeping You Awake At Night?,
and other Weekend Reads
Friday, January 29th, 2010
Here are AdvisorAnalyst’s weekend reads. Have a great weekend…..keep warm!
How Come I Feel More Tired When I Sleep Longer?
There’s nothing more frustrating than sleeping longer to “catch up” on much-needed sleep, only to feel even more tired that day. Sometimes, sleeping longer than usual does the trick for rejuvenating an over-tired body, but sometimes it can make matters worse. Why does this happen? More importantly, how can you avoid it?
Is A Narcissist Keeping You Awake At Night?
Narcissists can keep a neurotic awake, because the fear, hurt and/or anger (and subsequent guilt and anxiety over being so angry) a neurotic feels at being cared so little about can play over and over in their mind, making it difficult to fall asleep. What can you do about it if you’re sleeping with a narcissist?
Can’t sleep? Maybe it’s something you ate–or didn’t. The foods we eat can dramatically affect how much, and how well, we sleep. Some calm and relax, some wake up the nervous system, and some just downright wire you for the night.
Young adults at 20 now at risk of heart disease
Your kids have now joined you in the growing number of Canadians at risk for cardiovascular disease, according to the Heart and Stroke Foundation of Canada.
Divorce And 5 Reasons Not To Go To Bed Angry!
Getting angry may really be a cry for contact, having lost our connectedness with each other; it may be expressing feelings of rejection, grief, loneliness, or a longing to love and be loved. Often anger is saying I love you, or I need you, or please hear me, yet we are hurling abuse at each other instead.
The History of Valentine’s Day
Every February, across the country, candy, flowers, and gifts are exchanged between loved ones, all in the name of St. Valentine. But who is this mysterious saint and why do we celebrate this holiday? The history of Valentine’s Day – and its patron saint – is shrouded in mystery. But we do know that February has long been a month of romance. St. Valentine’s Day, as we know it today, contains vestiges of both Christian and ancient Roman tradition. So, who was Saint Valentine and how did he become associated with this ancient rite? Today, the Catholic Church recognizes at least three different saints named Valentine or Valentinus, all of whom were martyred.
“Doga”, yoga and meditation for dogs and their owners
Dog-owners and yoga-lovers have finally found a way to bring their two passions together: doga. Yoga classes for dogs and their owners are sprouting all around the United States, combining massage and meditation techniques with gentle canine and human stretching. Ludicrous or blissfully relaxing?
Sitting in a dark movie theater with your friends and a tub of buttery popcorn sounds like a perfect way to spend a Saturday night – and it could be, if you are willing to share your popcorn with the entire row of moviegoers around you.
How To Make Red Velvet Cupcakes
There are many holidays that would benefit from the addition of red velvet cupcakes to your celbration. Top them with candy hearts for Valentine’s Day, blueberries for Memorial Day or the 4th of July, and green sprinkles for Christmas. Of course, you don’t need a “red” holiday to enjoy these single serving treats. Whip up a batch of red velvet cupcakes whenever you’re in the mood.
Splitting Household Chores Between You and Your Partner
“I picked up the kids from daycare all week; you bathed the dog.”
13 Discipline Tricks from Teachers
As I sat on a teeny-tiny chair reading to Vivian in her kindergarten classroom, I noticed her teacher, Debbie, do something that made my jaw drop. “David called me ‘liar liar pants on fire!’ and he didn’t stop!” one boy reported to Debbie. Debbie took David’s hand and said, “Come over here and help me make sure I have enough milk for snack.”
A sliced Carrot looks like the human eye. The pupil, iris and radiating lines look just like the human eye…and YES science now shows that carrots greatly enhance blood flow to and function of the eyes.
Stefan Aschan: Getting Raw With Honey
Honey, yes honey. No, not your sweetheart — the one you adore and want to spend the rest of your life with. Rather, the honey that is produced from the busy bees.
Social media has taken over the way we connect and communicate with our friends and family. From your boy/girlfriend to the random kid who ate glue in grade school, we now can keep up with goings-on of everyone we cross in our path.
Exercising feet can help avoid injuries to back, other body parts
Our feet are the most used and abused part of our body. Our feet are our foundation; they are built for energy propulsion and shock absorption of the entire body. Yet we give them so little attention. As we all get back to our fitness programs, take care of your feet so you can achieve your goals.
Is sleep deprivation interfering with your kids’ learning?
Teachers no doubt saw plenty of yawning, sleepy-eyed kids stumbling to school this week, struggling to adjust to the time change.
Valentine Pancakes with Maple Raspberry Sauce
Make breakfast special with these heart-shaped buttermilk pancakes topped with a sweet ane easy-to-make raspberry-maple sauce. Other than tasting great, they can also be made ahead a reheated for an any-time treat.
Valentine’s Day Gifts We Actually Want
I like getting Valentine’s Day gifts as much as the next girl, but I can’t help but nitpick when I get a rose bouquet from the gas station. This year, instead of being passive (or worse, passive-aggressive), I’m forwarding this convenient list on to my significant other — I won’t be disappointed, and he’ll be happy that the pressure’s off.
Tags: Canadian Market, Candy Flowers, Cardiovascular Disease, Connectedness, Expressing Feelings, Flowers And Gifts, Heart And Stroke, Heart And Stroke Foundation, Heart And Stroke Foundation Of Canada, Heart Disease, History Of Valentine, Loneliness, Longing, Narcissist, Narcissists, Patron Saint, Risk Of Heart Disease, St Valentine, Valentine Day, Valentine S Day, Young Adults
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India’s Growing Appetite for Energy
Friday, January 29th, 2010
India’s appetite for energy continues to grow, pushing Indians to consume coal in ever great quantities. Whole cities, like Jharia, in eastern India, are disappearing. At a time when Global Warming is at the top of world’s agenda, FRANCE 24 takes you to a town sacrificed to the pursuit of energy. Click the image for the video.
Tags: Agenda, Appetite, Coal, Eastern India, Emerging Markets, France 24, Global Warming, India, India India, Indians, Quantities
Posted in Bonds, Emerging Markets, Gold, India, Markets | Comments Off
