The news was clear that the Japanese economy would soon face recession. It has been made evident that this was true after reports surfaced that Japan had suffered a negative growth in GDP of .4% in the July-September quarter and a 3.7% loss in the previous quarter. Two consecutive quarters of negative GDP growth is the standard for a defined recession. Read more…
After Henry Paulson outlined the new goal of the TARP program to buy shares of stock in banking corporations rather than purchase bank debt, investors went into panic mode. There are many reasons as to why investors should be unhappy with the new plan but the main reason is a complete theft of shareholder equity. Read more…
Investment money typically pours into defensive names at the first sign of an economic slowdown. Much of the larger returns from defensive names is from a change in investor sentiment, where investors pump up the valuations of defensive names to level that are above normal. We are finally getting some kind of proof that a shrinking economy really does help the discounters, and its coming from a fast food chain. Read more…
Stimulus packages around the world are slowly appearing. Just yesterday China announced that it would create its own $586 Billion economic stimulus package to make up for the zero export growth it expects in the upcoming year. The Chinese economy is centered around the growth of exports to developed nations. Read more…
Another poor jobs report came out today that put the number of jobless Americans at the highest in 14 years at the current rate of 6.5%. This is bad news all around and will inevitably affect consumer confidence, total spending, and the housing and finance market that is dealing with large amounts of people who are already in a position that they can’t make payments. Read more…
Failing banks have all used the same system of dumping debt. Form a substitute bank simply planned to fail to dump the bad debt it holds. Simply, Lehman hopes to transfer its billions of bad loans to a company that it hopes will do well, but is miserably doomed from the start. The new company will likely fail in its first few months as writeoffs will be larger than what the company will make. Read more…
Surely we can all remember the Reagan bailout of Chrysler in the 1980s and the talk is that the democratic presidency might feel some pressure to start working with US Automakers. Democratic challengers are a favorite with unions, especially with industries that are considered “American.” There is no business out there in a need of some financial help than the US automakers, while it would probably not be a sound financial decision for a country so heavily in debt there is going to be some pressure from politicians and union directors alike. Read more…
The credit crunch climate has cooled off as commodities are bringing up consumer confidence as they fall. This drop in prices is favorable to the average joe who is feeling a bit of a slowing economy. Luckily a drop in commodities across the board should free up some discretionary spending money and boost numbers this quarter. Looking out, the R word (recession) is nearing yet again. Read more…
Trading the markets is mentally demanding, especially when working with the intraday trading ranges that bounce often though irregularly. Traders who focus on short time frames often become exposed to the effects of tunnel vision, looking at a chart and a position in only one way. Tunnel vision can lead to large losses, especially when long term trends and chart patterns make their mark on short chart frames. Read more…
The SEC is finally giving some input on the practice of naked short selling but only in the realm of some desperate financial companies. The rest of the market is still available to short to the death as often happens with small cap stocks.
Naked shorting is selling shares before it is known that any shares can be bought back. Often this is done well past the companies float and to such an extent that share prices simple have to drop. The downward pressure that billion dollar firms can put on shares with naked shorts is tremendous, the SEC should jump in and stop this practice now. Read more…
The talk of inflation has never been this high. Bernanke and company are trying very hard to keep the markets up while keeping inflation lower than the key 3%, doing so is problematic. Trying to infuse billions of dollars without making prices rise universally is against the laws of economics. So far, that extra cash has only been seen in products high in demand: sugar, corn, oil, gold, silver. Read more…
It was interesting to look over the newswire today and see that Barack Obama is speaking out against oil speculation and threatening to tighten “loopholes” in the oil trading industry that keep the government from investigating the effects of speculation. The market to Senator Obama: speculation is just a natural part of the business cycle. Read more…
America as a whole has had a long disagreement with CEO pay, amongst a wide array of other high paid members of society. The baseball player, the entertainer, and the corporate executive, the million dollar a year salaries are abound and even higher in 2007. With the economy lagging, businesses failing, and severance pay higher than ever for failed CEOs, is America justified with its hatred for the corporate elite? Read more…
January to March quarter posted a 0.9% gain in GDP, giving investors the fundamental understanding that textbook recession is out of the picture. It was certain that investors would respond favorably, and they did. The dow was up 52 points to 12,646. This kind of optimism is great for a market that’s been beaten down by high commodity prices and a slowing economy.
Read more…
As the market livens up, it should be obvious to investors that the scams of the market are plentiful as well. Though the pump and dump nearly died at the beginning of the internet age, today these schemes are still doing quite well.
The pump and dump scheme is centered around two major contributors: pure speculation and illiquid stocks. Pump and dump operators never pick stocks with high volume, they instead look to find low volume stocks that can be pushed up in value on more buying volume. More people interested in buying a stock means that through competition they slowly push up the bid and ask prices. Read more…
I don’t think anything shines as bright as the movie theater as a perfect example of the amount of disposable income in the hands of people. The audiences are largely made up of young adults who earn less than older movie-goers but have less financial responsibilities thus rarely cut back on their spending when the economy slows. Older viewers are more likely to cut back on their entertainment expenses and likely put less money in the hands of their children to go see the new hot thriller.
Read more…
In this wild and unpredictable market, the forest for the trees approach of taking investments in sectors rather than individual stocks is certainly showing its strength. The up and down markets of today can be ridden out with this approach that not only have logical appeal, but plenty of evidence to back it up. Quite frankly, individual investors are horrible at picking individual stocks and would instead get the same return from investing in the sector rather than the company. Read more…
Industrial output dropped again for the second time in 3 months down .7% from last month. Industrial goods are the lifeblood of the economy. Industry that creates products generates wealth and maintains a healthy cycle. Manufacturing dropped even more with a .8% drop from a month ago.
Wealth is created from generating more revenue than is needed to complete a good. In the case of automotive, Toyota buys $10,000 worth of parts that are merely paperweights until assembled. At that point it becomes a $15,000 car that generates wealth of $5,000. The customer gets a necessity, the producer gets a hefty profit. The net result is the creation of wealth which can only happen when a good is produced for more than it costs. Read more…
The long term trend is definite. The big bankers are largely dependent on central banks to back up their own poor investments with bailouts and other solutions such as liquidity loans and collateral for treasury transactions. While these decisions ultimately hurt the taxpayer, this kind of benefit has been particularly beneficial to the big bankers. Small and regional banks are unlikely to receive any credit or help from the Federal Reserve though large banks readily get huge handouts for the greater good of the people. Read more…
Now that the dollar is its cheapest in quite some time, 50% discount to the Euro in just 5 years, there is some great room for foreign companies to start the buying spree. The market slowdown and minor correction is likely to start off the investment from foreign investors. Stocks, by price earnings multiple are the cheapest in years, a lower dollar makes that proposition even better for overseas investment.
Iran finally stopped selling oil in dollars, which will further lower the demand for greenbacks and as a result, their value on the open markets. The Japanese buy a considerable amount of their oil from Iran, and are now contracting to buy oil in yen rather than USD. While Japan has been buying up a large portion of US debt and dollars, the buying will likely slow or stop as they have no need outside the realm of oil. This leads me to think that Japanese buying in the US markets will explode. The US dollar reserves of Japan will likely turn to US securities, as the dollar buys little else around the world. Read more…
Poor timing, too low price points? No, it appears that Yahoo might be avoiding a Microsoft buyout solely for sentimental reasons. Now that Jerry Yang is the CEO, it appears he’s wanting to hold onto the company he worked so hard to start back in his own college years at Stanford.
Yang owns about 4% of the company that is currently worth $1.5 Billion, his stakes are huge and he’s still drawing the infamous $1 salary that is common with many tech giants. His wealth has been derived in its entirety from the growth and capital gains he’s received as a huge shareholder in Yahoo. As CEO and a founder, it seems that his own unwillingness to sell might lay in a dislike for Microsoft and sentimental views of Microsoft rather than what shareholders want. Read more…
Bonds, ETF, Forex, Futures and Commodities, Investing, Real Estate, Round Up, Stocks
Oil prices are sure to affect more than just the casual commuter. The price of oil is so high now that the price of goods are following. Very few items that are sold in stores are local, most must be shipped around the country and around the world before making it to the aisle of your favorite supermarket. Today, the price of oil can affect everything from commodity prices, the cost to fly to a vacation spot, or the price of millions of goods made with oil such as plastics. Read more…
The jobless report was released today which shows the amount of new people currently seeking unemployment benefits. This month showed a jump of 38,000 people to 407,000 people. Remember that this statistic is for the amount of NEW people, not an accumulation of people over the course of the year. This is 407,000 people who have lost a job in the last month. Just a year ago the stats showed just 319,000 people seeking unemployment benefits, a near 30% increase year over year. Read more…
Durable goods orders were down 1.7% last month. Ouch. Durable goods are things like appliances, your stove, your washer dryer etc. This might be due to great weather stateside, but I doubt that people still hang their laundry on clotheslines. Read more…
Ford Motors has been going down the tubes only to benefit Tata motors, the equivalent of Toyota to developing nations. The American automakers struggle with Unions and pension plans has forced Ford to sell the Jaguar brand and Land Rover to Tata motors for just $2.3 Billion, less than half the $5.2 Billion that Ford paid for both brands. Read more…
