More on Related Themes
2014-12-19 Solar Growth Not Impacted by Oil by Edward Guinness of Guinness Atkinson Asset Management
The recent fall in the oil price has caused the share prices of solar stocks to fall. This fall is indicative of a growing negative sentiment towards energy investing, but it is not supported by rational analysis of the economics of the solar industry.
2014-12-16 Oil, Employment, and Growth by John Mauldin of Mauldin Economics
Last week we started a series of letters on the topics I think we need to research in depth as we try to peer into the future and think about how 2015 will unfold. In forecasting US growth, I wrote that we really need to understand the relationships between the boom in energy production on the one hand and employment and overall growth in the US on the other.
2014-12-13 China Wants to Conduct the World's High-Speed Rail Market by Frank Holmes of U.S. Global Investors
The Chinese want to return to the railroad business. This time, however, they strive to become the world’s leading go-to provider of high-speed rail and exporter of mass transit technology.
2014-12-13 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The Fed prepares to take a "considerable" step. We could be in for another round of emerging market volatility.
2014-12-10 Who’s Really in The Kingdom’s Gun Sights? by Doug Holt of AdvisorShares
According to the EIA, U.S. crude oil imports averaged about 7.3 million barrels per day last week with Canadian barrels making up 3.2 million barrels of the total. U.S. commercial reserves increased by 1.9 million barrels week over week where total inventories fell 3.7 million barrels versus expectations of a build of 950,000.3 Are we at the beginnings of a rebalancing of the market? Possibly.
2014-12-10 Lessons Learned in 2014 by Seth Masters of AllianceBernstein
In 2014, US stocks forged ahead, international developed and emerging-market stocks lagged, bonds did better than expected, and the IRS took a bigger bite. Here are some lessons for US investors to carry forward into 2015.
2014-12-09 Designing Balanced DC Menus: Considering Equity Investments by Stacy Schaus, Ying Gao of PIMCO
Defined contribution investment lineups typically provide numerous equity choices but still may lack adequate diversification and return potential. Participants may benefit by accessing high-growth markets such as emerging markets and tapping in to dividend-paying stocks. Retirement outcomes could improve further by including portfolios structured using fundamental measures rather than market capitalization.
2014-12-06 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
Oil isn't the only commodity enduring a significant correction; The European Central Bank moves closer to QE; The U.S. is nearing full employment, but inflation holds the key to monetary policy
2014-12-05 Is the Oil Price Slump an Early Holiday Gift for Some Consumers? by Virginie Maisonneuve, Ji Young Park, Mark Richards of PIMCO
With 60% of global GDP driven by consumers, the impact that sustained lower oil prices will have on the global economy is an important factor for investors to take into account. The benefits of lower oil prices will not be evenly distributed and it is important to think about countries that stand to benefit more because of higher consumption and/or less economic dependence on oil exports.
2014-12-02 The Tooth-Fairy Economics of Jeff Madrick by Laurence B. Siegel (Article)
Incentives don't matter, tradeoffs don't exist and there are no limits to what the government can give you. Those who believe this dogma are likely to still have faith in the tooth fairy. In Seven Bad Ideas, a critique of the neoclassical revival in economics that surrounded Milton Friedman and that affected policy and politics worldwide for more than a generation, Jeff Madrick emerges as tooth-fairy economics' chief exponent.
2014-11-29 Giving Thanks to the Innovators and Creators of Capital by Frank Holmes of U.S. Global Investors
I’m grateful to live in a society that monetarily rewards such innovation and problem-solving, in addition to the intrinsic rewards entrepreneurs receive for improving the lives of others.
2014-11-27 Pick and Mix: Fresh Ideas for Diversifying Bond Exposure by John Taylor of AllianceBernstein
Policy backdrops and growth trajectories around the world are showing increasing signs of divergence. Yet many bond investors continue to congregate in a few selected pockets of the fixed income universe. In our view, it’s a perfect time to reconsider diversification tactics.
2014-11-25 Middle East/Africa: Regional Economic Review - Q3 2014 by Team of Thomas White International
Despite continuing geopolitical tensions and subdued oil prices, the Middle East and Africa region had a largely positive third quarter. South Africa, the largest economy in this region, saw its labor problems diminish while Egypt reported a string of encouraging data, signaling that it is steadily recovering from a long phase of political and economic turbulence.
2014-11-24 On the Verge of Chaos by John Mauldin of Mauldin Economics
In this week’s letter we’re going to explore some of the ramifications of the currency war that Japan is precipitating. It is more than just Germany, Korea, and China having issues and needing to contemplate their own competitive devaluations. If the yen goes too far too fast, there will be geopolitical repercussions far beyond the obvious first-order connections.
2014-11-24 Emerging Markets Equity Commentary: October 2014 by Team of Thomas White International
Emerging market equity prices turned volatile during October as concerns about weak global growth and the impending close of bond purchases by the U.S. Federal Reserve unnerved investors. Still, some of the large emerging markets in Asia rebounded strongly during the second half of the month.
2014-11-15 Explore and Discover the Winners When Gas Prices Fall by Frank Holmes of U.S. Global Investors
West Texas Intermediate (WTI) oil for December delivery is currently priced at $75 per barrel, Brent for January delivery at $78 per barrel. Many investors, publications and news sources focus only on the drawbacks to falling oil and gas prices-don't get me wrong, there are many-but today we're going to give the spotlight to the biggest winners and beneficiaries.
2014-11-10 Emerging Markets Trends: What’s Negative for One Market May Boost Another by Steve Cao of Invesco Blog
Economic conditions have continued to deteriorate in emerging markets, and corporate earnings forecasts have fallen. Overall, emerging markets were down 4.3% in the third quarter, underperforming the developed world. In the midst of this negative news, however, we’re seeing a few bright spots start to emerge, and we’ve been able to add holdings that, in our view, became mispriced during market volatility.
2014-11-06 Global Economic Overview: September 2014 by Team of Thomas White International
Global economic growth concerns resurfaced during the month of September, as data from the Euro-zone suggested that select large counties yet again face recession. Even Germany, the bulwark that shielded the common currency area during the fiscal crisis, has slowed down as subdued external demand has taken a toll on exports.
2014-11-01 Don’t Be Spooked by Market Volatility—Opportunity Is Still Knocking! by Frank Holmes of U.S. Global Investors
One of the greatest fears this October—possibly the most volatile month of the year—has been the correlation between the S&P 500 Index’s ascent in the first three quarters of the year and the possible ramifications of the end of quantitative easing (QE).
2014-10-31 Weekly Economic Commentary by Team of Northern Trust
Stress testing is performed in a number of arenas. Tools and parts are stressed to ensure that they will stand up to extreme conditions. Medical patients are stressed to detect heart disease. Computer systems are stressed to ensure that they can operate stably at peak times.
2014-10-26 A Scary Story for Emerging Markets by John Mauldin of Mauldin Economics
The all-too-predictable effects of a rising dollar on emerging markets that have been propped up by hot inflows and the dollar carry trade will spread far beyond the emerging markets themselves. This is another key aspect of the not-so-coincidental consequences that we will be exploring in our series on what I feel is a sea change in the global economic environment.
2014-10-26 Plot Twist…or a Different Book? by Liz Ann Sonders, Brad Sorensen & Jeffrey Kleintop of Charles Schwab
Volatility could continue but equity investors should keep the longer-term picture in mind, which we believe is positive. The U.S. economy is improving and monetary policy remains quite loose. The international picture is more concerning but diversification is important across asset classes. We currently favor emerging markets within a diversified international portfolio.
2014-10-23 Quarterly Review and Outlook by Team of Hoisington Investment Management
The U.S. economy continues to lose momentum despite the Federal Reserve’s use of conventional techniques and numerous experimental measures to spur growth. In the first half of the year, real GDP grew at only a 1.2% annual rate while real per capita GDP increased by a minimal 0.3% annual rate. Such increases are insufficient to raise the standard of living, which, as measured by real median household income, stands at the same level as it did seventeen years ago
2014-10-23 How Consensus Thinking Works Against Investors by Bob Andres of Andres Capital Management
Over the past several years we have used this newsletter to voice our concerns regarding the macro-economic landscape, while attempting to provide practical solutions for investors. Since our venture into financial commentary, we have questioned the veracity of consensus opinion and how it tends to be wrong, especially in regards to interest rates.
2014-10-22 Despite Volatility, This Bull Is Likely to Charge Higher by John Calamos, Gary Black of Calamos Investments
As the fourth quarter begins, the market has found itself engulfed in anxiety. Volatility has surged in the equity markets while the 10-year Treasury yield has dropped to 2%-leading some to question whether this bull market is breathing its last breath. We believe: * Global GDP growth will likely be in the 2.0%-3.0% range. * The U.S. is in the 5th or 6th inning of recovery, with slow but improving growth. * Despite the surge in volatility, this bull market has more room to run. * A balance of secular and cyclical growth companies presents the most attractive portfolio for this mid-cycle phase.
2014-10-21 Blurring the Lines Between Emerging-, Frontier- and Developed-Market Stocks by Mark Mobius of Franklin Templeton Investments
There has been some convergence in terms of how one might classify emerging-, frontier- or developed-market companies—and how they might fit into investors’ portfolios. Recently, we have noted an increase in liquidity and transparency of many frontier-market stocks (the smaller and lesser-developed subset of emerging markets).
2014-10-21 The Flat Debt Society by John Mauldin of Mauldin Economics
Since at least the beginning of 2006, the most asked question I get after a speech is “Do you think we will have inflation or deflation?” In an attempt at humor, my answer has been “Yes.”
2014-10-19 What the Strong Dollar Does to Yellow and Black Gold and Why We're Seeing Green by Frank Holmes of U.S. Global Investors
The United States is doing better than it has in years. Jobs growth is up, unemployment is down, our manufacturing sector carries the rest of the world on its shoulders like a wounded soldier and the World Economic Forum named the U.S. the third-most competitive nation, our highest ranking since before the recession.
2014-10-19 Weighing the Week Ahead: Is the Correction Over? by Jeff Miller of New Arc Investments
Was that the bottom? Nearly everyone is trying to time the market, so the financial media will focus on remaining risk versus signals of a bottom.
2014-10-16 The Right Question by Jeffrey Saut of Raymond James
In this business it has been said, “Sometimes knowing the right question is more important than actually knowing the answer.” Over the years I have found that old Wall Street axiom to serve me well. One example would be reading the footnotes in a company’s annual report.
2014-10-12 Weighing the Week Ahead: Can Corporate Earnings Reports Reverse the Stock Market Decline? by Jeff Miller of New Arc Investments
Last week featured a low signal to noise ratio – speech after speech, but little fresh information. This week heralds the start of earnings season. While we have a normal measure of government data, market participants will carefully parse the announcements and conference calls. This week will be all about earnings.
2014-10-11 Warning: Market Correction This Week? Did You See the Opportunity? by Frank Holmes of U.S. Global Investors
While stocks fell around the world this week amid growing concerns over global economic growth, Europe’s slowdown can’t stop emerging market population growth that drives long-term commodity demand. If the short-term market volatility concerns you, a solution is short-term tax-free municipal bonds. Check out the 5 Reasons Why.
2014-10-08 Letter to a Chinese "Little Emperor": It’s Nice To Be the King, but Not Always Easy by Francois Sicart of Tocqueville Asset Management
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, imagines writing to a privileged child of the "new" China, comparing such a child's coming-of-age with his own, in booming post-World War 2 France. He goes on to discuss "the curse of early money," and the pitfall it can cause for friendships and for personal development.
2014-10-07 A Q3 Letter to Clients: How to Navigate Rough Waters by Dan Richards (Article)
Each quarter I post a template for a client letter, as a starting point for advisors who want to send clients an overview of the three months that just ended and an outlook for the period ahead. Be sure to customize the letter to reflect your views, especially when it comes to recommendations for the period ahead.
2014-10-06 Emerging from the Global Competitiveness Ranks by Mark Mobius of Franklin Templeton Investments
The World Economic Forum (WEF) recently released its annual “Global Competitiveness Report,” which details the strengths and weakness of 144 countries in myriad factors including education, infrastructure, health and technology. There aren’t many huge surprises in the developed markets, as most countries’ overall rankings were fairly stable from the prior year. There were, however, a few interesting shifts in the ranks among emerging markets: some making leaps forward, and others, regressing.
2014-09-30 Asset Allocation in a Time of Complacency by Dimitri Balatsos of Tesseract Partners
Complacency is a dangerous mindset, especially for investors. Having been generously rewarded beyond their expectations, investors were coddled in the arms of complacency as 2013 drew to a close.
2014-09-30 Ebola by Bill O'Grady, Kaisa Stucke of Confluence Investment Management
Last week marked six months since the Ebola outbreak was identified in Guinea. The current Ebola epidemic is the most severe and most complex outbreak of the disease in the history of the virus. This week, we will explore the Ebola outbreak, looking at the origin of the disease and how it has spread and developed into a serious epidemic. Although it is hard to find comparable epidemics due to its complexities, we will look at other disease outbreaks in order to gain a better understanding of the scale of the current Ebola epidemic. We will finish with geopolitical and market ramifications.
2014-09-27 5 Reasons Why Short-Term Municipal Bonds Make Sense Now by Frank Holmes of U.S. Global Investors
Although short-term bonds might not be as sexy as common stocks in fashionable brands like Apple and Tesla, they play an important role in any serious investor's portfolio. Below are five reasons why investing in municipal bonds makes sense now more than ever.
2014-09-22 Alternative Approaches for Managing Emerging Market Equity Portfolios by Roger Edgley, Laura Geritz, Andrey Kutuzov, and Ajay Krishnan of Wasatch Funds
The shortcomings of indexing are especially evident in frontier markets, where some very small markets have significant weights. This paper discusses three approaches for targeting inefficiencies in emerging markets. These approaches are designed to fit together and complement each other within an investment portfolio. Overlap is generally minimal, so investors may reasonably employ all three.
2014-09-16 Authoritarianism versus Democracy: The Key Challenge to Chinese Ascendancy by Michael Edesess and Kwok L. Tsui (Article)
An intense debate has been underway for more than a decade about whether the East - China in particular - is in the ascendancy. Some argue this is so and that the West is in decline. Others say China's flawed political institutions will limit its monumental growth and render it precarious. This an especially opportune time to address these questions.
2014-09-14 What’s on Your Radar Screen? by John Mauldin of Mauldin Economics
So let’s look at what’s on my radar screen today. First up (but probably not the most important in the long term), I would have to say, is Scotland. What has not been widely discussed is that the voting age was changed in Scotland just a few years ago. For this election, anyone in Scotland over 16 years old is eligible. Think about that for a second. Have you ever asked 16-year-olds whether they would like to be more free and independent and gotten a “no” answer? They don’t think with their economic brains, or at least most of them don’t.
2014-09-13 Patiently Waiting for Mean Reversion by Frank Holmes of U.S. Global Investors
Because small caps tend to have higher beta than blue chips, you would expect them to outperform in a generally rising market—which we’re currently in. So it appears that a major rotation out of these riskier, more volatile stocks has inexplicably occurred, leading to the wide bifurcation between small and large companies. The good news is that, based on 20 years of historical data, stocks in the Russell 2000 tend to rally in the fourth quarter and continue steadily until around the end of the first quarter. Over this 20-year period ending in December 2013, the Russell has generat
2014-09-11 The Leapfrog: The Role of Technology in Accelerating Emerging Markets’ Growth by Mark Mobius of Franklin Templeton Investments
The potential for emerging and frontier markets to realize accelerated economic growth as a result of new technology transfer comes up regularly in our research findings. We have been increasingly excited about a new development—the capacity for new technology, particularly related to data over the Internet, to completely bypass swathes of older technology and business activity. We think this could lead to even more dramatic economic progress. In effect, the emerging markets are leapfrogging over the old technology and taking advantage of the newest technology today.
2014-09-06 The New Challenges of Price Discovery by Frank Holmes of U.S. Global Investors
In the past few years, price discovery—or the act of finding the “right” price for a security—has become much more challenging because of falling stock volume and widening bid-ask spreads. These challenges are directly attributable to the infiltration of high-frequency traders into the market, not to mention the expansion of dark pools and non-exchange trading.
2014-09-04 Emerging Markets Equity Commentary: July, 2014 by Team of Thomas White International
Emerging market equity prices continued to outperform the developed markets in July and ended the month with moderate gains. Markets in Asia significantly outperformed during the month, helped by signs of stabilizing economic growth in major markets such as China.
2014-09-03 Voya Fixed Income Perspectives – August 2014 by Christine Hurtsellers, Matt Toms of Voya Investment Management
Like the buzz of the alarm clock on the first day of school, the July/early August market selloff awoke investors to the fact that the lazy, carefree days can’t last forever. Though a single catalyst for the latest shift in sentiment is tough to identify, there are a number of suspects: ample geopolitical uncertainty, the possibility that strong U.S. economic data may hasten fed funds rate normalization and Fed rhetoric about froth in certain markets.
2014-09-02 Can Retirees Still Use a 4% Withdrawal Rate? Practical Applications of Monte Carlo Analysis by Wade Pfau and David Blanchett (Article)
Some advisors remain critical of Monte Carlo simulations, instead preferring to use analysis based on rolling historical periods or specific pre-defined scenarios. We believe Monte Carlo is a superior tool for measuring the uncertainties in long-term financial planning. As an example, we use it to predict the likelihood of a successful 4% withdrawal rate under today's market conditions.
2014-09-02 The Exaggerated Death of Inflation by Kenneth Rogoff of Project Syndicate
Modern central banking has worked wonders to bring down inflation. Ultimately, however, a central bank’s anti-inflation policies can work only within the context of a macroeconomic and political framework that is consistent with price stability.
2014-09-02 Banking on BRICS by Mark Mobius of Franklin Templeton Investments
In July, leaders of the five emerging market countries known as the “BRICS” (Brazil, Russia, India, China and South Africa) met in the Brazilian city of Fortaleza and announced the creation of a New Development Bank (NDB).
2014-08-29 Lucara Diamond Stock Sparkles, Reports Another Strong Quarter by Frank Holmes of U.S. Global Investors
Often it seems that gold gets all the fun when I write and speak about precious metals and minerals. But Vancouver-based Lucara Diamond has been turning heads here at U.S. Global Investors lately for a number of reasons, the most notable being that it continues to report stellar returns.
2014-08-28 The World is in Crisis…the Markets Are Not by Zachary Karabell of Envestnet
Markets have been gyrating for the past months in the face of a wave of geopolitical crises. But the chance of any of these crises dramatically altering the behavior of markets beyond the short-term is very, very slight.
2014-08-23 Managing Expectations by Frank Holmes of U.S. Global Investors
The third part of this series on managing expectations is devoted to fundamental resource stock evaluation. I’ll discuss some of the statistical tools we use to pick quality stocks during a treacherous bear market, such as what we’ve seen in gold stocks the last three years
2014-08-16 Managing Expectations - Part III by Frank Holmes of U.S. Global Investors
In the first of this three-part series on managing expectations, I discussed the role cycles play in the investment management process. At U.S. Global Investors, we actively monitor both short- and long-term cycles, from the annual seasonality of gold to four-year presidential elections, in order to manage expectations based on historical patterns.
2014-08-16 Bubbles, Bubbles Everywhere by John Mauldin of Mauldin Economics
You can almost feel it in the air. The froth and foam on markets of all shapes and sizes all over the world. It’s exhilarating, and the pundits who populate the media outlets are bubbling over. There’s nothing like a rising market to lift our moods. Unless of course, as Prof. Kindleberger famously cautioned (see below), we are not participating in that rising market. Then we feel like losers. But what if the rising market is … a bubble? Are we smart enough to ride it high and then bail out before it bursts? Research says we all think that we are, yet we rarely demonstrate th
2014-08-15 What Middle East Tensions Mean for Oil Prices & Equity Portfolios by Russ Koesterich of BlackRock
With turmoil in the Middle East dominating headlines, many investors are wondering what the recent and growing unrest in the region means for oil prices and for equity portfolios. Russ explains why oil prices are likely to remain elevated for the foreseeable future and why there’s a strong case for sticking with energy stocks even if oil prices don’t spike.
2014-08-12 Middle East/Africa: Regional Economic Review - Q3 2014 by Team of Thomas White International
With a geopolitical setback and a positive market development, the Middle East had a mixed second quarter. Amid the civil war in Syria, another conflict erupted in the region during the quarter as a militant group started systematically seizing territory from Iraqi security forces.
2014-08-11 Transformation or Bust, Part 2 by John Mauldin of Mauldin Economics
Envisioning a clear path through the issues from where we are today is not easy, though China certainly has more options than the world had with subprime by the middle of 2008, when there was so much toxic waste on the balance sheets of banks all over the world and there was no turning back. As we have emphasized in the past and will do today, China does have options. But each of the options has costs associated with it, and those costs are going up every day. Who pays and when is the simple question that most readers want to have answered, but therein lies the conundrum.
2014-08-11 What Countries are Hot? What Should a Momentum Investor be Looking at Now? by David Garff of Accuvest Global Advisors
In a previous whitepaper, we looked at using Momentum as a factor when investing across countries, and found it to be effective in generating outperformance vs. the benchmark.
2014-08-11 A Strengthening Case for European Bonds by David Zahn of Franklin Templeton Investments
The pace of the eurozone’s economic recovery has been so slow that many people are now asking whether quantitative easing (QE) is inevitable to support a recovery and prevent deflation. But David Zahn, portfolio manager for Franklin Global Government Bond Fund, thinks recent European Central Bank (ECB) interventions in the European financial markets already amount to QE. More importantly, he thinks the extensive set of measures that the ECB has announced not only may support Europe’s economic recovery, but bring a highly favorable backdrop for European fixed income investments gene
2014-08-09 Managing Expectations by Frank Holmes of U.S. Global Investors
Financial markets are influenced by relatively predictable cycles, a lesson we at U.S. Global Investors rely on to help us manage expectations and be effective stewards of your money. This is a theme I've frequently written about and discussed in investor presentations, one of which, “Anticipate Before You Participate,” is a classic that I often use to remind investors of these timeless principles.
2014-08-07 Federal Reserve Tapering Part I: Emerging Market Currency Performance by Bradley Krom of WisdomTree
While many investors tend to focus on changes of currency spot rates, a primary reason we have long advocated that investors allocate to EM currencies is the income potential driven by the higher interest rates in many emerging market countries. In today’s yield-starved environment, EM currencies remain one of the most significant means of generating income in a portfolio while limiting interest rate risk.
2014-08-01 Russia’s Eurasian Vision by Nouriel Roubini of Project Syndicate
The escalating conflict in Ukraine between the Western-backed government and Russian-backed separatists has focused attention on the Kremlin’s long-term objectives. Though Russian President Vladimir Putin’s immediate goal may have been limited to retaining some influence in Ukrainian affairs, his longer-term ambition is much bolder.
2014-07-26 Second Quarter Earnings: Marching Toward a Strong Recovery by Frank Holmes of U.S. Global Investors
It’s earnings season once again, and though only a quarter of the Russell 1000 has reported so far, the news is just north of positive. All signs indicate that the market has dusted itself off and is back to its cheerful self after a ho-hum first quarter, which was negatively affected by harsh winter weather.
2014-07-25 The Outlook for Emerging Market Bonds by Shane Shepherd of Research Affiliates
Emerging market bonds exhibit high real yields and improving credit quality. In addition, emerging market currencies are likely to strengthen. This article explains why emerging market bonds issued in local currencies might be a solid addition to a diversified portfolio.
2014-07-23 Should EMC Corp Break Itself Apart?: FAST FUNdamental Analysis by Team of F.A.S.T. Graphs
On Monday a Wall Street Journal article reported that the hedge fund Elliott Management Corp has taken a more than $1 billion stake in EMC Corp (EMC) and revealed that it intends to petition the company to break itself apart. Elliott believes that this would unlock shareholder value. Implicit in that thesis would be the idea that EMC Corp is not receiving full value from the market. This article is offered as an in-depth analysis of the fundamental value of EMC Corp in relation to how the market is evaluating its business.
2014-07-21 A Farmland Investment Primer by Julie Koeninger of GMO
Farmland is a real asset that combines solid investment fundamentals with the potential for attractive cash yields, inflation hedging, and consistent returns from biological growth. Furthermore, farmland total returns tend to be uncorrelated with financial asset returns, offering genuine portfolio diversification for institutional investors.
2014-07-16 U.S. Now World’s Largest Producer of Oil & Gas by Gary Halbert of Halbert Wealth Management
Recent reports have confirmed that the US is now the world’s largest producer of crude oil with output exceeding 11 million barrels per day in the 1Q of this year. This surpasses the daily oil production of Russia and Saudi Arabia.
2014-07-15 The Fed Announces Its Intentions by Chris Maxey, Ryan Davis of Fortigent
Minutes from the mid-June FOMC meeting were released last week, offering keen insight to the Federal Reserve’s current thinking on the economy. While the Fed suggests that the economic outlook is benign, the minutes offered guidance on the Fed’s exit path, which is expected to arrive by the end of the year.
2014-07-12 2014 Commodities Halftime Report by Frank Holmes of U.S. Global Investors
What a difference six months can make. After a disappointing 2013, the commodities market came roaring back full throttle, outperforming the S&P 500 Index by more than 4 percentage points and 10-year Treasury bonds by more than 6.
2014-07-05 I'm Grateful to Live in America. Here's Why. by Frank Holmes of U.S. Global Investors
An important principle of our investment process at U.S. Global Investors is a belief that government policies are a precursor to change. As a result, we closely monitor the fiscal, monetary and other impactful governmental policies of the world’s largest countries, both in terms of economic stature and population. We’re always listening for the proverbial shot heard around the world. As we approach America’s Independence Day, this belief rings especially true.
2014-07-05 Central Bank Smackdown by John Mauldin of Mauldin Economics
And so it is that on a beautiful July 4 weekend we will amuse ourselves by contemplating the serious smackdown that central bankers are visiting upon each other. If the ramifications of their antics were not so serious, they would actually be quite amusing. This week’s shorter than usual letter will explore the implications of the contretemps among the world’s central bankers and take a little dive into yesterday’s generally positive employment report.
2014-07-01 The 2014 Mid-Year Geopolitical Update by Bill O'Grady of Confluence Investment Management
As is our custom, we take the middle of the year to reflect on the current geopolitical situation. This report is less a series of predictions as it is a list of potential geopolitical issues that we believe will dominate the international landscape for the rest of the year. It is not designed to be exhaustive; instead, it focuses on the “big picture” conditions that we believe will affect policy and markets going forward. They are listed in order of importance: America’s Strategic Drift, Chinese Maritime Expansion, The German Problem, and The Remaking of the Middle East.
2014-06-28 Health Care Sector Spurred by Population Growth and M&As by Frank Holmes of U.S. Global Investors
Recently I spoke with John Derrick, director of research here at U.S. Global, to pick his brain about what he thought was the most interesting sector right now. You might expect him to have said energy, perhaps because of the intensifying violence in Kurdistan Iraq, a major oil producer. But instead, he said that he had his eyes on health care.
2014-06-26 You Don’t Have to Love Soccer by Brian Andrew of Cleary Gull
The FIFA World Cup (for soccer aka football) is in full swing. There are 32 teams from around the world treating a world-wide audience of nearly 2 billion to a great show of sport. The teams are competing for $576 million in prize money. And while the U.S. will not likely make it to the final match, the tournament does offer some insight into diverse economies around the globe and why we should consider international investments as a pillar in any portfolio.
2014-06-25 World Cup and World CPI Are Heating Up, Risking Mistakes by Key Players by Jeffrey Kleintop of LPL Financial
Just as the World Cup has been heating up, increasing the risk of player mistakes, the world consumer price index (CPI) has also been heating up, complicating the task for policymakers at the world’s central banks and increasing the risk of mistakes that could have market implications.
2014-06-21 Ah, the Power of Mean Reversion. by Frank of U.S. Global Investors
The chatter this week has been gold. The precious metal flew up $45 an ounce on Thursday, surprising investors, the media and markets alike.
2014-06-17 Boko Haram by Kaisa Stucke and Bill O'Grady of Confluence Investment Management
On April 14, the Nigerian terrorist group Boko Haram kidnapped 276 girls from their school in the town of Chibok, Nigeria. Investor interest in African economies has been increasing over recent years, piquing an interest in the continent’s rising economic and demographic power, Nigeria. This week, we will take a look at the country of Nigeria, including its history and economy. We will then describe the evolution of the terrorist group Boko Haram and its strategic goals and leadership. We will conclude with items of importance when investing in Africa, in general, and Nigeria, specifical
2014-06-14 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The World Cup begins amid a series of financial controversies; Is the honeymoon over for Japan's Abenomics program?; The last word on Thomas Piketty
2014-06-14 Gold Investors: Let This Cycle Be Your Guide by Frank Holmes of U.S. Global Investors
U.S. Global Investors recently welcomed Doug Peta, an economist from BCA research, to our offices. He presented some interesting research regarding the Fed Funds Rate Cycle, and in turn, what that research could mean for gold. I wanted to share points from his presentation, as well as our own in-house research, to help you understand the positivity we see for the precious metal looking towards 2015.
2014-06-13 New Faces at the Federal Reserve by Craig Elder of Robert W. Baird
The Federal Open Market Committee (FOMC) is the monetary policymaking body of the Federal Reserve System. This article provides a behind the scenes look at recent changes in the composition of FOMC voters, characterizing them as a dove, focused more on higher employment, or a hawk , concerned more with the central bank’s inflation targets. One of the implications from this analysis is that the Fed will be more reluctant to raise interest rates next year than most people think.
2014-06-13 South Africa Strike Boosts Platinum Prices, Opens Opportunity for American Producer by Frank Holmes of U.S. Global Investors
All eyes are on South Africa, where a labor strike, now in its fifth month, has brought a halt to the production of platinum and palladium. As a result, platinum prices have inched up 8.25 percent this year to just under $1,500 an ounce, while palladium prices have surged 19.28 percent to over $850 an ounce, a three-year high.
2014-06-12 A Quarter Century of Emerging-Markets Investing by Mark Mobius of Franklin Templeton Investments
At one time or another, every country could have been classified as “emerging.” Back in the 1800s, the Western part of the United States was called the “new frontier.” Investors purchasing farmland there were likely to consider it a highly speculative venture putting stakes in such a rugged and wild place.
2014-06-11 I'd Choose Emerging Markets, Wouldn't You? by Ryan Larson of Research Affiliates
There’s a lot of negativity about emerging market stocks—so it makes sense for long-term, value-oriented investors to rebalance into the asset class. Here’s why a systematically contrarian strategy like fundamentally weighted indexing might outperform.
2014-06-07 China Leads the World in Green Energy, Gaming and Gambling Markets by Frank Holmes of U.S. Global Investors
Last month, Xian Liang, co-portfolio manager of our China Region Fund (USCOX), attended the 19th CLSA China Forum in Beijing. There he and hundreds of other global attendees were given the opportunity to meet with representatives from Chinese corporations, some of which U.S. Global owns. Xian also managed to get a sense of how the nation’s recent changes in consumer behavior and governmental policy reforms might affect its investment outlook. Although China remains an emerging market, it has lately taken a number of considerable strides to position itself as one of the world’s most
2014-06-05 The Platinum Supply Shock by Peter Schiff of Euro Pacific Precious Metals
Even investors who typically eschew precious metals have been hard-pressed to ignore the platinum industry this year. The longest strike in South African history paired with surging Asian demand is set to push the metal back into a physical deficit in 2014 - and could have repercussions for years to come. While gold remains the most conservative choice for saving, the "industrial precious metal" platinum is a compelling investment for those, like me, who are bullish on global net economic growth.
2014-06-02 Multi-Asset Investing: Is Now the Time for Emerging Market Equities? by Mihir Worah of PIMCO
Although emerging markets (EM) will continue to grow faster than developed markets (DM), we believe the difference may be lower than what has been seen over the last five years. Higher earnings yields in EM equities offer partial compensation for risks, but careful analysis is warranted to assess the true valuation differential. A modest allocation to EM equities may be warranted based on relative price-to-earnings multiples and our expectation that policy rates will stay lower for longer than markets expect, which makes higher-yielding EM assets more attractive.
2014-05-31 From Constantinople to Istanbul, Turkey Has Never Been Better by Frank Holmes of U.S. Global Investors
Every time he travels to Turkey, portfolio manager of our Emerging Europe Fund (EUROX), Tim Steinle, says the country continues to develop. Although technically classified as an emerging market, one wouldn’t think to label the country as such upon arrival. The population is young and growing, there are improvements to infrastructure everywhere you look, beautiful green parks are more prevalent, and the professional staffs that run many of the shops and businesses are both well organized and thriving.
2014-05-31 Looking at the Middle Kingdom with Fresh Eyes by John Mauldin of Mauldin Economics
China has the potential to become a real problem. It seemed to me that almost everyone who addressed the topic was either seriously alarmed at the extent of China’s troubles or merely very worried. Perhaps it was the particular group of speakers we had, but no one was sanguine. If you recall, a few weeks back I introduced my young colleague and protégé Worth Wray to you; and his inaugural Thoughts from the Frontline focused on China, a topic on which he is well-versed, having lived and studied there. Our conversations often center on China and emerging markets (and we tend
2014-05-24 In a Flash, China Looks Strong by Frank Holmes of U.S. Global Investors
If you want to know where the world economy is headed, there is one number that I believe investors should focus on: the HSBC China Manufacturing Purchasing Managers’ Index (PMI). On Thursday, the preliminary flash PMI for May came in at 49.7, beating Bloomberg’s consensus of 48.3.
2014-05-22 Scarce Growth - Can the Tortoises Continue to Outpace the Hares? by Robert McConnaughey of Columbia Management
For some time we have suggested that in a world slowly recovering from the 2008 financial crisis, aggregate global growth would be sub-par and that investors would benefit from seeking scarce growth, so long as that growth did not become wildly overvalued. Recent market action has tested that stance severely.
2014-05-20 Inflation Becomes the Latest Topic du Jour by Chris Maxey, Brian Payne of Fortigent
Long discussed pricing pressure is beginning to show up in various domestic indices, leading some to believe the Fed will pull its foot off the brakes sooner than anticipated. While inflation is stabilizing, there are few signs that it is accelerating materially, leaving plenty of room for the Fed to maneuver. It will be important to keep an eye on prices going forward, though, as any acceleration could alter the investment and economic landscape quickly.
2014-05-17 Which Resource Areas Show Signs of Strength? by Frank Holmes of U.S. Global Investors
Global synchronized growth, as measured by the Global Purchasing Managers' Index (PMI), remained stable or positive for the past 12 months until Japan reversed the momentum in April with a precipitous drop in its PMI. China is contributing modest growth but, fortunately, the U.S. and Europe are rebounding. This lack of consistent global momentum has created a short-term, volatile, hot and cold, stop-and-go sentiment. Global real GDP growth peaked in 2010 at 5.2 percent then slowed for the next three years to 3 percent. Global growth in 2014 is likely to accelerate, for the first time in four y
2014-05-16 Examining the Relationship between Gold and the Commodity Currencies by Ade Odunsi of AdvisorShares
In this week’s commentary we examine the performance of the price of gold expressed in the currencies of the world’s largest gold producing countries. In a number of previous commentaries we have investigated the currency like nature of gold investing.
2014-05-08 Middle East/Africa: Regional Economic Review - Q1 2014 by Team of Thomas White International
As the Middle East and Africa region stepped into the New Year, the three regional economies under our coverage did not see any material change in their political or economic situation. Labor problems remained the most immediate concern for South Africa while Egypt unveiled yet another stimulus program to mend an economy that has been struggling amid political uncertainty for three years now.
2014-05-07 Are "Currency Controls" Coming To America On July 1? by Gary Halbert of Halbert Wealth Management
Some very controversial regulations passed way back in 2010 and finalized in 2012 are scheduled to go into effect on July 1 of this year, and most Americans know little or nothing about this new law. Yet the effect of these new regulations could send shockwaves through the financial system worldwide. Basically, the regulations that take effect July 1 will make it very difficult and costly for Americans to hold money or investments outside the US.
2014-05-04 Albania's Fertile Grounds for Oil Opportunities by Frank Holmes of U.S. Global Investors
Texas is oil country. The state I now call home leads the nation in oil production and would be one of the top oil-producing nations if it were its own country. But that doesn?t stop us from exploring other promising oil opportunities further afield. Last week I traveled to Albania to check out a drill site of Petromanas Energy, a Calgary-based international oil and gas company focused on exploration and production throughout Europe and Australia. We own the junior stock in our Global Resources Fund (PSPFX) and Emerging Europe Fund (EUROX).
2014-05-02 Emerging Markets Outlook - April 2014 by Team of Thomas White International
Emerging market equities as an asset class have been underperforming developed market equities for more than three years, though they continue to maintain the lead over 10-year returns. The divergence in returns between emerging and developed markets widened sharply in 2013, when the prospect of reduced capital inflows heightened investor concerns about slower economic growth in the emerging countries.
2014-04-30 The Debate Debate by Peter Schiff of Euro Pacific Capital
While there is wide agreement that the cost of college education has risen far faster than the incomes of most Americans, there is some debate as to whether the quality of the product has kept pace with the price. Not surprisingly, almost all who argue that it has (college administrators, professors, and populist politicians) are deeply invested either ideologically or financially in the system itself. More objective observers see a bureaucratic, inefficient, and hopelessly out of touch ivory tower that is bleeding the country of its savings, and more tragically, its intellectual acuity.
2014-04-30 De-Risking Pensions in a Time of Tapering by Rene Martel, Markus Aakko of PIMCO
Despite improved funding in corporate defined benefit pension plans, some sponsors concerned about rising rates may be tempted to delay glide path prescriptions to boost fixed income allocations. For these sponsors, a better approach might be to break de-risking into two steps, potentially allowing for significant risk-reduction benefits yet preserving tactical flexibility in timing purchases of long-duration bonds. Any reduction in equity and other return-seeking assets should be implemented in short order to lock in recent market gains. ?
2014-04-28 The Devolution of Diversification by Chris Richey of Neosho Capital
We are only some 40 years removed from an era when the typical investment account had 12 or fewer individu-al holdings, and less than 20 years removed from a time when respected stock funds might hold 20-30 stocks and be considered ?fully diversified?. Now we find that the typical active equity portfolio or fund holds between 50-100 individuals stocks and that there are generally three or more such active equity managers for each institutional or high net worth account, all adding up to hundreds of underlying holdings.
2014-04-27 The Cost of Code Red by John Mauldin of Mauldin Economics
There is reason to believe that there have been major policy mistakes made by central banks - and will be more of them - that will lead to dislocations in the markets - all types of markets. And it’s not just the usual anti-central bank curmudgeon types (among whose number I have been counted, quite justifiably) who are worried. Sources within the central bank community are worried, too, which should give thoughtful observers of the market cause for concern.
2014-04-26 China Holds the Keys to the Gold Market by Frank Holmes of U.S. Global Investors
It’s important to follow the money, or in this case the gold, to see how people around the world react to this rare commodity. Looking forward, stay curious as an investor and you’ll see if China can keep the key to the gold market.
2014-04-24 Resistance is Futile, for Now by Scott Minerd of Guggenheim Partners
The U.S. ?risk-on? trade is still in place, even as some leveraged credit is showing signs of overheating.
2014-04-23 Positioning Your Portfolio for Rising Rates. by Team of Forward Management
Accelerating outflows from bond funds in 2013 highlight investor nervousness over the prospect of rising interest rates. Investors may want to carefully assess the role of fixed-income investments in their portfolios, particularly in light of other types of income-producing vehicles. Upon careful evaluation of their options, investors can make adjustments suitable to their objectives.
2014-04-17 What to Make of the Rebound in Emerging Market Equities by Dara White of Columbia Management
A month ago, much of the news from the emerging markets (EM) was negative. We saw headlines highlighting the liquidity headwinds created by U.S. QE tapering, Russia?s aggressive opportunism in the Ukraine, and China?s imminent hard landing.
2014-04-17 Fixed Income Outlook by Team of Osterweis Capital Management
Given that the Fed is likely to complete its asset purchases this year and may raise rates in early 2015, we still feel that Treasuries and investment grade bonds are unattractive. Although yields in the high yield universe are low by historical standards, they still give us a decent cushion against rising rates, especially at the shorter end of the maturity spectrum. Maintaining a shorter duration exposure in high yield and some convertible bonds, as well as a cash reserve, continues to make sense.
2014-04-17 Why Energy is Catching the Market's Eye by Frank Holmes of U.S. Global Investors
Over the last month the energy sector has outperformed the market, and as you can see in the chart below, has done so by 6.5 percent. Year-to-date the sector is beating the S&P 500 Index by over 3 percent. In a spectacularly performing market during 2013, energy lacked some of the incredible performance seen throughout the other sectors, but recently it has turned up, catching the attention of the market yet again.
2014-04-15 What's Next for Emerging Markets? by Nathan Rowader of Forward Management
Emerging markets (EM) have been an enduring growth story, but their recent stretch of underperformance and fears of a global economic slowdown are chilling investors’ enthusiasm. Pulled between opportunity and risk avoidance, many investors have been left uncertain as to what they should do next.
2014-04-14 Uncovering Opportunities in Emerging Markets by Mark Kiesel of PIMCO
Emerging markets have underperformed expectations, but the longer-term secular outlook remains constructive for many regions. Highly negative investor sentiment and outflows have sharply reduced prices, significantly improving relative value in emerging markets. We see opportunities in emerging markets in interest rates, sovereign credit and select companies for investors with a longer-term investment horizon. ?
2014-04-12 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The Federal Reserve’s search for stability. The patterns of world trade are undergoing important changes. Greece issued debt this week: good news or bad news?
2014-04-12 Every Central Bank for Itself by John Mauldin of Millennium Wave Advisors
Whether the FOMC can actually turn the taper into a true exit strategy ultimately depends on how much longer households and businesses must deleverage and how sharply our old-age dependency ratio rises, but markets seem to believe this is the beginning of the end. For now, that’s what matters most. Under Fed Chair Janet Yellen’s leadership, the Fed continues to send a clear message to the rest of the world: Now it really is every central bank for itself.
2014-04-05 The Lions in the Grass, Revisited by John Mauldin of Millennium Wave Advisors
Today we explore a few things we can see and then try to foresee a few things that are not quite so obvious. The simple premise is that it is not the lions we can see lounging in plain view that are the most insidious threat, but rather that in trying to avoid those we may stumble upon lions hidden in the grass.
2014-04-04 What's Abuzz About Gold? by Frank Holmes of U.S. Global Investors
If we continue to see these large movements of the physical metal, especially from the West to the East, it would appear to be only a matter of time until these supply-and-demand factors lift the gold price.
2014-04-01 Have You Looked at India Lately? by Eric Stein, Patrick Campbell of Eaton Vance
In our judgment, it?s time to remove India from the ranks of the so-called ?Fragile Five?* emerging-market countries. We believe the strong investment case to be made for India today underscores the importance of taking a country-by-country approach to emerging-market investing.
2014-04-01 Why Key Long-Term Trends Matter to Stock Pickers by Virginie Maisonneuve of PIMCO
The combination of demographic changes, climate change and the ongoing shift in emerging markets over the next 30 years will have long-term consequences for supply and demand factors and business sustainability for many companies. The impact of these long-term trends must not be underestimated. It is crucial for equity investors to not only be attuned to them, but also to understand how companies are adapting to the shifts in the global corporate operating environment. ?
2014-03-28 ?Mind the Gap?: Adapting to a Post-Crisis World in Transition by Virginie Maisonneuve of PIMCO
??Barring any sharp deterioration in global geopolitical risk, the medium term outlook for equities is quite positive in an environment where we see subdued growth and inflation amid healing economies. From a markets standpoint, valuations are not very expensive ? they?re not cheap, but they?re not expensive versus historical standards for the market overall.
2014-03-28 Four Areas Revved Up for a Resources Boom by Frank Holmes of U.S. Global Investors
Commodity returns vary wildly, as experienced resource investors can attest and our popular periodic table illustrates. This inherent volatility can spell opportunity for the nimble investor who can look past the mainstream headlines to identify hot spots. Our global resources expert, Brian Hicks, CFA, identified four we believe are revved up for a resources boom.
2014-03-26 Unleashing Africa?s Potential by Michael Hasenstab of Franklin Templeton
Many investors who have never traveled in Africa probably have preconceived ideas about it, perhaps as a land of safaris and political strife, rich in coveted natural resources that have failed to bring widespread wealth and development to the continent. Many also might not realize how diverse the landscape, the economies and the people are on the continent, which boasts more than 1,000 languages spoken in more than 50 countries and climates ranging from hot deserts and tropical rainforests to frozen glaciers.
2014-03-25 Janet Yellen Enters the Picture by Chris Maxey, Ryan Davis of Fortigent
After bursting onto the scene earlier this year, Janet Yellen held her first official FOMC meeting last week. Rather than upset the apple cart, she held a largely status quo stance, but several comments raised more than a few questions.
2014-03-22 China's Minsky Moment? by John Mauldin of Millennium Wave Advisors
In speeches and presentations since the end of last year, I have been saying that I think the biggest macro problem in the world today is China. China has run up a huge debt, and the payments are coming due. They seem to be proactive, but will it be enough? How much risk do they pose for the global system?
2014-03-22 What Makes a Slam-Dunk Portfolio? by Frank Holmes of U.S. Global Investors
As a native Canadian, hockey is in my blood, but after moving to Texas, the icy arenas changed to basketball courts, as the sole major league sports team in the city is the San Antonio Spurs.
2014-03-21 World Industrial Production Finished 2013 At An All-Time High by Team of GaveKal Capital
The CPB Netherlands Bureau for Economic Policy Analysis publishes a monthly report called "World Trade Monitor". This report tries to quantify the seemingly unquantifiable; world industrial production and world trade volume and prices. Either later today or early next week the CPB should come out with the first statistics for 2014. Today, however, we are going to take a look at world industrial production for 2013.
2014-03-17 Frontier Markets Find Footing by Mark Mobius of Franklin Templeton
Frontier markets remain in focus for the Templeton Emerging Markets Group in 2014, and my team and I have spent the early part of the year exploring potential investment opportunities in a number of them.
2014-03-17 Emerging Markets Equity Commentary - February 2014 by Team of Thomas White International
After a weak start to the year, emerging market equity prices recovered in February as concerns about slower than expected global expansion and a further decline in Chinese economic growth subsided.
2014-03-17 Frontier Markets: Weighing the Risks by Nathan Rowader of Forward Investing
Why would investors even think about investing in fledgling, so-called frontier economies half a world away? The quick answer is that some of the best-performing stock markets in the world can be found in places like Kenya, Bulgaria and Argentina. Annual equity returns topped 40% in all three countries in 2013 while a number of other frontier markets (FMs), including Romania, Serbia and Nigeria, experienced annual returns ranging from 25% to 35%. Although past performance is not a guarantee of future results, investors in search of portfolio growth and diversification are taking note.
2014-03-16 Inequality and Opportunity by John Mauldin of Millennium Wave Advisors
Today we will continue our thinking about income inequality, and I will respond to some of your letters, as they make good launching points for further discussion of the topic.
2014-03-13 Emerging Markets: Will Ukraine fallout become contagious? by Jeff Hussey of Russell Investments
Jeff Hussey, global CIO, outlines Russell Investments? views on the conflict in Ukraine and how it might impact the markets.
2014-03-11 Making Green from Gold, Palladium and Pollution by Frank Holmes of U.S. Global Investors
Gold is coming back with a vengeance, experiencing a clear recovery and grabbing the attention of market cynics. Analysts from Noruma Securities even upgraded its outlook for gold, expecting bullion to climb over the next three years, according to Barron?s.
2014-03-10 Four Reasons to Consider Emerging Markets for the Long Term by Borge Endresen of Invesco Blog
Emerging markets are at that peculiar place where everyone likes them over the long term, but very few like them in the short term. Many well-publicized headwinds from 2013 remain going into 2014, accompanied by election uncertainty in Brazil, India, Indonesia, South Africa and Turkey. And political uncertainty keeps surfacing in such places as Thailand, Turkey and the Ukraine.
2014-03-09 The Problem with Keynesianism by John Mauldin of Millennium Wave Advisors
Keynes himself would appreciate the irony that he has become the defunct economist under whose influence the academic and bureaucratic classes now toil, slaves to what has become as much a religious belief system as it is an economic theory. Men and women who display an appropriate amount of skepticism on all manner of other topics indiscriminately funnel a wide assortment of facts and data through the filter of Keynesianism without ever questioning its basic assumptions. And then some of them go on to prescribe government policies that have profound effects upon the citizens of their nations.
2014-03-07 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The fight over Ukraine is an unwelcome source of uncertainty; Hiring in the U.S. improves in February; American businesses have lots of cash to invest.
2014-03-07 Making Green from Gold, Palladium and Pollution by Frank Holmes of U.S. Global Investors
Gold is coming back with a vengeance, experiencing a clear recovery and grabbing the attention of market cynics. Analysts from Noruma Securities even upgraded its outlook for gold, expecting bullion to climb over the next three years, according to Barron's.
2014-03-06 Emerging Markets: Distinguishing Opportunities by of Manning & Napier
The recent sell-off in emerging market currencies and equities is part of a broader move that has seen the asset class heavily underperform developed markets since mid-2012. Part of the underperformance can be attributed to disappointing economic performance, as actual growth in the emerging markets (EMs) has come in much lower than broader consensus expectations.
2014-03-06 Evolution of SRI Leads Investors to a Sustainable Future by Chat Reynders of AdvisorShares
It?s no secret that positive screening as an investment strategy is becoming increasingly popular as advisors seek ways to identify substantive investment opportunities. The practice focuses investors on the elements of a company that can make a positive impact both on the bottom line and on society, pointing to socially progressive companies that generate returns.
2014-03-04 Does International Diversification Improve Safe Withdrawal Rates? by Wade Pfau (Article)
Safe withdrawal rate (SWR) studies have been based on a few asset classes and rarely incorporated international diversification. This is problematic, as an SWR depends on portfolio return and volatility, and broader diversification can extend the efficient frontier toward better retirement outcomes. To determine the benefits of international diversification, I looked at the relative performance of withdrawal rates in 20 developed-market countries.
2014-02-28 China?s Growth Puzzle by Stephen Roach of Project Syndicate
Though China?s economy is now slowing, the significance of this is not well understood. The downturn has nothing to do with problems in other emerging economies; in fact, it is a welcome development.
2014-02-28 Emerging-Market Risk and Reward by Nouriel Roubini of Project Syndicate
Industrialization, urbanization, and the rise of a middle-class consumer society were supposed to boost emerging-market countries' long-term economic and sociopolitical stability. But in many countries recently wracked by political unrest, it is the urban middle classes that have been manning the barricades.
2014-02-28 Emerging Markets Equity Commentary: January 2014 by Team of Thomas White International
Emerging market equity prices corrected in January as investors worried about slower growth in China as well as political and economic turbulence in some the frontier economies such as Argentina and the Ukraine. Markets were also unnerved by the unexpectedly large interest rate hike in Turkey, which failed to prop up the currency.
2014-02-28 Hide and Seek by Herbert Abramson, Randall Abramson of Trapeze Asset Management
Hide and seek. A game investors played as children but should not forget these days. Currently, investors need to hide safely to protect from some unfavourable developments in an environment that could hurt them.
2014-02-28 What Areas of the Market Will Remain in the Limelight? by Frank Holmes of U.S. Global Investors
The current bull market has been five years in the making. Since the bottom on March 9, 2009, the S&P 500 Index has grown an incredible 174 percent. With this spectacular performance, investors are asking if U.S. companies will stay in the limelight or if it is time to draw the curtain on equities.
2014-02-27 Gut Check: The Outlook on Fixed Income by Colin Lundgren of Columbia Management
With nearly two months of the year behind us, we thought now would be a good time to see how the fixed-income market is faring in 2014 and assess our outlook. We asked our investment team five questions to help capture our view on the market today.
2014-02-26 What Columbus Missed: Royce Rediscovers India by David Nadel of The Royce Funds
In 1492, Italian explorer Christopher Columbus set sail to discover India. He missed his mark, however, landing in America instead. The rest, as they say, is history-with the exception that more than 500 years later India is still worthy of discovery for many Western investors.
2014-02-26 EM and the Fragile Five: Separating the Wheat from the Chaff by Blaise Antin, David Loevinger, Anisha Ambardar of TCW Asset Management
The shift in capital flows triggered by former Fed Chairman Ben Bernanke’s tapering remarks in May 2013 set off a cascade of market events that continues to this day. His comments also birthed a cottage industry of emerging market doomsayers, who now predict regularly: 1) the end of growth in emerging markets (EM), given that it was, in their view, all a mirage fueled by carry and leverage; and 2) a wave of defaults of the kind last seen in the 1990s that threaten to bring down not only emerging but developed markets as well.
2014-02-25 How to Profit from the Yellen Fed by Axel Merk of Merk Funds
Janet Yellen might have the most powerful job in the world, as the Federal Reserve (Fed) she now chairs controls what may be the world?s most powerful printing press. We take a closer look at what her reign might mean for investors? portfolios.
2014-02-24 Three Reasons Frontier & EM Equities Are Not Created Equal by Russ Koesterich of iShares Blog
With all the turmoil in emerging markets recently, some investors may be especially wary of investing in so-called frontier markets. Russ explains why frontier and emerging markets are separate asset classes, each deserving of a strategic allocation.
2014-02-23 The Worst Ten-Letter Word by John Mauldin of Mauldin Economics
A new word is achieving ubiquity. The word has always been with us and at times has been a beacon to attract the friends of liberty and opportunity. But now I?m afraid it is beginning to be used as a justification for social and economic policies that will limit the expansion of both liberty and opportunity. The word? Inequality.
2014-02-22 Going for the Gold by Frank Holmes of U.S. Global Investors
Everyone wants the gold. Around the world, athletes train for years to compete for a gold medal. In Hong Kong and China, the Love Trade seeks gold coins, bars and jewelry.
2014-02-20 International Equity Commentary: January 2014 by Team of Thomas White International
International equity markets have started the year on a difficult note, as concerns about the robustness of economic growth in the U.S., Japan and Europe have made investors more cautious. Though the U.S. economy expanded at a faster than expected pace during the last quarter of 2013, recent data reports from the labor market have not been as healthy.
2014-02-20 Emerging Markets Equity Commentary: January 2014 by Team of Thomas White International
Emerging market equity prices corrected in January as investors worried about slower growth in China as well as political and economic turbulence in some the frontier economies such as Argentina and the Ukraine. Markets were also unnerved by the unexpectedly large interest rate hike in Turkey, which failed to prop up the currency.
2014-02-20 Where the Frontier Lies by Robert Harvey of Matthews Asia
My last research trip to Asia included eight flights and nearly 50 grueling hours in the air. During this time, I had the opportunity to ponder a question I am frequently asked, ?How do you define a frontier market??
2014-02-18 Why Emerging Market Fears are Overblown by Robert Huebscher (Article)
Conditions in the emerging markets bear little resemblance to those in 1997 leading up to the Asian crisis, according to Simon Derrick, a leading market strategist with BNY Mellon. In this interview, he also explains why the euro is overvalued and picks the winners and losers in today’s currency wars.
2014-02-15 The Economic Singularity by John Mauldin of Millennium Wave Advisors
Today, let’s think about central banks and liquidity traps and see if we agree that central bankers are driving the car from the back seat based upon a fundamentally flawed theory of how the world works. That theory helped produce the wreck that was the Great Recession and will have its fingerprints all over the next one.
2014-02-14 These Gold Charts Will Make Your Heart Beat Faster by Frank Holmes of U.S. Global Investors
So while gold may correct over the next several months as the metal enters its seasonally weak period of the year, this looks promising for gold investors.
2014-02-11 Equities Markets Start 2014 in Deep Freeze by Douglas Coté of ING Investement Management
By slowly normalizing policy, the Fed is passing the responsibility of pricing risk back to the markets, resulting in higher volatility. The health of the emerging markets is vital to global growth, as developing countries have doubled their contribution to global GDP over the past decade to nearly 40%. S&P 500 corporations derive half their revenue from overseas; support from global consumerism and manufacturing is on track to continue. Broad global diversification across equity and fixed income markets is the best way to protect against volatility.
2014-02-11 ?Hot? Money?s Fast Exit Cools Emerging Markets by of Knowledge @ Wharton
Capital flight from emerging markets has been accelerating in recent weeks ($6 billion alone in the week ending February 5). Turkey is the poster child, but the exodus is also happening in India, Indonesia, Brazil, South Africa and others ? mostly from equity markets. This ?hot money? is moving out over concerns that asset bubbles have built up, and that emerging market economic growth is now slowing. The slowdown is partly a result of tighter money in the wake of the Fed?s tapering plans and a decelerating economy in China, many believe. To better understand the risks to the global financial
2014-02-10 Emerging Markets Equity Commentary - December 2013 by Team of Thomas White International
Emerging market equity prices saw a modest correction for the second successive month in December, as investors remained cautious about the outlook for some of the emerging economies. Select countries such as Thailand in Asia and Turkey in Europe continue to face difficult political environments, with large demonstrations against the governments. Their currencies have reacted negatively to the latest developments, making investors fearful of a repeat of the volatile market movements seen during the third quarter of 2013.
2014-02-10 Bond Investing in a Rising Rate Environment by Kathleen Gaffney of Eaton Vance
After a transitional year like 2013, when a multidecade declining rate environment moved to a rising rate environment, we think it is important for investors to consider a multisector approach to finding value in the bond market. Finding bonds that can appreciate in price regardless of the interest-rate environment is what a multisector strategy generally seeks to accomplish.
2014-02-09 Global Economic Overview - December 2013 by Team of Thomas White International
The global economic outlook has turned brighter as several major economies are improving. Both business and consumer sentiment have become healthier across most regions, as the policy uncertainties that plagued several countries last year have faded. The U.S. economy is expected to accelerate further in 2014, while Europe and Japan are also likely to see faster growth.
2014-02-07 And That's The Week That Was by Ron Brounes of Brounes & Associates
How do you follow up some 30%-ish annual index gains in 2013...with major losses in January? Sadly, that’s what investors experienced as the Dow plunged over 5% to start the month, the worst January since 2009. Those who say "as January goes, so goes the market" are not among the most popular these days. Earnings have been lackluster at best; emerging markets are in panic mode; Bernanke is moving out to pasture; investors still have quite a few profits they can take from last year. Then again, 11 months is plenty of time to "right the ship."
2014-02-07 What's the Game Changer for Gold? by Frank Holmes of U.S. Global Investors
What will break gold of its losing streak? Will inflation, which is a lagging indicator, be stronger than expected? In one of my most popular posts last year, I said that based on the jobs market, the limited housing recovery and regulations slowing down the flow of money, the Fed would have no choice but to start tapering and raising rates very gradually to keep stimulating the economy.
2014-02-06 How Did the Emerging Markets Get Into This Mess? by Andres Garcia-Amaya of J.P. Morgan Funds
A number of central banks around the world tightened monetary policy during the week of January 27, but the rationale for their policy decisions varied significantly. In the U.S., the Federal Reserve continued its "tapering" of quantitative easing (QE) to reflect the strong economic growth prospects, while Turkey, India and South Africa tightened policy in an attempt to prevent an exodus of foreign capital from their countries.
2014-02-06 Emerging Market Woes abd Fed Tapering Equals Stocks Plunge by Gary Halbert of Halbert Wealth Management
January saw US stocks record their first losing month since last August. After reaching new record highs at the end of December, the Dow Jones shed almost 1,000 points in the last half of the month and the decline continues. Analysts attributed the sell-off in large part due to troubling news from several emerging nations, in particular to the so-called "Fragile Five" - Turkey, India, Brazil, Indonesia and South Africa.
2014-02-06 So Cruel: Pullback Could Become Correction by Liz Ann Sonders of Charles Schwab
For now, the EM tail is wagging the dog, but the US remains the world’s big dog and should ultimately get through the latest turmoil. "January Barometer" has sent mixed signals for the remainder of the year historically. More technical and sentiment recovery is likely needed before a market recovery is likely.
2014-02-06 How Fragile are Emerging Markets? by Kenneth Rogoff of Project Syndicate
Emerging-market equities and exchange rates are again under severe downward pressure, but are the underlying economies really as fragile as global traders seem to fear? The short answer, for a few, is probably "yes," but, for most, "not quite yet."
2014-02-06 Year-End Odds and Ends by Jeremy Grantham of GMO
In a new quarterly letter to GMO’s institutional clients, chief investment strategist Jeremy Grantham offers "Year-End Odds and Ends": Fossil Fuels: Is Tesla a Tease or a Triumph?, Fracking and Yet More Technical Stuff on Fracking, Update on Metals, Fertilizers, and Food, Problems in Forecasting Short-term Prices for Resources, Another Look at U.S. GDP Growth, Investment Lessons Learned: Mistakes Made Over 47 Years
2014-02-06 Divesting When Discomfited by Ben Inker of GMO
Ben Inker explains why, "for our asset allocation portfolios we generally try to trade slowly." He notes, "The slightly odd fact is that moving slowly on value-driven decisions has simply made more money historically than moving immediately would have."
2014-02-04 Volatility Prompts a More Cautious View Toward Emerging Markets by Russ Koesterich of BlackRock Investment Management
The market selloff continued last week, and emerging markets stocks are looking more uncertain in the short term. With U.S. wages under pressure, consumer-related stocks remain an unattractive option. The Federal Reserve’s tapering program is starting to remove a pillar of support for stocks.
2014-02-04 Investors Should Focus on Wages, Not Jobs by Chris Maxey, Ryan Davis of Fortigent
This Friday investors receive the first official labor market report of 2014. Following a highly disappointing jobs figure in December, many market participants hope to see a rebound - particularly one that will help justify the Fed’s decision last week to continue tapering its asset purchases.
2014-02-03 10 Steps Forward, 1 Step Back! Comments on January Stock Market by David Edwards of Heron Financial Group
US stocks as measured by the S&P 500 delivered a phenomenal 32.4% return in 2013. That was the 6th best year for US stocks since 1940. In January, US stocks fell 3.5%. We don’t watch business news anymore, but judging from an increased volume of phone calls from clients, we presume that CNBC, Fox Business, CNN and MSNBC have categorized this modest decline as "an apocalypse." Our "dashboard" shows return numbers for US and International stock markets, commodities, currencies and bond yields. A lot of red YTD 2014, but all green at the end of 2013.
2014-02-01 Central Banker Throwdown by John Mauldin of Millennium Wave Advisors
The Federal Reserve is signaling that it is going to end quantitative easing at some point in the future; therefore, investors are trying to find the exits before the end actually comes.
2014-01-31 Not All Emerging Markets Are Created Equal by Robert McConnaughey of Columbia Management
Emerging markets (EM) is a term given to a universe of countries that is extremely diverse across a wide number of variables including geography, levels of industrialization and political systems. Despite this diversity, emerging markets are often discussed as if they are a homogenous block, particularly in the context of broad asset allocation decision making. We think that’s a mistake. Instead, we see opportunity from applying a more bottom-up approach to country, industry and security selection amidst growing dispersion in outcomes across the emerging world.
2014-01-31 The Trouble with Emerging Markets by Nouriel Roubini of Project Syndicate
The financial turmoil that hit emerging-market economies in the spring of last year, following the Federal Reserve’s "taper tantrum" over its quantitative-easing policy, has returned with a vengeance. But the immediate trigger for these pressures should not be confused with deeper causes: Many emerging markets are in real trouble.
2014-01-30 A Healthy Correction in Emerging Markets by Scott Minerd of Guggenheim Partners
It has been a hard start to the year, especially for emerging markets, but the latest dislocation is a healthy part of the cycle and the risk-on trade remains intact.
2014-01-30 The Path to Becoming an Emerging Market by Henry D'Auria, Morgan Harting of AllianceBernstein
Why have some equity markets in the developing world flourished more than others? It’s a pivotal question for investors hoping to stake an early claim to the potential emerging-market (EM) success stories of the next decade.
2014-01-29 2014 Oil Outlook: How Slick Is the Oil Slope by Greg Sharenow of PIMCO
While the supply outlook tilts the balances toward bearish in 2014, an improving global economy is a positive for oil demand and a support for prices. With roll yields positively contributing to returns, investors ultimately could be paid to hold a security that hedges both global event risk and any resulting shock to inflation. Growth in shale oil has been a powerful moderating force for prices by both filling an important gap in global supply and demand and by anchoring the back end of the futures curve.
2014-01-29 Fed Responsible for EM Crisis? by Axel Merk of Merk Investments
From the bully pulpits in Sao Paulo to the blogosphere in cyberspace, the Fed is blamed for the turmoil in Emerging Markets (EM). That’s a bit like blaming McDonald’s for obesity. Blaming others won’t fix the problems in EM economies, it won’t fix investors’ portfolios and it is an unlikely way to lose weight. Investors and policy makers need to wake up and realize that they are in charge of their own destiny. Let us explain.
2014-01-29 Middle East/Africa: Regional Economic Review - 4Q 2013 by Team of Thomas White International
The International Monetary Fund (IMF) anticipates weak growth in the Middle East and North Africa (MENA) region mainly due to heightened political instability. What’s more, after years of healthy performance, growth in the oil exporting nations is expected to lose pace due to lower international demand and local oil supply disruptions. Given that these countries are witnessing a population boom, the IMF emphasized the need for economic diversification by the oil exporters and job creation in private non-oil sectors.
2014-01-28 An Active Management Turning Point? by Chris Maxey, Ryan Davis of Fortigent
Active managers faced a difficult road in recent years, leading to many questions about the efficacy of active versus passive investment management. There are signs that the tide is once again changing in favor of active managers and the road ahead could offer happier times.
2014-01-28 The TTIP and the TPP by Bill O'Grady of Confluence Investment Management
The Transatlantic Trade and Investment Partnership (TTIP) is a trade and investment treaty being negotiated between the European Union (EU) and the U.S. The Trans-Pacific Partnership (TPP) is a similar pact between the U.S. and various Pacific Rim nations. We will examine overall details of each, focusing on how they’re different from traditional trade agreements. From there, we will present an analysis of the controversy surrounding the proposals, followed by a look at the geopolitical aims and likelihood that these treaties will be enacted. We conclude with potential market ramificatio
2014-01-28 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
My caution last week unfolded into a market sell off related to both disappointing earnings and concern over emerging markets affecting the foreign exchange markets.
2014-01-27 Hasenstab: Standing One's Ground by Michael Hasenstab of Franklin Templeton
When the masses are against you, it’s hard to stand your ground. Going against the crowd is familiar turf for Michael Hasenstab, who manages Templeton Global Bond Fund and co-manages Templeton Global Balanced Fund, and certainly knows the virtue of patience. He has staunchly defended his investment theses over the years, tuning out the naysayers and market noise time and again.
2014-01-25 Why the Recent Lift in Junior Miners Will Likely Continue by Frank Holmes of U.S. Global Investors
Junior venture companies in Canada are finally seeing a significant lift. In early January, the S&P/TSX Venture Composite Index rose above the 200-day moving average for the first time in three years. The index is also very close to experiencing a golden cross, which is when the shorter-term 50-day moving average crosses above the 200-day moving average. Historically, traders see this cross as extremely bullish.
2014-01-25 At Davos, Inequality and Africa in Focus by Scott Minerd of Guggenheim Partners
The focus at Davos has shifted to two new topics: growing income inequality as a risk to economic growth and social stability and the emergence of Africa as an economic force. Neither of these is a big surprise as neither is new. But the fact that these are the primary focus this year tells us that these topics will likely become more prominent in 2014.
2014-01-24 United Arab Emirates: An Emerging Market Melting Pot by Mark Mobius of Franklin Templeton
The investable Middle East/North Africa region known as "MENA" encompasses 11 diverse countries, extending from Oman to Morocco, and also includes Bahrain, Egypt, Jordan, Kuwait, Lebanon, Qatar, Saudi Arabia, Tunisia and the United Arab Emirates (UAE). I recently had the pleasure of returning to Dubai, the largest city in the UAE, a truly striking and cosmopolitan city with a diverse population from around the world.
2014-01-23 Can Equities Continue Their Rise? Equity Investment Outlook: January 2014 by Matt Berler, John Osterweis of Osterweis Capital Management
2013 marked the fifth year of recovery following the near-death experience of the 2008 global financial system meltdown. From a low of 677 in 2009, the S&P 500 Index (S&P 500) finished 2013 at 1,848, delivering a stunning 203% total return from the low. Over the same period, the total return for the Dow Jones Industrial Average was 188%. The tech-heavy and arguably more speculative NASDAQ logged a 249% total return. These very large equity returns reflect both a strong recovery in corporate profits and a dramatic clean-up of our financial system.
2014-01-21 Superstition Ain't the Way by John Hussman of Hussman Funds
When you believe in things that you don’t understand, then you suffer.
2014-01-21 Emerging Markets 2014 Outlook: Shaping the Next Decade by Mark Mobius of Franklin Templeton
As we embark upon a new year, the Templeton Emerging Markets Group believes 2014 could be an important year for many emerging markets, possibly establishing trends that could play out through much of the remainder of the decade. In particular, Chinese government reform initiatives announced in late 2013 could have far-reaching significance. And, major elections in a number of countries in 2014 could bring dramatic (or not-so-dramatic) changes. Here are a few themes and countries we’ve got our eye on in the new year.
2014-01-17 What Does It Take to Be in the Top 1 Percent? Not As Much As You Think by Frank Holmes of U.S. Global Investors
You might be surprised to learn that the top 20 percent of income earners bring in a household income of just over $100,000. The top 10 percent of earners have a household income of more than $148,687. To be considered in the top 1 percent, household income is at least $521,411.
2014-01-16 EM Sovereign Debt 2014: Neither Phoenix nor Failure by Paul DeNoon of AllianceBernstein
Emerging-market (EM) sovereign bonds were burned badly in 2013. Will they rise from the ashes in 2014? We believe some will and some won’t. The watchword for 2014 will be selectivity.
2014-01-15 Investment Insights from a Road Warrior by Frank Holmes of U.S. Global Investors
As part of our investment process, we often take the explicit knowledge learned from our statistical models and overlay them with global travel.
2014-01-10 Continuing a Winning Formula for 2014 by Frank Holmes of U.S. Global Investors
We believe there’s a way that increases the odds of winning. It’s by combining a bottom-up approach with a top-down strategy: Find great, fast-growing and shareholder-focused companies and focus on the best stocks in the sectors experiencing positive momentum.
2014-01-07 Emerging Markets 2014 Outlook: Shaping the Next Decade by Mark Mobius of Franklin Templeton
As we embark upon a new year, the Templeton Emerging Markets Group believes 2014 could be an important year for many emerging markets, possibly establishing trends that could play out through much of the remainder of the decade. In particular, Chinese government reform initiatives announced in late 2013 could have far-reaching significance. And, major elections in a number of countries in 2014 could bring dramatic (or not-so-dramatic) changes. Here are a few themes and countries we’ve got our eye on in the new year.
2014-01-06 ProVise Bullets by Ray Ferrara of ProVise Management Group
To say that 2013 was an interesting year would be a bit of an understatement. We learned a long time ago not to make predictions about the stock market because no matter what is predicted, it is likely to be wrong. Even if we get lucky one year, we are not likely to even get close the following year. We do try to give guidance, however. Last year we suggested that, given the late run in the market in 2012 and its 15% return, investors should be happy with a return of 8 to 10% in 2013. Obviously, investors enjoyed much better returns.
2014-01-04 Forecast 2014: The Human Transformation Revolution by John Mauldin of Millennium Wave Advisors
It is that time of the year when we peer into our darkened crystal balls in hopes of seeing portents of the future in the shadowy mists. This year I see three distinct wisps of vapor coalescing in the coming years. Each deserves its own treatment, so this year the annual forecast issue will in fact be three separate weekly pieces.
2014-01-03 Gold Stocks: What to Expect in the New Year by Frank Holmes of U.S. Global Investors
After three years of pain, can gold stocks break their losing streak and see a gain in 2014? History says chances are good.
2014-01-03 2014 Outlook: The Emergence of a Global Expansion by Team of Loomis Sayles
After years of a global recovery characterized by fits and starts, we expect more synchronized global growth in 2014. Global GDP growth will accelerate modestly from 2.7% in 2013 to approximately 3.4% in 2014, primarily driven by larger advanced economies. In particular, we are optimistic that US growth will be sustainable. The fading economic drag from government policy and the ongoing housing recovery should help boost US GDP growth toward 3% as the year progresses. The UK is poised for a similar rate of expansion in 2014, and Europe will likely post positive growth in the coming year.
2013-12-24 The Price America Pays for Global Leadership by Bob Veres (Article)
America’s political debates inevitably default to finding ways to contain our federal deficits, and our investment debates focus on whether we’re facing a secular bear or bull market - and how to maneuver within that environment. I had never imagined that these two debates could be related until I heard a presentation by Bill O’Grady, of Confluence Investment Management in St. Louis, MO at the Insider’s Forum conference in Dallas.
2013-12-20 A Surprising Way to Participate in Today's Tech Boom by Frank Holmes of U.S. Global Investors
China has become one of the best consumption stories out there, and looking over the next few years, local technology companies are almost certain to benefit. So while many U.S. investors are getting excited about the growing number of initial public offerings in the tech sector, they would be remiss if they didn’t look beyond Silicon Valley.
2013-12-19 Coal in the Fed's Stock-ing by Tony Crescenzi, Lupin Rahman, Ben Emons of PIMCO
Forward guidance has become an increasingly common practice among global central banks. Communicating a possible change in the policy rate could have a large effect on long-term interest rates. Capital has moved literally around the globe as a result of central bank activism in developed countries. Looking ahead, we expect 2014 to be a year of increased differentiation across emerging markets in terms of economic fundamentals, policy reactions and market outcomes.
2013-12-17 How a Simple Sandwich Got a Top Prospect’s Attention by Dan Richards (Article)
Many advisors generously support charities and good causes in their communities and around the world. Here’s how to communicate that support to clients.
2013-12-17 The 2014 Geopolitical Outlook by Bill O'Grady of Confluence Investment Management
As is our custom, we close out the current year with our outlook for the next one. This report is less a series of predictions as it is a list of potential geopolitical issues that we believe will dominate the international situation in the upcoming year. It is not designed to be exhaustive; instead, it focuses on the "big picture" conditions that we believe will affect policy and markets going forward. They are listed in order of importance.
2013-12-13 Saying Goodbye to a Great Peacemaker by Frank Holmes of U.S. Global Investors
Last week, the world lost a hero. There are so few people in this world who have fought for freedom in such a benevolent way as Nelson Mandela.
2013-12-13 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The past two weeks were pretty quiet as the Thanksgiving holiday combined with conflicting economic data produced a stalemate on Wall Street.
2013-12-13 One of the Most Notable Stories of the Year: Energy Renaissance in the U.S.A. by Frank Holmes of U.S. Global Investors
Only a few years ago, we were contemplating the supply constraints facing the petroleum industry, as many major oil fields around the world were facing a decline in production. Now, with the disruptive technology in shale oil and gas, we may be looking forward to decades of drilling.
2013-12-06 Did the Government Shutdown Help the Economy? by Frank Holmes of U.S. Global Investors
Take the government shutdown in October, when the House and Senate fought over the debt ceiling. Economic data wasn’t released, services were halted, national parks were closed, and "non-essential government workers were told to stay home. As a result, GDP was expected to collapse. Yet, data released this week reveal a different, stronger image of the U.S. economy. I think Shakespeare would deem the media’s fear mongering tactics as Much Ado About Nothing.
2013-12-05 A Synchronous Expansion by Scott Minerd of Guggenheim Partners
Major developed economies are all contributing to global economic growth, and this improving fundamental picture, coupled with ongoing monetary accommodation, bode well for risk assets.
2013-11-30 Arsonists Running the Fire Brigade by John Mauldin of Millennium Wave Advisors
In the old days, central banks raised or lowered interest rates if they wanted to tighten or loosen monetary policy. In a Code Red world everything is more difficult. Policies like ZIRP, QE, LSAPs, and currency wars are immensely more complicated. Knowing how much money to print and when to undo Code Red policies will require wisdom and foresight. Putting such policies into practice is easy, almost like squeezing toothpaste. But unwinding them will be like putting the toothpaste back in the tube.
2013-11-29 From the Taj Mahal to Westminster Abbey: Notes from a Global Investor by Frank Holmes of U.S. Global Investors
I recently returned from India, a nation where an incredible 600 million people are under the age of 25. That’s nearly double the entire population of the U.S.
2013-11-27 Emerging Markets Equity Commentary - October 2013 by Team of Thomas White International
Equities Gain as Currencies Remain Stable and Data Trends Show Positive Signs.
2013-11-27 International Equity Commentary - October 2013 by Team of Thomas White International
Equities Advance as Global Manufacturing and Services Activity Gains Momentum
2013-11-19 Where Will the Holiday Shopping Season Lead Us This Year? by Chris Maxey, Ryan Davis of Fortigent
The unofficial start to the holiday shopping season kicks off in a few short days. Economic uncertainty abounds, raising fears that consumers will pull back from spending, but some positive developments suggest consumers will be just fine.
2013-11-19 France and the Iranian Negotiations by Bill O'Grady of Confluence Investment Management
Earlier this month, negotiations between Iran and the P5+1 failed to reach an agreement despite great hopes that one was near. In this report, we will examine the reasons behind French objections to a nuclear deal with Iran. We will begin with an examination of France’s relations with the Middle East, focusing on its relations with Israel. Using this history as a guide, we will analyze why the French scotched the potential agreement. A short discussion will follow of the impact of France’s objection on the evolution of U.S. policy with Iran. As always, we conclude with market ramif
2013-11-15 “Great Rotation?” How About “Selective Rotation?” by Eric Takaha of Franklin Templeton
A few months ago there was a lot of buzz about a so-called “Great Rotation,” used to describe an investor exodus from fixed income and into equities, conjuring up images of a massive herd of wildebeest on the African plain racing for greener pastures. Oftentimes, when investors react to the market with a herd mentality, they can wind up losing sight of where they are going, and why. Eric Takaha, senior vice president and portfolio manager for Franklin Strategic Income Fund, says what he’s seen is more of a “selective rotation.”
2013-11-15 Dressed to the Nines with Gold by Frank Holmes of U.S. Global Investors
While paper gold is getting the cold shoulder in the West, the Love Trade buyers in the East are wrapping their arms around all the physical gold they can get their hands on.
2013-11-14 In 20 Years, What Country Will Produce the Most Gold? by Frank Holmes of U.S. Global Investors
A question like that is impossible to answer, of course, due to mining difficulties, diminishing resources, and changing government policies and regulations that help or hinder a country’s ability to mine, farm or drill efficiently.
2013-11-08 U.S. Shale Oil: A Central Banker's Best Friend by Charles Wilson of Thornburg Investment Management
After nearly a decade of sustained high energy prices , U.S. oil and natural gas producers responded to the market’s call for supply with newly exploitable shale resources. The fresh supply helped reduce concerns about global spare production capacity and limited upward pressure on energy prices. Central bankers around the world were able to maintain highly accommodative monetary policies for prolonged periods as a result.
2013-11-08 Equality of Opportunity by Michael Kayes of Willingdon Wealth Management
Countless statistics show that the gap between the rich and poor has widened considerably and continues to widen. To an extreme, an economics professor at George Mason recently published a book in which he predicts the population will be divided into two groups: those who are good at working with intelligent machines, and those who can be replaced by them. This is obviously a scary outcome, but are we focusing on the wrong thing?
2013-11-08 Big Ideas in the Big Easy by Frank Holmes of U.S. Global Investors
This is likely a contrarian view to the folks in the White House, but I think investors benefit from being contrarian and thinking differently. In preparation for my presentations in New Orleans as well as for the Metals & Minerals Investment Conference in San Francisco and the Mines and Money in London in a few weeks, I’ve been pulling together this kind of research that we can all put to use now.
2013-11-02 Bubbles, Bubbles Everywhere by John Mauldin of Mauldin Economics
The froth and foam on markets of all shapes and sizes all over the world. It is an exhilarating feeling, and the pundits who populate the media outlets are bubbling over with it. There is nothing like a rising market to help lift our mood. Unless of course, as Prof. Kindleberger famously cautioned, we are not participating in that rising market. Then we feel like losers. But what if the rising market is a bubble? Are we smart enough to ride and then step aside before it bursts? Research says we all think that we are, yet we rarely demonstrate the actual ability.
2013-11-01 When Small is Big by Mark Mobius of Franklin Templeton
There’s a popular saying in the US, “good things come in small packages,” which is generally a statement about gifts of jewelry. My team and I find this saying can apply to the investment world, too, as we often find companies that are small in size, but which may have big long-term potential.
2013-11-01 Emerging Markets Equity Commentary by Team of Thomas White International
Emerging market equity prices saw a robust recovery in September as investor concerns about slower capital inflows to these markets faded after the U.S. Federal Reserve unexpectedly decided to delay the tapering of bond purchases.
2013-10-24 Africa's “Glass With Attitude” by Mark Mobius of Franklin Templeton
Africa has been an area of interest to our team, for many reasons. One might say Africa’s biggest asset is its youthful population. With a median age of under 20 in many countries today, that means a very high portion of Africa’s population is dependent on the adult workforce. Tomorrow, however, it means that the workforce will be massive, and the ratio of dependents to workers (the dependency ratio) could be among the lowest in the world. This huge and youthful population is a key rationale for our interest there.
2013-10-22 Middle East/Africa: Regional Economic Review - 3Q 2013 by Team of Thomas White International
Economic activity in the Middle-East and North Africa (MENA) has been hindered by prolonged political unrest and civil strife. The region’s vulnerability has increased over the last two years due to mounting structural challenges. What’s more, widening fiscal deficits due to the economic slowdown and dwindling foreign currency reserves remain sources of concern, as noted by a World Bank report.
2013-10-20 The Damage to the US Brand by John Mauldin of Millennium Wave Advisors
There is no doubt that the image what I will refer to in this letter as the "brand" of the United States has been damaged in the past month. But what are the actual costs? And what does it matter to the average citizen? Can the US recover its tarnished image and go on about business as usual? Is the recent dysfunction in Washington DC now behind us, or is it destined to become part of a bleaker landscape?
2013-10-18 Trying to Stop a Bull Market Has Risks by Frank Holmes of U.S. Global Investors
U.S. stocks have been on a tear. The S&P 500 Index has climbed a surprising 20 percent so far this year, as a global synchronized recovery takes shape and funds flow back to equities. As I often say, investors take risks when they try to stop a bull run, and plenty of data suggest you might regret taking that action this year.
2013-10-15 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
Flip-flopping Federal Reserve (Fed) policy defined the third quarter. Last quarter, the Fed threw the markets a curve ball by announcing possible tapering of its large-scale asset purchases beginning this year. That “taper talk” set off a mini-riot in global bond markets. Many emerging market (EM) countries, like Brazil, India, Indonesia and South Africa, were the biggest victims, as their bond yields rose and their currencies crashed.
2013-10-12 These Could be the Most Lucrative Energy Plays by Frank Holmes of U.S. Global Investors
Sometimes the most attractive energy assets aren’t found in the ground. Rather, at times like today, they are listed on the stock exchange.
2013-10-12 Sometimes They Ring a Bell by John Mauldin of Millennium Wave Advisors
Three items have come across my screen in the past month that, taken together, truly do signal a major turning point in how energy is discovered, transported, and transformed. And while we’ll start with a story that most of us are somewhat aware of, there is an even larger transformation happening that I think argues against the negative research that has come out in the last few years about the reduced potential for growth in the world economy.
2013-10-08 Absolute Return Letter: Heads or tails? by Niels Jensen, Nick Rees, Tricia Ward of Absolute Return Partners
Demographics captivate me. There are around 7.1 billion of us occupying planet earth today, going to 10 billion by 2050. I often think about how good old mother earth will cope with the additional 3 billion people we are projected to produce between now and 2050. More people translate into increased pressure on already scarce resources, but that is only part of the story and a story well covered by now.
2013-10-04 The Fire Fueling Gold by Frank Holmes of U.S. Global Investors
For patient, long-term investors looking for a great portfolio diversifier, a moderate weighting in gold and gold stocks may be just the answer. And, today, when looking across the gold mining industry, you’ll find plenty of companies that have paid attractive dividends, many higher than the 5-year government yield.
2013-10-03 Survival of the Fittest? by William Gross of PIMCO
I hate crows and my wife Sue hates bugs, but like most married couples we have learned to live with our differences. Crows eat bugs though, and bugs eat bugs, and that scientific observation sets the context for the next few paragraphs of this month’s Investment Outlook.
2013-09-27 How to Profit from a Changing China by Frank Holmes of U.S. Global Investors
We believe China’s rebalancing is positive for investors who selectively invest in its stocks. As Jim O’Neill puts it, “When a country is embarking on a significant compositional change to its economy, stock-pickers rather than index-trackers have the upper hand.”
2013-09-25 Occupy QE by Stephen Roach of Project Syndicate
The Occupy Wall Street movement began two years ago this month, galvanizing attention to income and wealth inequality in the US and around the world. But, if anything, economic inequality has deepened since then and, lost in the angst over inequality, is the critical role that central banks have played in exacerbating the problem.
2013-09-24 Lehman Five Years LaterLessons and Threats by Dean Curnutt of Macro Risk Advisors
The five-year anniversary of the Lehman bankruptcy and onset of financial crisis is here and so too is the raft of opinion pieces around what caused the meltdown and how it is different this time.In a recent interview with Charlie Rose, when asked about the risk of another 2008 event, Morgan Stanley CEO James Gorman said, “The probability of it happening again in our lifetime is as close to zero as I could imagine.”
2013-09-21 Fifty Shades of Gold by Frank Holmes of U.S. Global Investors
Unlike many commodities, there are many shades to gold, such as the Love Trade’s buying gold for loved ones and the Fear Trade’s purchasing gold as a store of value. An additional “shade” investors need to be aware of is how the Fed interprets the recovery of the U.S. economy.
2013-09-20 Investment Bulletin: Emerging Markets Equity by Team of Bedlam Asset Management
Since the start of the year to date, the portfolio has whupped the index by over 1,100 basis points, with a real gain against an index loss. Overall, the developed market (DM) index easily outperformed that for emerging markets (EM). This is expected to continue at the index level, partially because of weaker earnings growth and for political/social reasons. Analysts crank out studies on their companies, yet few look up from their spreadsheets to take a wider view encompassing politics and real people.
2013-09-18 Is the Commodity Supercycle Dead? by Nicholas Johnson, Greg Sharenow of PIMCO
While commodity price appreciation won’t likely mirror the supercycle, this shouldn’t necessarily imply a negative view on commodity returns going forward. We believe commodity prices are at reasonable levels from a long-term valuation perspective. In addition, the roll yield from investing in commodities is the highest it’s been since 2005. The outlook for commodity returns today seems broadly consistent with historical returns, and commodities remain an important tool for hedging inflation risk.
2013-09-17 Charles de Vaulx: “We Have Never Been as Cautiously Positioned” by Robert Huebscher (Article)
Charles de Vaulx is the chief investment officer and a portfolio manager at International Value Advisers. In this interview, he discusses his outlook for the market and the economy, and why his fund has never been as cautiously positioned as it is today.
2013-09-17 Consumers Face An Economy at a Crossroads by Chris Maxey, Ryan Davis of Fortigent
As the Federal Reserve prepares to debate the merits of tapering its asset purchase program this week, a key area of the economy that will be closely analyzed by Bernanke and Co. is the health of the American consumer. There are tenuous signs that consumers are spending more, but attitudes towards the economic recovery are hardly encouraging. Consumers will find it difficult to stay the key cog of economic growth in the U.S., but at the very least, their participation in the recovery is imperative, and leaves much to be desired.
2013-09-16 Russia is Tough to Love, Easier to Hate, Hard for Investors to Ignore. Here's Why by Frank Holmes of U.S. Global Investors
Russian President Vladimir Putin created a stir recently when he shared his thoughts with Americans in an op-ed printed in The New York Times. According to The Times, very few pieces written by heads of state have been published by the paper and very few received the attention Putin attracted.
2013-09-13 September Investment Bulletin: Global Equity Strategy by Team of Bedlam Asset Management
Year-to-date end-August the strategy performed well with a gain of 22.2% vs. 14.6% for the benchmark. During the month, the index “tumbled” 3.9%, partly out of fear of foreign military action in Syria and partly that central banks would cease printing money to hold down interest rates commonly known as tapering. Even so, the portfolio held up in August, with a much lesser 2.4% fall, thereby further widening outperformance over the index to 760 basis points so far in 2013.
2013-09-12 The Best Time to Own Cash: No Return is Better than a Negative Return by Francois Sicart of Tocqueville Asset Management
In his latest essay, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, writes about "the best time for an investor to own cash," which somewhat counter-intuitively, he believes is when that cash pays nothing.
2013-09-11 Absolute Return Letter: A Case of Broken BRICS? by Niels Jensen, Nick Rees, Tricia Ward of Absolute Return Partners
EM currencies, stocks and bonds have struggled since the Fed signalled its intent to change course in late May. This has seemingly triggered an exodus of speculative capital from emerging markets but, as is always the case, there is more to the story than that. EM countries (ex. China) no longer run a current account surplus with the rest of the world, and this hurts global liquidity. It is not yet a re-run of the 1997-98 Asian crisis, but it has the potential to become one with all sorts of consequences for bond yields in developed markets, currency wars, etc.
2013-09-06 The Emerging Markets Debt Evolution by Giordano Lombardo of Pioneer Investments
My colleagues Mauro Ratto, Head of Emerging Markets, and Yerlan Syzdykov, Head of Emerging Markets Bond & High Yield, offered these thoughts on emerging markets.
2013-09-06 Will Gold Follow Its Seasonal Pattern This Year? by Frank Holmes of U.S. Global Investors
There are factors beyond Syria this week driving gold. That’s the Love Trade. This group gives gold as gifts for loved ones during important holidays and festivals. This is the time of the year that we are in the midst of right now. Historically, September has been gold’s best month of the year. Looking at more than four decades of monthly returns, the precious metal has seen its biggest increase this month, averaging 2.3 percent.
2013-09-05 Seventh Inning Stretch by William Gross of PIMCO
They say that reality is whatever you wish it to be and I suppose that could be true. Just wish it, as Jiminy Cricket used to say, and it will come true. Reality’s relativity came to mind the other day as I was opening a box of Cracker Jacks for an afternoon snack. That’s right I said Cracker Jacks! I can’t count the number of people who have told me during the seventh inning stretch at a baseball game to make sure I sing Cracker Jack (without the S) because that’s what the song says. I care not. No one ever says buy me some “potato chip” or some “pea
2013-09-04 Off to the Races by Peter Schiff of Euro Pacific Precious Metals
Summer is traditionally a slow season for precious metals, but this summer started with a rout. In the last week of June, gold and silver hit 2-year lows of $1,192 and $18.61 respectively. Fortunately, after staggering along the lows, the precious metals are off to the races once more - with gold rallying more than 18% and silver 31%. This remarkable performance continues even in the face of the Fed’s sustained tapering threats.
2013-09-03 Are Emerging Markets Submerging? by Kenneth Rogoff of Project Syndicate
After years of solid output gains since the 2008 financial crisis, the combined effect of decelerating long-term growth in China and a potential end to ultra-easy monetary policies in advanced countries is exposing significant fragilities in emerging markets. Is the inevitable “echo crisis” in these countries already upon us?
2013-08-31 How Do I Hate Thee? by John Mauldin of Millennium Wave Advisors
I will list a number of reasons why I hate this market and then suggest a few reasons why that should get you excited. We will look at some charts, and I’ll briefly comment on them. No deep dives this week, just a survey of the general landscape.
2013-08-30 An American Energy Revolution by Frank Holmes of U.S. Global Investors
In Texas these days, there’s a feeling of absolute and unwavering confidence in the concept of an American energy revolution. From the depths of reserves to the richness of the energy, an incredible transformation is taking place.
2013-08-29 Middle East Tensions, Oil Prices and the US Economy by Russ Koesterich of iShares Blog
A further escalation of violence in the Middle East will not only have a terrible human toll, it could also lead to rising oil prices, which in turn could hurt consumers and the global recovery. Russ explains the situation and shares how investors can prepare.
2013-08-28 Weekly Market Review Notes by Team of Tuttle Tactical Management
Yesterday was a pretty big down day for the market. The media blamed it on fear about a war in Syria. If the market sold off every time there was a war or fear of a war in the Middle East then the Dow would be at 100 by now. What you had was a market that was slightly overbought in the short term, a week when tons of people are on vacation, and an excuse to take profits. Moves like this are disconcerting but at the end of the day they are just noise. For Syria to cause a real market decline it would have to morph into a massive war that engulfs the entire Middle East.
2013-08-26 The Global QE Exit Crisis by Stephen Roach of Project Syndicate
The global economy could be in the early stages of another crisis and, once again, the Federal Reserve is in the eye of the storm. As the Fed attempts to exit from its unprecedented policy of massive purchases of long-term assets, many high-flying emerging economies suddenly find themselves in a vise.
2013-08-23 5 China Charts That Look Bullish for Commodities by Frank Holmes of U.S. Global Investors
Over the past few months, investors have seen better economic data coming out of Europe. Consumer confidence in the continent has been rising, manufacturing data is improving and the fiscal situation is on the mend. Now, China appears to be strengthening as well, which could signal better times ahead. Below are five charts that look bullish for China and commodities. While not meant to be comprehensive, they do point to areas where investors might want to pay close attention.
2013-08-23 Embrace Bottom Up by Herbert and Randall Abramson of Trapeze Asset Management
With all the conflicting macro news, some good, some not, and with the S&P 500 and the Dow at new highs while many sectors languish, it is preferable to focus on the little picture not the big one. The big one may currently be more unpredictable than the small one, being bottom up investment in undervalued securities. Those may currently be less popular, but we value investors are naturally driven to buy investments low, that are neglected and unpopular, with the view of selling them high when their popularity is enhanced. Buy low and sell high. Not buy high and sell higher as is now in vogue.
2013-08-23 Buckle Up by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Caution is warranted near-term. For investors that have a solid strategy of dollar-cost averaging into the market, we don’t recommend deviating from that path. However, for investors who are more tactical, better entry points are likely yet to come. Longer-term, we remain bullish on US equities and prefer developed international markets over emerging markets.
2013-08-20 The Embassy Closings by Bill O'Grady of Confluence Investment Management
In the first week of August, the Obama administration announced the closing of 22 embassies and consulates across the Middle East and North Africa. In this report, we will discuss the role of the embassy for a superpower, the return of al Qaeda, including its strengths and weaknesses, the nature of the terrorist group’s intelligence and an examination of other actions that may be behind activities in Yemen.As always, we will conclude with potential market ramifications.
2013-08-19 Chicago and Detroit A Guest Commentary by Joshua Laurito of Lumesis
A few weeks back, we brought you a guest commentary by Josh Laurito regarding the City of Detroit. His perspectives were well-received by our readers. This week, Josh is back by popular demand with some thoughts on his home town of Chicago. We believe there is great value in considering fresh perspectives from intelligent people that is precisely what Josh brings to the table.
2013-08-16 What Happens When You Tell Indians to Stop Buying Gold by Frank Holmes of U.S. Global Investors
With the government in India raising its import tax for gold to 10 percent this week, I firmly believe Indians will continue indulging in gold, even if they have to smuggle it in.
2013-08-14 Middle East Is A Looming Tinderbox - Think Egypt by Gary Halbert of Halbert Wealth Management
We begin today by looking into the latest unprecedented embassy closures across the Middle East and North Africa. Did President Obama take the appropriate actions, or were the closures a sign of weakness to our enemies in the region? From there, we turn our attention to the worsening political tensions in Egypt. There is a real threat that Egypt could deteriorate into a full-scale civil war in the months ahead.
2013-08-14 What Role for Emerging Markets After the Sell-Off? by Ramin Toloui of PIMCO
While history suggests that the sell-off in emerging market bonds could ultimately offer attractive buying opportunities, it is important to anchor investment decisions firmly within a forward-looking economic and market outlook. Continuing vulnerabilities in global growth suggest there is fundamental value in EM bond yields at present valuations, as interest rate hikes priced into EM yield curves are unlikely to materialize in an environment of tentative growth.
2013-08-09 A Surprising Way to Play a Europe Rally by Frank Holmes of U.S. Global Investors
After a lengthy period of stagnant growth and lackluster results, the gradual crescendo of improving economic data that’s been coming out of Europe lately certainly commands attention.
2013-08-05 Two Charts Illustrate How to “Follow the Money” by Frank Holmes of U.S. Global Investors
Too often investors get caught up in their political allegiance or parties, focus on the negative and lose confidence in stocks. As a result, they can miss great bull markets. I believe when it comes to finding investment opportunities, it’s not about the political party, it’s about the policies, both monetary and fiscal.
2013-08-01 Lack of US Economic Growth May Slow Fed Tapering by Kevin Mahn of Hennion & Walsh Asset Management
While we are encouraged that the U.S. economy has been growing, as measured by Gross Domestic Product (GDP) growth, for 15 consecutive quarters starting in the third quarter of 2009, we are concerned that the growth rate has been below that of previous economic recoveries and the economy appears to be stalling and struggling to get back above a 2% growth rate thus far in 2013.
2013-07-30 The U.S. Energy Revolution by Bill O'Grady of Confluence Investment Management
In March 1971, the Texas Railroad Commission (TRC), which allocated oil production for the state of Texas, announced that producers in the state would be allowed a “full allocation.” This was the first time the TRC had allowed Texas producers to supply an unlimited amount of crude oil since WWII.
2013-07-30 ING Fixed Income Perspectives July 2013 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
We are constructive on interest rate risks in many developed and emerging economies as global central banks reinforce accommodative monetary policy. We favor the U.S. dollar versus the Japanese yen, the Euro and other developed market currencies. Credit spreads should narrow from current levels as the markets gain confidence and the Treasury market stabilizes. preads offer more than adequate compensation for likely credit losses and a further rise in interest rates. Spreads have been pressured to pre-QE3 levels and mortgages look attractive at these higher levels as prepayment speeds slow.
2013-07-26 Attention 3-D Shoppers by John West of Research Affiliates
Why do retail shoppers love a sale while capital markets flee from falling prices? Investors should consider starting to fill their shopping carts while inflation hedges are cheap....
2013-07-26 Is Europe Ready to Take Off? by Frank Holmes of U.S. Global Investors
After the U.S.’s huge run, is it possible the country will be handing off the baton across the Atlantic for the next leg of the relay race? Here are a few areas of strength that could send European stocks higher.
2013-07-22 Trouble in Emerging-Market Paradise by Nouriel Roubini of Project Syndicate
Some of the better-managed emerging-market economies will continue to experience rapid growth and asset outperformance in the coming decade. But many BRICS countries and a few other emerging markets may hit a thick wall, with growth and financial markets taking a serious beating.
2013-07-22 Middle East/Africa: Regional Economic Review Q2 2013 by Team of Thomas White International
Moderate growth is anticipated in Middle-East and North Africa (MENA) region as the International Monetary Fund (IMF) notes that economic expansion in the oil exporting countries has slowed down due to subdued global oil demand. While oil importing countries are expected to make a slight recovery, nations in transition are facing complex socio-political issues, which could further delay their recovery.
2013-07-22 4 Reasons to Consider Investing in Frontier Markets by Russ Koesterich of iShares Blog
At a time when investors are worried about Chinese banks and Brazilian riots, investing in the riskiest areas of the emerging world seems counterintuitive. But according to Russ, there are four reasons why many investors should consider having a small allocation to frontier markets.
2013-07-19 Print the Legend by Peter Schiff of Euro Pacific Capital
The Trayvon Martin/George Zimmerman tragedy has become one of those transcendent events that dominates the national discourse and throws light on dimly lit aspects of our society. Obviously, the case touches most closely on issues of race relations, media culture, and the politicization of the justice system. It also reveals how preconceived emotional commitments to a narrative can consistently trump demonstrable facts. These tendencies are also present in the polarized discussion about the persistent weakness of the U.S. economy.
2013-07-16 Hedge Funds Can Advertise...But Should They? by Chris Maxey, Ryan Davis of Fortigent
In April 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law. The legislation eased a number of regulatory burdens on small businesses and private industry in a bid to boost job growth. The bill made additional headlines for lifting an 80-year ban on solicitation for private placements, the restriction that prevented hedge funds from advertising their wares to the general public.
2013-07-16 Triangulating a Truer Course Through Emerging Markets by Tassos Stassopoulos of AllianceBernstein
Where can you find a car market which will double in size in the next five years? Brazil and Russia might be obvious places to look, but would you have expected Chile, Colombia, Ukraine and Vietnam? Picking the next big themes in emerging consumer markets is even harder than in the well-researched developed world. To get a better handle, we think, requires a triangular approach.
2013-07-15 Investment Bulletin: Emerging Markets Equity by Team of Bedlam Asset Management
For the half year to end June the index was buffeted, falling 3.1%. In contrast, the portfolio managed a gain of 8.3%, more than 1,000 basis points better. During the month of June, the Emerging Market index was whacked by 6.4%; the portfolio’s value also fell, but by a lesser 6.2%. The relative year-to-date and longer term falls in some of the regional indices have been grim (Chart 1, p.4): for example, in the first six months of 2013, EM equities underperformed those in developed markets on a total return basis by 16%, and by 14% over the last 12 months.
2013-07-09 So the Bulls Returned... by Blaine Rollins of 361 Capital
So the Bulls returned to Equities on a holiday shortened week with plenty of news and data to outrun. The Egyptians threw out their President and the Portuguese gave a thumbs down to their government. But dovish comments out of Draghi/ECB, strong data out of Japan, and a 3rd strong month of Non-Farm Payroll growth pushed the Russell 2000 to all-time highs as the rest of the market jumped into its slipstream.
2013-07-05 Why Oil Has Proven Resilient by Russ Koesterich of iShares Blog
Crude oil has proven more resilient and less volatile this year (depending on which benchmark you use, it is either up or down in the single digits) than most other commodities. There are three main factors behind this.
2013-07-05 The Asian Giant Stampeding into Gold by Frank Holmes of U.S. Global Investors
In this environment, gold should remain attractive. However, as the West flees the precious metal, another set of gold buyers has come forward with the aim to preserve wealth. Take a look at the chart below which shows total gold production compared to the gold deliveries on the COMEX and the Shanghai Gold Exchange.
2013-07-04 The Free-Trade Charade by Joseph E. Stiglitz of Project Syndicate
The negotiations to create a free-trade area between the US and Europe, and another between the US and much of the Pacific (except for China), are not about establishing a true free-trade system. Instead, the goal is a managed trade regime managed, that is, to serve the special interests that have long dominated trade policy in the West.
2013-07-03 Investment Bulletin: Emerging Markets Equity by Team of Bedlam Asset Management
The portfolio performed very well in May, taking the year to date net gain to 15.0%, vs. 3.5% for the index. There were two causes for the good numbers: stock selection i.e. ignoring index weightings - and the avoidance of countries with deteriorating balance of payments and budget deficits, and with high government debt to GDP ratios, such as Hungary, Poland, India, Turkey and South Africa.
2013-07-02 Preparing for the Second Half of 2013 by Russ Koesterich of iShares Blog
It’s halftime halfway through the year. That means Russ is looking back at what he got right and wrong in the first half of the year, and updating his expectations for the remainder of 2013.
2013-06-28 Stay the Course As Mixed Signals Move Markets by Frank Holmes of U.S. Global Investors
We maintain that gold is in extremely oversold territory and mathematically due for a reversal toward the mean. Yet when gold prices plummet, fear takes over and some investors forget the fundamental reasons to own gold: Gold is a portfolio diversifier and a store of value. It is a finite resource with increasing global demand.
2013-06-28 The New, Old Normal by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
We believe the recent volatility will be relatively short lived and provides an opportunity for investors who need to adjust their portfolios to do sowith long-term goals in mind. The risks associated with fixed income have been illustrated over the past couple of weeks and rising yields have caused equity volatility and a pullback. But we remain optimistic about US equities as well as developed international markets; particularly relative to emerging markets.
2013-06-28 Investment Bulletin: Global Equity Strategy by Team of Bedlam Asset Management
For the first five months of the year the global portfolio enjoyed a net gain of 21.0%, 350 basis points better than the index, edging ahead further in May. Recent smoke signals from the Federal Reserve Bank implying - subject to a wide range of get-out clauses that less money might be put into the system, have caused market hysterics. Bond investors have rightly been stampeding out, ending a 32-year old bull market. Its longevity had caused dangerous complacency and overexposure, especially to illiquid and expensive emerging market debt through open-ended vehicles.
2013-06-27 De-Risking Revisited by Nouriel Roubini of Project Syndicate
The prices of a wide range of risky assets have been rising, despite sluggish GDP growth worldwide. This discrepancy portends a new period of asset-price volatility one that could mark the beginning of a broader de-risking cycle for financial markets.
2013-06-27 Is There Life After BRICs for Emerging Market Investors? by Sammy Suzuki of AllianceBernstein
For more than a decade, Brazil, Russia, India and China have dominated the landscape in emerging markets. But as the BRICs-driven commodities boom wanes, investors may need to rethink their approach.
2013-06-25 The Great Debate on Inequality: Stiglitz versus Krugman by Michael Edesess (Article)
Economics Nobel laureate Joseph Stiglitz is the chief alarmist warning that income and wealth inequality in the U.S. is a very serious threat to the economy. So it comes as a surprise that his fellow Nobelist Paul Krugman ? Stiglitz’s intellectual comrade-in-arms ? disagrees with him. Their disagreement goes to the heart of today’s economic problem.
2013-06-21 What's an Investor to do in Markets like These? by Frank Holmes of U.S. Global Investors
What should an investor do after a day like yesterday? Stay calm and invest on, as I believe there is opportunity in picking up what the bears left behind. Here are a few ideas to ponder.
2013-06-18 Help Clients Fill the Income Void by Sponsored Content from Legg Mason Global Income Survey (Article)
Affluent investors all over the world just aren’t getting what they want from their income investments, according to Legg Mason’s recently released Global Income Survey. Yet there is good news: most say they want to become more knowledgeable about income investing, and they’re eager for financial professionals to point out fresh opportunities.
2013-06-14 Looking for Growth? Go Small and Global by Liliana Castillo Dearth, Bruce Aronow of AllianceBernstein
In the hunt for growth in today’s low-growth world, up-and-coming small- and mid-sized companies are a good place to start. But you need to look everywhere, from Indiana to Indonesia.
2013-06-14 A Sweet Find on an African Adventure by Frank Holmes of U.S. Global Investors
The heart of Africa has been beating strong in recent years due to elevated commodity prices and resilient domestic demand, despite the global economic slowdown. Among the sub-Saharan African countries, Sierra Leone was the fastest growing country last year, according to the World Bank. Its economy experienced growth that is as rare today as Fancy Red diamonds. GDP increased a whopping 18 percent.
2013-06-11 And Like Clockwork... by Blaine Rollins of 361 Capital
And like clockwork, stocks bounced both from their very short term oversold point and off the 50 day moving average on Wednesday...
2013-06-10 Emerging Market Opportunities by Patrick OShaughnessy, Ashvin Viswanathan of OShaughnessy Asset Management
Emerging market equities present both unique opportunities and also unique risks. Unlike more mature economies, emerging markets’ economies have the potential for impressive growth rates. But emerging markets also have the potential for damaging socio-economic and political instability. Equity returns in these countries are often impressive, but to earn these returns investors must deal with considerably higher volatility than in the developed equity markets.
2013-06-10 Emerging Markets Mid-Year Pulse Check by Mark Mobius of Franklin Templeton Investments
Global economic growth hasn’t been terribly inspiring so far in the first half of the year, but many investors have nevertheless been inspired to pour more assets into the equity markets, some of which have surged to record highs. As we hit the mid-year point, now seems like a good time to take a pulse check of emerging markets and assess our prognosis.
2013-06-07 As Economy Heats Up, Will Commodities? by Frank Holmes of U.S. Global Investors
Don’t wait for the Fed to officially raise rates, as research shows that investors get the most benefit from materials and energy stocks by getting in now
2013-06-04 The Role of Cash in Multi-Asset Portfolios by Ashish Tiwari, Andrew Spottiswoode of PIMCO
Determining the optimal allocation to cash is as challenging as ever in today’s unusually uncertain markets. When allocating to cash, investors should consider a multi-dimensional framework to assess the liquidity of the underlying cash instruments. In our view, the most attractive risk-adjusted opportunities for cash investors lie just outside the traditional money market space.
2013-06-03 And That's the Week That Was by Ron Brounes of Brounes & Associates
And the streak continues. (The monthly winning streak that is.) While stocks have drifted lower each of the past two weeks, the Dow has surged for six straight months and the S&P 500 now stands at seven and counting. In fact, much of the week’s losses came in the final hour(s) of trading as investors took profits for the month and positioned their portfolios for the summer. No news from the Fed yet, but the bond debates continue. Housing remains strong on the economic front, but next week’s data will go a long way toward setting the tone for the future.
2013-05-31 What's the Answer to Unprecedented Policies and Ultralow Rates? by Frank Holmes of U.S. Global Investors
So what’s the answer to unprecedented central bank policies that have been driving stocks higher and ultralow rates? I believe investors need to stick to a strategy that includes dividend-paying stocks that offer the opportunity for both income and growth.
2013-05-24 The Love Trade for Gold is Still On! by Frank Holmes of U.S. Global Investors
The more important demand for gold, in my opinion, comes from the enduring Love Trade, as countries like China and India buy the precious metal out of love and tradition.
2013-05-21 Measuring the Cost of Socially Responsible Investing by Adam Jared Apt (Article)
Quite apart from its motivations, the consequences of socially responsible investing have intrigued analysts. The actual results, as distinct from the desired results, cannot be taken for granted. Mark Kritzman has written about the subject, but his research was little noticed until recently, when SRI achieved renewed prominence in the form of popular demands that institutional portfolios divest themselves of investments in fossil-fuel companies. Kritzman’s point, and the conclusion of his analysis, is that SRI, properly understood, incurs a cost to the portfolio.
2013-05-21 Why the Lack of Inflation Is a Problem by Chris Maxey, Ryan Davis of Fortigent
Given the outsized role central banks are playing in today’s financial markets, inflation watching has taken on increased significance.It is widely assumed that continued easy money policies are only possible as long as price increases remain under control.At the same time, for a global economy trying to escape an extended period of weak growth and burdensome debt loads, low inflation is a double-edged sword.
2013-05-17 Making the Most of Equity Allocations by Andrew Pyne, Sabrina Callin of PIMCO
We believe slowing global growth and deleveraging are likely to result in lower long-term returns for equities. Traditional approaches to building equity portfolios may not be enough for investors to meet their return goals. We have found three complementary ways investors can enhance equity return potential: fundamental indexes, index-plus strategies and high active share stock selection approaches.
2013-05-17 Finding Opportunity Far and Near by Frank Holmes of U.S. Global Investors
Would it surprise you to learn that a vast majority of equity valuation models state that stocks should head much higher over the next five years?
2013-05-16 Investors Living in Emerging Markets are a Bullish Bunch! by Mark Mobius of Franklin Templeton Investments
Part of my job involves putting myself out on a limb at times, and I have taken the risk of being subject to contrary (sometimes enthusiastically so) viewpoints. I’ve even been accused of being too optimistic about emerging markets, perhaps partly because my views often represent a stark contrast to dramatic news headlines. So when I took a look at the findings of Franklin Templeton Investments’ 2013 Global Investor Sentiment Survey (GISS),1 I was pleased to discover my longstanding optimism about emerging markets seems to be spreading among investors.
2013-05-14 Nouriel Roubini: Four Reasons Investors Should be Worried by Robert Huebscher (Article)
Despite a modest recovery from the nadir of the financial crisis, the global economy still faces tail risks, according to Nouriel Roubini. Roubini’s forecast is not as gloomy as the one that earned the moniker “Doctor Doom,” when he correctly predicted the housing market collapse and the ensuing global recession. But, in a talk May 1, he identified today’s biggest danger points in Europe, the U.S., China and geopolitics which he said threaten to destabilize the global economy.
2013-05-08 6.7 Million “Missing Workers” Where Did They Go? by Gary Halbert of Halbert Wealth Management
Today we will touch several bases. We begin with last Friday’s unemployment report which was hailed by the mainstream media, but had a lot of bad news to go with the good. From there we look at the estimated 6.7 million “missing workers” in this economy and ponder if they’re permanently gone from the employment rolls.
2013-05-07 Attractive Dividends? Earnings Growth? A Way to Get Both by Team of Lord Abbett
International equities provide broader opportunities for combining appealing divided yields and earnings growth.
2013-05-07 Syria and the Red Line by Bill O'Grady of Confluence Investment Management
On Thursday, April 25, Secretary of Defense Hagel acknowledged that evidence that chemical weapons exposure occurred in Syria was probably accurate. This news dominated the Sunday talk shows, mostly because President Obama had indicated that Syrian military use of chemical weapons would be a “game changer” and a “red line” that would trigger a U.S. and international response. Now that it appears that somehow chemical weapons exposure did occur, the world awaits to see what exactly the president meant by a “response.”
2013-04-30 The Boston Marathon Bombing by Bill O'Grady of Confluence Investment Management
In this report, given the extensive media coverage of the event, we will not go into much detail on the attack itself except to illustrate points about the origins of the act. We will discuss why we think the Boston Marathon Bombing was the work of grassroots amateurs and what that means for the nation’s security. We will touch on how humans become radicalized and how managing that condition challenges democracies. As always, we will examine the ramifications of this event on the financial and commodity markets.
2013-04-26 The Race of Our Lives by Jeremy Grantham of GMO
Our global economy, reckless in its use of all resources and natural systems, shows many of the indicators of potential failure that brought down so many civilizations before ours. By sheer luck, though, ours has two features that might just save our bacon: declining fertility rates and progress in alternative energy. Our survival might well depend on doing everything we can to encourage their progress. Vested interests, though, defend the status quo effectively and the majority much prefers optimistic propaganda to uncomfortable truth and wishful thinking rather than tough action.
2013-04-26 The Yin and the Yang of Commodity Price Trends by Team of Northern Trust
In recent weeks, financial press headlines have centered on the sharp drop in the price of gold. Of greater importance, however, are the significant price declines of oil, wheat, corn and copper. The S&P Goldman Sachs Commodity Index is down 6.1% year-to-date after a nearly steady reading in 2012 and gains exceeding 20% in both 2010 and 2011. It is essential to recognize the different nuances buried in these commodities’ price trends. First we will focus on the implications of declining commodity price trends and then discuss gold specifically in more depth.
2013-04-26 A Playbook for Investors: How to Shoot, Score, Win by Frank Holmes of U.S. Global Investors
So, in the competitive spirit of the NBA playoff season, I’ve gathered a series of plays that investors can use to shoot, score and win during this year’s market. I’m happy to say they include all the elements of an exciting game, including a comeback kid, an upset and an underdog.
2013-04-24 The 2030 Non-state World by Bill O'Grady of Confluence Investment Management
Several weeks ago we started looking at the alternative world scenarios as projected by the National Intelligence Council (NIC). The NIC issues a long-term strategic outlook every five years and projects a forecast from this analysis for the following 15-20 years. In the most recent report, Global Trends 2030, the NIC proposes four alternative world scenarios. We are now turning to the last projected outlook, the Non-state World. Under this scenario non-state actors aided by emerging technologies will have increasing influence, as the importance of traditional nation-states decays.
2013-04-23 Middle East/Africa: Regional Economic Review by Team of Thomas White International
According to a World Bank (WB) report, global growth in 2013 will remain sluggish as economic recovery in the developed nations is likely to be slow. Lower business and consumer confidence, government spending cuts, as well as high rates of unemployment may delay the recovery, the report says. The report has also noted that developing nations may experience slower growth due to structural and monetary policy challenges.
2013-04-22 Will Emerging-Market Stocks Close Gap with Global Equities? by Morgan Harting of AllianceBernstein
Companies in emerging markets are more profitable and less debt burdened than their developed-market peers, and their shares trade at a deep discount. So when will emerging-market stocks close the gap with global equity markets?
2013-04-19 Global Economic Overview - March 2013 by Team of Thomas White International
Global economic trends turned softer during the month of March as indicators from Europe showed further declines and U.S. consumer sentiment moderated on labor market uncertainties, government spending cuts, and tax increases. Continuing weakness in European demand has somewhat dulled the export outlook for emerging economies, while government policies to prevent excessive asset price inflation have led to concerns about domestic consumption growth in these countries.
2013-04-19 Are Gold Stocks Oversold? by Steve Land of Franklin Templeton
Gold bugs have been bugging out over a sharp decline in the price of gold, which hit a two-year low in April. Many gold-related stocks felt the sting. We think gold-related stocks could be oversold, and that there are still compelling reasons to own them.
2013-04-19 Gold Buyers Get Physical As Coin and Jewelry Sales Surge by Frank Holmes of U.S. Global Investors
Even with the gold price dropping, why are gold coins selling at a premium? It’s Economics 101: The coin supply is limited and the demand is high. This buying trend isn’t only occurring in the U.S. In Bangkok, Thailand, for example, crowds of buyers were filling stores, eagerly waiting in multiple lines to purchase gold jewelry and coins.
2013-04-18 Emerging Markets Investment Bulletin by Team of Bedlam Asset Management
The benefits of focusing on attractively priced, well managed and growing businesses, irrespective of their inclusion in an index, continued to aid fund performance. Thus it was virtually flat in March, capping a strong quarter in absolute and relative terms with a gain of over 10%, again beating the 5% gain by the index. These - achieved through a combination of a valuation discipline that sets the entry and exit prices and the focus on quality businesses. Not surprisingly, stock selection has been a consistent factor behind the outperformance, both this year and previously.
2013-04-17 What's Driving Emerging Markets? by James McDonald, Daniel Phillips, Phillip Grant of Northern Trust
Emerging market (EM) equities have historically outperformed as the global economy gained momentum, as shown in Exhibit 1. After a great catch-up rally in the second half of 2012, the stocks finished the year as global outperformers only to lose that momentum in the first quarter of 2013. What is behind the recent underperformance, and what does it say about the outlook? Our research points to a number of contributors to the recent weakness.
2013-04-17 Emerging Markets Equity Commentary by Team of Thomas White International
Emerging market equities corrected for the second successive month in March, on concerns that continuing weakness in European demand could hurt export growth for several countries in Asia and Latin America. These economies had seen a revival in their export fortunes during the second half of last year as U.S. consumer demand turned healthier. However, the moderation in U.S. consumer sentiment during March has somewhat dulled the optimism.
2013-04-12 How a Landslide Shifts Copper Supply by Frank Holmes of U.S. Global Investors
The U.S. mining industry was dealt a devastating blow as Kennecott Utah Copper’s Bingham Canyon Mine experienced a pit wall failure causing a massive landslide with rocks and dirt covering the bottom of the mine pit. It’s a miracle no one was hurt due to the vigilance of its owner, Rio Tinto. The landslide is just one example of how quickly and unexpectedly the supply and demand factors facing the red metal can shift, which underscores the need for nimble active management.
2013-04-11 Emerging-Market Debt: Pure High-Yield Strategies Come of Age by Marco Santamaria of AllianceBernstein
We believe investors should be thinking about emerging-market debt in terms of credit quality buckets (investment grade or high yield) rather than sectors (sovereign or corporate). For some types of investor, pure high-yield strategies can offer significant advantages.
2013-04-05 China's Uncertainties Won't Stop Renminbi's Rise by Hayden Briscoe of AllianceBernstein
Recent data releases and the transition to new political leadership have created some uncertainty about China’s short-term economic outlook. While positive growth surprises are unlikely in 2013, we still think nothing can stop the long-term appreciation of China’s currency, the renminbi (RMB).
2013-04-05 Dodging Soccer Balls and Sharks in Recife, Brazil by Mark Mobius of Franklin Templeton Investments
Recife, in Brazil’s northeast Pernambuco state, is known to many as the “Venice of Brazil” given its many waterways and bridges. A welcome winter stop for our emerging markets team, the city is blessed with a tropical climate that’s as warm and sunny as its people. While the residents in this area of Brazil are often regarded as being extremely laid back given the balmy weather, we found them to be very hard workers. We found this seaside and shipping hub was not only a hotbed of tourist activity, but of potential investment opportunities as well.
2013-03-28 What Maslow and Rand Would Tell Investors Today by Frank Holmes of U.S. Global Investors
While gold’s performance in the short term has been counterintuitive, I plan to stick to my own advice. I simply feel safer with a small weighting in gold as insurance.
2013-03-26 A Cry for Help from Income Investors by Legg Mason Global Income Survey (Article)
Confronted with the stark realities of income investing now, affluent investors all over the world are rethinking their approach, notes Legg Mason’s just-released Global Income Survey. Yet the Survey also found income investors hungry for more knowledge and ideas -- creating opportunities for savvy financial advisors.
2013-03-22 Happy Clients; Terrified Prospects by David Edwards of Heron Financial Group
Four years ago, on March 9th, 2009, US stocks collapsed to a 12 year low. A financial crisis rooted in overleveraged purchases of junk (or even fraudulent) securities claimed, in quick succession, Bear Stearns, Lehman Brother, Merrill Lynch (forced into a shotgun marriage with Bank of America) and AIG. Investors panicked, selling good securities at deep discounts to fair value.
2013-03-22 Power of Positive Screening: Pursuing Strength of Social and Financial Returns by Chat Reynders, Patrick McVeigh of Reynders, McVeigh Capital Management
Market volatility and sweeping changes to mainstream views of investing are catalyzing acceptance of tactics that combine fundamentals with a progressive outlook on social issues. Positive screening brings balanced companies to the fore of the investment landscape: this practice isolates sound equities that demonstrate strength of balance sheet, dependability of management, and a commitment to act as part of a global community focused on positive change.
2013-03-22 In Gold We Trust by Frank Holmes of U.S. Global Investors
Poorly thought out government policies hurt the formation of capital and destroy people’s trust in paper money. Leaders may have good intentions, but some of their actions show disrespect for private property and individualism. This only reemphasizes gold as an important asset class.
2013-03-19 Why Are Emerging Markets Struggling in 2013? by Ryan Davis of Fortigent
Despite one of the sharpest rallies in US equities in recent memory, emerging market equities have been left curiously behind in 2013. Through last Friday, the market segment was down 1.0%, compared to an S&P 500 index that was up 10.0%. This seems to violate the regime that investors have gotten used to over the past 10 years, whereby the emerging markets equity index served as a high beta proxy for the US equity market.
2013-03-19 Keeping Up With Changes In Emerging Market ETFs by Jun Zhu of Leuthold Weeden Capital Management
In this report, we highlight benchmark changes in a major player, a potential substitute (with cheaper fees) for another major player, a new player with an innovative weighting scheme and provide an overview of the Emerging Market ETF space available to investors.
2013-03-12 U.S. Dominates World Markets for the Trifecta by Douglas Cote of ING Investment Management
While large-cap indices get all the headlines, mid and small caps have continued to excel. Frontier markets have picked up the slack as major emerging markets stumble. Global risks persist, though U.S. fundamentals appear solid. The move toward U.S. energy independence should soon result in a trade surplus, boosting GDP.
2013-03-12 The 2030 Increasing Inequality Scenario by Bill O'Grady, Kaisa Stucke of Confluence Investment Management
Last month we started looking at the 2030 alternative world development scenarios as laid out by the National Intelligence Council (NIC). The NIC forecasts the likely paths that are either currently underway or are forecast to occur in the future. In its most recent report, the NIC projects four possible global political and economic states based on expected trends. Last time, we presented the most likely best case scenario. This week, we will explore the third scenario, under which the world gets wealthier as a whole, but inequalities increase.
2013-03-08 How to Keep Calm and Invest On by Frank Holmes of U.S. Global Investors
The market noise of today will not be going away. However, investors can gain confidence in the following wisdom of the crowd. As famous investor Benjamin Graham said, "The individual investor should act consistently as an investor and not as a speculator. Keep calm and invest on.
2013-03-07 A New Chapter for Turkey? by Frank Holmes of U.S. Global Investors
In 2012, Turkey was the best performer among the emerging markets we track on our Periodic Table showing a decade of returns. All developing countries rose last year, but stocks in Turkey climbed an astounding 56 percent.
2013-03-01 Critical Juncture? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Headwinds have reemerged and investor concern is heightened yet again. We still believe stocks can run further, but a pullback is more likely in the near-term. The sequestration is now in affect but that doesn't necessarily mean it's here to stay and more budget fights loom, particularly in advance of the potential government shutdown on March 27. Meanwhile, some members of the Fed are in favor of scaling back its quantitative easing (QE) program, rattling markets a bit.
2013-03-01 Greetings from Istanbul! by Frank Holmes of U.S. Global Investors
As I travel around Turkey, I am reminded how vital good government policies are to the health of a nation. Following a decade of fiscally responsible actions, Turkey is the picture of a growing prosperity. Perhaps Americas elected officials could take a tip from this vibrant country overseas.
2013-02-26 Global Investment Review First Quarter 2013 by Team of Bedlam Asset Management
At the beginning of last year the prospects for capital markets were grim yet the results surprisingly good: positive returns and modest economic growth. The cause was central banks in developed countries acting as a backstop for sovereign and other large debts, through direct purchasing funded by accelerated money printing. This also ensured low interest rates. Subsequently, mountainous debt problems are slowly being tackled, even as they appear to increase.
2013-02-22 Emerging Markets Outlook: Will Emerging Markets Continue Their Run in 2013? by Scott Klimo of Saturna Capital
A number of times we have been asked whether emerging markets will continue their run in 2013. Our response typically begins with the following clarification: "Emerging markets" may be a handy way to refer to the countries that constitute a generally recognized asset class, but this group is far from monolithic. Widely differing levels of development, economic drivers, opportunities to invest, and returns exist under the emerging markets umbrella. For this reason it's not entirely correct to imply that "emerging markets" had a run in 2012.
2013-02-16 When It Comes to Gold, Stick to the Facts by Frank Holmes of U.S. Global Investors
During short-term gold corrections, its much more important to focus on the facts, including the fact that gold is increasingly viewed as a currency. Rather than buying real estate, lumber or diamonds, central banks around the world are buying gold. According to the World Gold Council (WGC), over 2012, central bank demand totaled 534 tons, a level we have not seen in nearly 50 years.
2013-02-14 Emerging Markets Consolidate After Last Year's Gains by Team of Thomas White International
After the strong relative performance towards the end of last year, emerging market equities settled with moderate gains during the month of January as global investor sentiment remained optimistic. Global economic data continue to be mostly positive, sustaining the trend from the second half of last year.
2013-02-12 The Milton Friedman Centenary: One Hundred Years of Surprisingly Little Solitude by Laurence B. Siegel (Article)
Milton Friedman was once a lonely voice for capitalism in a collectivist era, and seemed doomed to a hundred years of solitude. Instead, he arguably became the preeminent public intellectual of the hundred years that followed his 1912 birth.
2013-02-08 Out With the Dragon In With the Snake by Frank Holmes of U.S. Global Investors
Over 2013, we expect the Chinese government to continue its accommodative efforts, which should reinforce the equity rally. In addition, the new pyramid of power is focused on growth, as it seeks to improve and reform policies that will provide its residents with opportunities and social security, increase incomes and raise standards of living, which should encourage domestic consumption. Growth is set to be considerable over the next several years.
2013-02-07 Commodities: Correlating Trends with Opportunities by Mark Mobius of Franklin Templeton Investments
Commodity price inflation is both a social and an economic issue. In emerging markets in particular, food and energy costs take a deeper slice out of consumers' income, which can lead to the type of unrest that causes governments to topple. In addition to the potential impact of extreme weather on food supplies, central banks around the world are printing a flood of money, which could lead to inflated prices for other goods and services.
2013-02-07 Complacency in a Leaderless World by Joseph Stiglitz of Project Syndicate
In the last 25 years, we have moved from a world dominated by two superpowers to one dominated by one, and now to a leaderless, multi-polar world. While we may talk about the G-7, or G-8, or G-20, the more apt description is G-0. We will have to learn how to live, and thrive, in this new world.
2013-02-06 The Good, the Bad, and the Greek (Risks) by John Mauldin of Millennium Wave Advisors
Greece is a small country with large implications. Last week we began to explore what I learned from my recent trip to Greece. In this week's letter we will finish those observations and in particular look at some of the comments from my meetings with over 40 people: owners of small businesses and large ones, billionaires, taxi drivers, politicians, central bankers, investors, ex-patriots, wives, and mothers. I believe we can arrive at some small understanding of the problems Greece faces. Then we will consider the broader consequences for Europe.
2013-02-04 A Gross Underestimate by Jonathan Coleman, Soonyong Park of Janus Capital Group
As we enter 2013, we felt it would be an appropriate time to revisit one of last years most controversial predictions of future equity performance. We acknowledge that equities in general may not continue to deliver the same real rate of return they have over the last century; however, we believe the glum outlook for the asset class forecasted by Bill Gross last year misses the mark. Our estimates of future equity returnsbased on three different approachesall point to a meaningfully higher forecast than Gross' pessimistic prediction.
2013-02-01 Feasting in a Time of Famine: The South African Consumer by Maria (Masha) Gordon, Richard Flax of PIMCO
South Africa's consumer sector has been on a strong run for the past several years, but there are signs the consumer is now coming under pressure. For all the challenges that have faced the South African economy, most listed consumer companies have enjoyed a great run since 2008. However, a combination of factors strong growth in retail sales and credit along with the rise in consumer debt levels and weak employment growth suggest the South African consumer sector may have pulled consumption forward in a way that could prove ultimately unsustainable.
2013-02-01 Dow To 14,000 and Beyond? by Frank Holmes of U.S. Global Investors
So will the Dow go beyond 14,000? Although you cant predict how hot the weather will be this summer, the clouds appear to be parting to reveal the sun today. Make sure your asset allocation positions your portfolio to shine.
2013-02-01 A Gross Underestimate by Jonathan Coleman and Soonyong Park of Janus Capital Group
The glum outlook for the asset class forecasted by Bill Gross last year misses the mark. Our estimates of future equity returnsbased on three different approachesall point to a meaningfully higher forecast than Gross pessimistic prediction.
2013-01-30 The Complicated Case of Mali by Bill O'Grady of Confluence Investment Management
On January 11, 2013, French President Francois Hollande announced the French military was intervening in Mali at the request of the government. The Mali military was reeling in the face of jihadist rebels from the north who were making rapid inroads toward the south. Although the U.N. Security Council had authorized an African-led military intervention in Mali to contain the rebels, it had been ineffective. Thus, France "piggybacked" off that resolution to justify its intervention.
2013-01-25 Resource Investors: Why You Can Expect Sunnier Days Ahead by Frank Holmes of U.S. Global Investors
During the current commodity supercycle, there have been occasionstoo many to countwhen investor psyche has been damaged by reports about slowing U.S. growth, a hard landing in China or a debt crisis in Europe. Yet just behind the gloom, significant and positive trends are taking hold, causing the storms to start dissipating.
2013-01-24 Searching for Growth in a Low-Growth World by Austin Graff of PIMCO
We believe corporate profit growth will fall short of sell-side consensus estimates. But companies with inflation-linked revenues and supply side advantages to drive revenue growth, and those with ample cost levers to improve margins, are positioned for sustained earnings growth in the New Normal.
2013-01-23 Is the European Crisis Over? by Chris Maxey, Ryan Davis of Fortigent
The European sovereign debt crisis that first erupted in 2010 and stoked almost three years of intense market volatility has all but faded from the front pages. Overshadowed by domestic policy issues and European Central Bank (ECB) President Mario Draghi's pledge to do "whatever it takes" to save the Eurozone, fears that the monetary union would crumble and unleash a maelstrom of financial distress appear to have dissipated.
2013-01-22 Puppet Show by John Hussman of Hussman Funds
What's fascinating is that in the presence of what are not thin strings, but massive cables supporting the economy like a puppet, the only response that Wall Street can muster is "Hey! He's walking!" as if the puppet is capable of motion without being propped up to a nearly reckless extent.
2013-01-19 France and the UK Could Be the Lynchpins of Europe by John Browne of Euro Pacific Capital
While the problems of Europe appear to be contained, under the surface the problems are getting more dire by the day.
2013-01-18 Middle East/Africa: Regional Economic Review 4Q 2012 by Team of Thomas White International
According to the International Monetary Fund's Regional Economic Outlook report, countries in the Middle East and North Africa region are expected to grow at different rates. Oil exporting nations are cashing in on high energy prices and production, and are projected to expand 6.6 percent in 2012 before tempering in 2013. On the other hand, oil importers such as Jordan, Morocco and Tunisia among others are expected to clock growth just over 2 percent as the slowdown in the world economy and political tensions continue to hinder expansion for some of these countries in transition.
2013-01-18 2013 International Outlook by Colin Moore of Columbia Management
We continue our outlook for 2013 with a review of select international economies and financial markets. Similar to the U.S. the road to recovery will be bumpy and we expect financial markets to continue being affected by macroeconomic uncertainties. While the overall environment remains uncertain, some of the significant headwinds in 2012, e.g. the Chinese leadership transition and a complete disintegration of the eurozone, are perhaps less concerning for markets than they were a year ago.
2013-01-18 4 Sensational Facts About Gold Investing That You Might Not Know by Frank Holmes of U.S. Global Investors
1. Gold has been a consistent performer over the decades. 2. Gold should remain a hot commodity in 2013. 3. Gold is the least volatile commodity on the table. 4. The last four years were better than you thought.
2013-01-17 The Year Past, The Year Ahead by Michael Gomez of PIMCO
The multiyear run of performance by emerging market (EM) sovereign external debt has been remarkable but residual valuations look either just fair (investment grade) or expensive (high yield) versus other comparable credits. We still see abundant opportunities in EM local markets, while EM equities are poised to benefit from a relatively low starting point for both earnings and earnings expectations.
2013-01-17 Investing in Africa: Misconceptions and Realities by Mark Mobius of Franklin Templeton Investments
It's easy to fall prey to misconceptions and generalizations about places we've never been: to assume everyone in the United States drives big cars, all the French love croissants and all Canadians play hockey. There are many misconceptions about investing in developing markets, and Africa certainly has its fair share, but it's dangerous to make sweeping generalizations.
2013-01-15 The Year Past, The Year Ahead by Michael Gomez of PIMCO
While not immune to global economic headwinds, emerging market investments remain well positioned to outperform their developed world counterparts over time. The multiyear run of performance by emerging market (EM) sovereign external debt has been remarkable but residual valuations look either just fair (investment grade) or expensive (high yield) versus other comparable credits. We still see abundant opportunities in EM local markets, while EM equities are poised to benefit from a relatively low starting point for both earnings and earnings expectations.
2013-01-15 Emerging Markets Equity Commentary: December 2012 by Team of Thomas White International
Emerging market equities outperformed during the month of December, helped by signs of further improvement in the economic growth outlook. Economic data released over the month were largely positive for most emerging countries, and strengthened the optimism that these markets could see a moderate improvement in growth rates during 2013.
2013-01-14 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
The ?nal quarter of 2012 was the icing on the cake of an exceptional year for the credit sectors. Fourth quarter credit gains stemmed in part from uncommonly aggressive monetary policy responses in the third quarter. As economic growth continued to undershoot expectations, major central banks made clear that they were dissatis?ed with the status quo of tepid economic growth and high unemployment. The Federal Reserve went so far as to tie its monetary policy to the level of the unemployment rate.
2013-01-14 The 'Dark Continent' is Shining Bright by Team of Thomas White International
From a recipient of aid, Africa has transformed itself into a magnet attracting capital and investment.
2013-01-11 Special Edition: The Outlook for 2013 by Team of Northern Trust
At this time of the year we typically get warm and generous wishes for the New Year and, of course, numerous questions about what our crystal ball has in store for 2013. While many economists publish their perspectives prior to January 1, we opted to wait in the hope of having a clear fiscal picture for the United States. A lot of good that did us...
2013-01-11 Invest In Equities: Your Future Self May Thank You by Frank Holmes of U.S. Global Investors
Investors have had an illusion about the stock market since the financial crisis. With the barrage of negative headlines and abhorrence toward risk, investors seemed to feel that equities would not improve going forward. This turned out to be a mistaken belief.
2013-01-11 On the Road in India by Mark Mobius of Franklin Templeton Investments
India appears to be on its way to becoming a major market for motor vehicles. Annual car and truck sales currently in India are roughly one third of the 15 million units produced in the U.S., but the pace of growth has been high. The total population of registered motor vehicles in India numbered more than 100 million in 2008- 2009, with consumer vehicles (passenger cars, motorcycles and scooters) accounting for about 4/5 of the total.
2013-01-08 2012: Resumption of the Stock Market Recovery by Ronald Surz (Article)
Let's take a close look at the details of what occurred in 2012 so we can assess the opportunities and prepare for the surprises that 2013 will bring. I'll give you my opinions, and you should form your own.
2013-01-04 Ring in the New by Mark Mobius of Franklin Templeton Investments
The "year of the dragon" in 2012 certainly didnt disappoint, as the global markets battled one financial dragon after another. From the Eurozone's sovereign debt crisis to persistently high unemployment in the U.S. and a mayday call from many who worried that China's growth rate was headed for a "hard landing," 2012 certainly was interesting. As we turn the calendar page to 2013, the Eurozone seems to be in less-critical condition and China's economic growth still appears to be flying but as of this writing, the U.S. debt problems still haven't been solved.
2013-01-04 In 2013, Resolve to Follow the Money by Frank Holmes of U.S. Global Investors
During these first days of January, many adopt an out with the old, in with the new, approach to shed bad habits or extra pounds. Washington opted for its same ol strategy when averting the fiscal cliff, as the addictive nature of can-kicking is a transatlantic sport, according to The Economist. The short-term fix did nothing to control the unsustainable path of entitlement spending on pensions and health care nothing to rationalize Americas hideously complex and distorted tax code... and virtually nothing to close Americas big structural budget deficit.
2013-01-03 2013 Forecast: Good Economy, Challenged Markets by Douglas Cote, Karyn Cavanaugh of ING Investment Management
We enter 2013 bombarded by conflicting signals. While fundamentals have been mixed of late, longer-term themes our "tectonic shifts" like the energy revolution are gaining momentum and promising to make positive contributions sooner rather than later. And while salutary measures taken by policymakers have eased global risks and lessened fears of Armageddon, there is considerable work yet to be done.
2012-12-28 Don't Wait for the Robins: Investment Strategy for 2013 by Pamela Rosenau of HighTower Advisors
Warren Buffet once remarked, "If you wait for the robins, spring will be over." "Uncertainty" has been an overarching issue since the financial crisis of 2008 and one of the principal reasons that investors have remained on the sidelines away from the equity markets. As it has been a part of the investment lexicon, "uncertainty" will always exist in some capacity. In 2012, investors began by focusing on European issues, then the U.S. election, and now the fiscal cliff. In fact, when there is little uncertainty and investors appear unafraid, one should be more concerned.
2012-12-24 Emerging Markets Equity - Monthly Product Commentary: November 2012 by Team of Thomas White International
Sustained domestic demand growth and a revival in export demand are anticipated to drive expansion next year.
2012-12-21 Egypt's Arab Winter by Mark Mobius of Franklin Templeton Investments
It's been almost two years since the "Arab Spring" swept North Africa and the Middle East, and with it, grand hopes for change. Sometimes, change doesn't happen as quickly as the people would like, and oftentimes it can be a messy process. That is certainly true in Egypt right now, a country that is still in the throes of shaping its future. The ousting of Hosni Mubarak in 2011 didn't instantly transform the nation into a model of democracy, and the country is currently deliberating the best way forward via public debates, protests and the election process.
2012-12-21 Light at the End of the Tunnel for Gold by Frank Holmes of U.S. Global Investors
Intuition was telling me something was going on these past few days in the gold market. Our investment team was watching gold and gold stocks take a tumble for no obvious reason. It wasnt only us who felt this way: many analysts were caught off-guard. One comment from Barclays Research indicated that the week was unusually brutal with quite a few confused participants with some seemingly positive aspects of the market not having an impact.
2012-12-19 PIMCO's Cyclical Outlook for Asia: Awaiting the Policy Breakthrough by Tomoya Masanao, Robert Mead, Ramin Toloui of PIMCO
Our base case for China includes incremental policy reform, but we also see an increased chance of a potential positive surprise on reform, resulting from the recent changes in leadership. Japan's new government will likely focus on reflating the structurally impaired economy, but policy effectiveness will remain questionable. Australia is being burdened by the unintended consequences of the policy responses of others, accompanied by the impending rebalancing of the Chinese economy.
2012-12-19 Imagine...a Better Future by Liz Ann Sonders of Charles Schwab
After a weekend of sadness and reflection, I wanted to write something more optimistic we'll go back to the future to learn and unlearn.
2012-12-18 Jeremy Siegel on 'Dow 15,000' by Robert Huebscher (Article)
Jeremy Siegel was one of very few individuals to have correctly predicted the strong performance of the equity markets over the last year. The Wharton professor and author of the renowned book, Stocks for the Long Run, forecasts continued strong performance for the year ahead.
2012-12-15 A Face-Off Between Passive and Active Investing by Frank Holmes of U.S. Global Investors
Exchange-traded funds continued to attract assets in 2012 while money has been exiting mutual funds. Still a majority of assets continue to be invested in actively managed products: As of the end of 2011, of the nearly $13 trillion invested in funds, index and exchange-traded funds comprise only about 8 percent, according to the Investment Company Institute.
2012-12-08 How Gold Miners Can Leverage the Price of Gold by Frank Holmes of U.S. Global Investors
Gazing into their crystal balls this week, Wall Street firms interpreted differing futures for gold next year. Morgan Stanley awarded gold the best commodity for 2013 while Goldman Sachs called the end of the metals hot streak. After seeing 11 consecutive years of positive performance from gold, one needs to be wary of research analysts price forecasts, as they have consistently underestimated the shifting dynamics driving the precious metal higher.
2012-12-06 Americas Hope Against Hope by Joseph E. Stiglitz of Project Syndicate
After a hard-fought campaign, it seems that not much has changed in American politics. The main cause for celebration is that America has avoided policies that would have pushed it closer to recession and increased inequality further.
2012-12-01 A Fresh Start (Hopefully) by Howard Marks of Oaktree Capital
For years I kept these memos away from anything related to politics. But more recently I began to discuss issues facing the US, and this has required some mention of policy and thus of politics. Ive tried very hard to be non-partisan, with a goal of not having readers know my leanings. I hope Ive succeeded; at least no one has complained. Because I found Americas recent presidential election and especially the results so fascinating, Im going to move explicitly to the field of politics, but with the same goal of non-partisan expression.
2012-12-01 The Significant Impact of U.S. Oil Production by Frank Holmes of U.S. Global Investors
The Eagle Ford shale formation lies south of our headquarters in San Antonio, Texas, giving the U.S. Global investment team a firsthand, tacit perspective on the oil and gas industrys growing natural resources phenomenon. Weve witnessed how the oil activity is boosting the local economy with solid-paying jobs, a healthy housing market and strong consumer sentiment, as oil giants such as Schlumberger and Halliburton take a bigger stake in the area.
2012-11-27 A Critique of Grantham and Gordon: The Prospects for Long-term Growth by Laurence B. Siegel (Article)
The vigorous global economic growth of the last two centuries is over, according to Jeremy Grantham and Robert Gordon. That prediction, if correct, has profound and worrisome implications for investors. And the short-term trend is indeed disquieting: Growth has been close to zero over the last decade in advanced countries. But the most likely outcome is that per capita GDP growth going forward will approximate its U.S. historical average of 1.8%, and it will grow faster in developing markets.
2012-11-26 Deja Vu All Over Again by Tony Crescenzi, Andrew Bosomworth, Lupin Rahman, Ben Emons of PIMCO
If the eurozone is to endure, it will require reduced economic differences among countries and larger common fiscal capacity. Emerging market central banks are likely to remain in wait-and-see mode while looking to the U.S. for clarity on the fiscal negotiations and domestic macro prints for signs of moderation in both inflation and activity. While central banks in advanced economies have not traditionally used explicit policies to target exchange rates, the European debt crisis may change all that.
2012-11-23 Five Amazing Global Consumer Trends by Frank Holmes of U.S. Global Investors
Fifth Avenue no longer the worlds most expensive retail location. China set to be the second largest luxury market by 2017. Viva Macau is gaming capital of the world. Inexpensive Indian Aakash 2 could revolutionize tablet industry. Emerging market residents don't need a bank account to pay with their mobile wallet.
2012-11-20 Companies Grapple With Pressure from All Sides by Chris Maxey, Ryan Davis of Fortigent
As we move closer to closing the books on another earnings cycle, it is time to look back at the hits and misses for the quarter. Unfortunately, this quarter brought more misses than investors have seen in quite some time, despite a greatly reduced bar. The outlook also leaves something to be desired, with companies cutting forward guidance and analysts ratcheting down estimates for the next two quarters.
2012-11-20 Emerging Markets Equity -- Monthly Product Commentary: October 2012 by Team of Thomas White International
Economic data from major emerging markets suggested a moderate reversal from the weak trends of recent months.
2012-11-19 The Year of Betting Conservatively by Nouriel Roubini of Project Syndicate
As consumers, firms, and investors become more cautious and risk-averse, the equity-market rally of the second half of 2012 has crested. And, given the seriousness of the downside risks to growth, the correction could be a bellwether of worse to come for the global economy and financial markets in 2013.
2012-11-17 Three Events That Sum Up the Week by Frank Holmes of U.S. Global Investors
India regained its title as the strongest performing market, overtaking the greater China area, as the country experienced a bounceback in demand due to improved sentiment during the festival season. The Federal Housing Administration reported that it has exhausted its reserves, possibly requiring a bailout from U.S. taxpayers for the first time ever in its nearly 80-year history. The global economic picture came into focus a little more this week with the announcement of Chinas new leadership.
2012-11-15 New Leaders, Same Steady Hand on the Chinese Economic Tiller by Anthony Chan of AllianceBernstein
The media spotlight is on China's new president, Xi Jinping. But investors should be watching Li Keqiang, the new premier. It's Mr Li who will be responsible for combating the country's slowing economic growth and, with it, potentially the fate of the world's economy.
2012-11-13 Europe: Opportunity of a Generation by David Marcus of Evermore Global Advisors
A difficult political and economic backdrop is masking exceptional opportunities in European markets for discerning, long-term oriented investors. Evermore believes that there is a generational opportunity to build significant wealth by selectively investing in catalyst-driven, deep value European securities, trading at depressed valuations.
2012-11-13 Argo and Ethel: America Has Never Been a "Rose Garden" by Bill Smead of Smead Capital Management
We recently had the pleasure of seeing a movie, Argo, and a documentary on HBO, Ethel. Argo is the story of the rescue of the six Americans from the Canadian Ambassador's residence at the time of the Iranian takeover of the US Embassy in Teheran. Ethel is a documentary which tells the story of Ethel Kennedy, the wife of Senator Robert Kennedy. It was produced, directed and narrated by Ethel Kennedy's youngest daughter, Rory. I rate both of these films highly and believe they tell US investors something they need to be reminded of.
2012-11-09 A Portrait of Two Presidents by Frank Holmes of U.S. Global Investors
On Friday, President Obama addressed the two topics that have been on many equity investors minds since election night: the economy and the dreaded fiscal cliff. In his speech, he delivered his familiar plan to combine spending cuts with increasing revenue by raising taxes on the wealthiest Americans. Thats how we did it in the 1990s, when Bill Clinton was president, says the president.
2012-11-07 October Surprise by Douglas Cote of ING Investment Management
Third quarter earnings growth for S&P 500 companies is at risk of being negative for the first time in three years. While the presidential election is important, Congress will ultimately control spending and tax legislation. Monetary stimulus alone is both inadequate and unsustainable; pro-growth taxation, spending and regulatory policy is key to our economic revival.
2012-11-06 Same Old Samba for Brazil by Milton Ezrati of Lord Abbett
The old saw for the last 80-plus years puts Brazil perpetually on the verge of becoming the next economic powerhouse, but never quite making it. It is easy to see the potential. The nation is large; rich in natural resources and arable land; has a sizable, active population; and has well-developed trade relations in the Americas, with Europe, and with Africa. Brazil has failed to realize its potential less for economic reasons than because of misguided government policies.
2012-11-06 Favorable Reports Post Sandy by Christian Thwaites of Sentinel Investments
The devastation of Sandy blighted the week. We were lucky in that most of our employees escaped the worst effects. We had some evacuations and plenty of lost power. But the images of devastation were overwhelming and we hope our clients and friends of the firm are safe. Perhaps, as a non-native, my perspective is warped but in the US we have an uncanny ability for industry, problem-solving, drive, inventiveness and optimism. Sometimes the very best of us comes out in these times.
2012-11-05 How to Stop Illegal Downloads by Dan Ariely of Dan Ariely Blog
Three days after publication of my new book , The (Honest) Truth About Dishonesty, I was able to find electronic copies on a few websites that specialize in illegal content. These were high quality versions of the book, including the images of the cover, the references, andmy favorite partthe copyright notice.
2012-11-05 The Foreign Policy Choice by Bill O'Grady of Confluence Investment Management
Tomorrow is Election Day. After months of campaigning and hours of watching insipid political commercials, the time to decide is upon us.
2012-11-02 World's Economies Come of Age by Mark Mobius of Franklin Templeton Investments
As we grow and age, our needs and habits often change. The same is true of economies, which grow and change along with their people. Short-term statistics that impact a country's economic growth rate, such as consumer spending, exports and the like are certainly important, but there are also long-term shifts that can have significant economic implications for the future. Changing demographics is one of them. As a long-term investor, I have to look not only at today's opportunities, but also plan for tomorrow's developments.
2012-10-26 Will South Africa's Struggles Overshadow its Potential? by Mark Mobius of Franklin Templeton Investments
Africa is a continent many investors bypass, but from my perspective as a long-term investor, I think that's a mistake. South Africa has faced some struggles recently, but I think they can be overcome, and a brighter future could be ahead there for its people. South Africa is the largest economy in Africa, and is the only country on the continent where I think the "frontier" market label doesn't apply. Some have added an "S" to the end of the "BRIC" acronym to include South Africa in the grouping of emerging market economies of Brazil, Russia, India and China.
2012-10-26 Don't Fear a Normal Gold Correction by Frank Holmes of U.S. Global Investors
Dont let the short-term correction fool you into selling your gold and gold stocks. The dramatic increase in money suggests that monetary debasement will continue, and in addition to all the above drivers, these are the positive dynamics driving higher prices for gold and gold stocks.
2012-10-23 Six Unexpected Ways to Boost Productivity by Dan Richards (Article)
If vacations don't boost productivity, then what does?
2012-10-23 The Perils of the Fiscal Cliff by John Mauldin of Millennium Wave Advisors
In today's letter we'll peek over the Fiscal Cliff and see what economic models can tell us about government spending. And if we have time we'll quickly look at an interesting study that uses economics to predict the outcome of this US presidential election.
2012-10-19 International Equity - Monthly Product Commentary: September 2012 by Team of Thomas White International
International equities made strong gains in September as aggressive policy action from central banks in Europe and the U.S. helped offset concerns over moderating economic growth across the globe. The European Central Bank (ECB) announced a program to buy unlimited quantities of debt issued by troubled countries such as Spain, Portugal, and Greece, provided they adhere to a strict fiscal adjustment timetable.
2012-10-19 Global Overview: September 2012 by Team of Thomas White International
Aggressive policy action by the U.S. Federal Reserve and the European Central Bank (ECB) helped lift investor sentiment further in September, even as economic signals from across the world continued to be jaded. The Fed has committed to buy mortgage backed securities and keep interest rates low until U.S. economic growth becomes more vigorous and the unemployment rate declines to more comfortable levels.
2012-10-19 Chinese Stocks Looking Like a Bargain by Frank Holmes of U.S. Global Investors
This appears to be a good time to be investing in China, as stocks are historically cheap. Chinese stocks are also cheap compared to emerging markets.
2012-10-18 Emerging Markets Equity - Monthly Product Commentary: September 2012 by Team of Thomas White International
Investment inflows and low interest rates helped emerging market equities. Emerging market equities saw a healthy recovery during the month of September, as the U.S. Federal Reserve and the European Central Bank rolled out aggressive monetary measures to support their respective economies. As the U.S. and Europe are the biggest markets for exports from emerging market countries, it is hoped that the latest monetary stimulus measures will help these countries revive the export growth that has slackened in recent months.
2012-10-17 Emerging Europe: Third Quarter 2012 Economic Review by Team of Thomas White International
In its recent economic assessment, the European Bank for Reconstruction and Development (EBRD) said it expects growth to slow down during the year in member countries such as Russia, Poland, Hungary, and Turkey as the effects of the Euro-zone crisis spills over. The bank said many of these countries have already seen lower growth, but Russia especially is affected by falling commodity prices. Striking a similar note, the International Monetary Fund in its World Economic Outlook said emerging economies of the world are at risk should the developed economies experience a continued slowdown.
2012-10-15 Commodity Inflation Complicating Pro-Growth Policies by Ryan Davis of Fortigent
The return of commodity inflation raises several questions, primary among them being the impact it will have on emerging markets. While rising commodity prices are generally bullish for equity prices in emerging markets, it may also inhibit central bank flexibility at a time when many developing countries are experiencing decelerating economic growth. This issue was paramount in 2010, leading to underperformance in many EM stock markets. Since then, however, commodity prices have generally moved sideways, allowing those fears to subside.
2012-10-12 Chinas Pyramid of Power by Frank Holmes of U.S. Global Investors
We've been able to witness Chinas incredible growth, with GDP averaging 10 percent per year and more than 500 million people moving out of poverty over the past 30 years. Now after three decades of tremendous expansion, this new generation of leaders will have to carefully maneuver the country into the next decade, towing the line between maintaining the stability created during the previous Hu-Wen administration and continuing the political and economic reform necessary to adjust to the countrys slowing growth.
2012-10-10 Will South Africas Struggles Overshadow its Potential? by Mark Mobius of Franklin Templeton Investments
Africa is a continent many investors bypass, but from my perspective as a long-term investor, I think that's a mistake. South Africa has faced some struggles recently, but I think they can be overcome, and a brighter future could be ahead there for its people. South Africa is the largest economy in Africa, and is the only country on the continent where I think the "frontier" market label doesn't apply. Some have added an "S" to the end of the "BRIC" acronym to include South Africa in the grouping of emerging market economies of Brazil, Russia, India and China.
2012-10-08 Finding Economies of Scale in Solar by Catherine Wood, Brett Winton of AllianceBernstein
Advocates of solar energy have argued for years that the industry only needs subsidies to gain the economies of scale that would make it cost competitive. We think that day may never arrive, as my colleague Brett Winton explains.
2012-10-04 When Career Risk Reigns by Neils Jensen of Absolute Return Partners
In this month's Absolute Return Letter we pick up the baton from last month. How does the current crisis actually affect financial markets? How do you overcome the low returns? What can you do to protect the downside risk in a high correlation environment? We argue that career concerns often lead to irrational decisions by professional money managers and that this provides opportunities for those who can afford to deviate from the norm.
2012-10-03 Let the Good Times Roll by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup
To summarize our current position, while we acknowledge there are many risks we feel those are already reflected in the market and stock prices will drift higher as investors begin to recognize the positive developments outlined above. Analysts remain very bearish and continue to recommend a below-average weighting to stocks. Moreover, despite strong returns from equities investors have pulled money from U.S. stock funds for 18 straight months and are largely under-allocated when compared to history.
2012-10-02 Letters to the Editor by Various (Article)
Two readers respond to Rob Arnott's commentary, The Glidepath Illusion, which was published on September 25. A reader responds to Adam Apt's article, How to Build a Portfolio, which appeared last week.
2012-10-02 Damages by Bill Gross of PIMCO
How could the U.S. not be the first destination of global capital in search of safe (although historically low) prospective returns? Studies by the CBO, IMF and BIS (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow, and the dollar would inevitably decline.
2012-09-28 Commodity Stocks: Improving Returns With No Extra Volatility by Frank Holmes of U.S. Global Investors
Not every investment is the same. Even within the commodities space, when looking at measures such as correlation, performance and risk, two indexes can have very different effects on a portfolios results.
2012-09-27 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
The investment outlook for large swaths of the Islamic world may actually strengthen, because of or in spite of, events of recent weeks. Stock-price buoyancy on the Egyptian and Karachi exchanges, amid continuing public outrage, may presage coming improvements. Also this week, we take a look at Turkey, given the exceptional gains seen on the Istanbul Stock Exchange.
2012-09-27 PIMCO'S Cyclical Outlook for Asia: Structural Slowdown Shaping Near-Term Growth Dynamics by Tomoya Masanao, Robert Mead, Ramin Toloui of PIMCO
Rather than a hard landing for China, we foresee a structural downshift that could be called a "New Normal with Chinese characteristics." Australia has considerable scope for additional rate cuts and more expansionary fiscal policy to address regional weaknesses. The Japanese economy will be affected by weak economic growth in China, which will add more pressure for the Bank of Japan to respond.
2012-09-26 Are BRICs Hitting a Growth Wall? by Mark Mobius of Franklin Templeton Investments
A global pattern of easing economic growth in the first half of 2012 has impacted the "BRIC" nations Brazil, Russia, India and China. However, I don't think the BRIC economies have hit a brick wall. While some market participants have been waiting impatiently for governments to undertake further stimulus measures, others have wondered whether something more fundamentaland less within governmental controlmight be at work.
2012-09-24 Echoes of the Arab Spring by Bill O'Grady of Confluence Investment Management
In this report, we will discuss the issue of American foreign policy, democracy and the emerging world. Our primary focus will be on the Arab states. From there, we will examine the particular issues of democratization and regime change for a few selected nations in the Middle East. As always, we will conclude with potential market ramifications.
2012-09-21 The Ramifications of a Robin Hood Tax by Frank Holmes of U.S. Global Investors
Could a transaction tax have unintended consequence for American banks? While the jury is still out on that answer, Hungarys example is a reminder to policymakers to comprehensively consider the rewards of collecting a Robin Hood tax along with the risks. Profits and bank credit growth rates across Hungary plummeted due to the hefty bank levies imposed.
2012-09-18 Campaign Rhetoric and Our Energy Future by Michael Edesess (Article)
At their respective conventions, both President Obama and Mitt Romney spoke to a centrally important topic for America and the world: energy. Their positions ? political posturing aside ? are broadly similar. But rather than a coherent, sustainable vision for the energy future of the United States, both men's rhetoric reflected the usual exercise in political base-touching, apple pie-polishing, and third-rail avoidance. And two important, perhaps crucial, pieces of the energy puzzle were hardly mentioned at all.
2012-09-17 Emerging Markets Equity Monthly Product Commentary: August 2012 by Team of Thomas White International
Emerging market equities saw a marginal price correction during the month of August, as concerns about growth moderation in these economies persisted. The economic downturn in Europe, one of the largest markets for export-oriented emerging market countries, continues to force policy makers in emerging economies to come up with programs to support domestic growth. However, renewed optimism over aggressive policy action to stem the fiscal crisis in Europe helped the emerging markets in.
2012-09-17 Global Overview: August 2012 by Team of Thomas White International
Signs of emerging political consensus in Europe over supporting further action by the European Central Bank (ECB) and a closer banking union helped sustain investor sentiment during the month of August. Germany and select other countries that were skeptical of open ended policy measures by the ECB now appear to be scaling down their opposition.
2012-09-17 The 9/11 Lessons for Terrorists by Bill O'Grady of Confluence Investment Management
In this report, we will outline potential lessons learned over the past 11 years by terrorist groups. By doing this, we hope to outline how terrorists might act in the future. As always, we will conclude with potential market ramifications.
2012-09-17 A Fed Fueled Rally by Chris Maxey of Fortigent
The week was overshadowed by policy actions from the Federal Reserve, which led to a 2.2% gain in the Dow Jones Industrial Average and a 1.9% increase in the S&P 500 Index.
2012-09-14 All Signs Pointing to Gold by Frank Holmes of U.S. Global Investors
So, gold investors, if you havent put in your orders, consider getting them in quickly, because the bulls are buying. Credit Suisse saw 'massive inflows' into gold exchange-traded products in August after experiencing significant outflows compared to crude oil and the broader market in March, April, May and July. August shows a clear preference toward gold.
2012-09-11 Ten Ways to Recapture Your Passion This Fall by Dan Richards (Article)
Think for a moment what it would take to hit the ground running truly excited about your business. If you struggle to figure out the formula to reach that goal, try these 10 strategies.
2012-09-11 The Winds of Market Change by Mark Mobius, Michael Hasenstab of Franklin Templeton Investments
As we cross the mid-way point of the year, you might say the equity and fixed income markets have been a lot like the recent weather in much of the world: uncertain, and tending toward extremes. The perception of a stormy economic climate has driven some equity valuations to extremely low levels, particularly in Europe, and investors have been pouring into fixed income despite extremely low yields.
2012-09-11 The Problem of Proxies by Bill O'Grady of Confluence Investment Management
In this report, we will discuss the role of proxies and their use by governments, including a historical perspective of their positive and negative aspects. A short discussion of the regional factors of the Syrian situation will follow, focusing primarily on Iran's problem if the Assad regime is replaced by a Sunni-led government. Interestingly enough, these regional factors also affect the proxy groups, making them more difficult for their sponsors to control.
2012-09-07 Chinas Next Act by Frank Holmes of U.S. Global Investors
World markets may not have to wait much longer for Chinese policymakers to act, as the government recently announced new infrastructure projects. According to Bloomberg, China approved 25 new subway construction projects, with related investments estimated to be more than 840 billion yuan. Railway, subway and construction stocks in China increased on the news. China is in much better shape than the rest of the world. A powerful rebalancing strategy offers the structural and cyclical support that will allow it to avoid a hard landing.
2012-09-06 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
Pessimism about the next administration's impact on the emerging markets is held in check by the likely convergence of US and Chinese economic interests. More than ever, Ms. Smith needs Ms. Wong. To borrow a recent Financial Times headline, "Obama should pray that China overtakes the US." To us, Indonesia and Malaysia look pretty promising by this standard. Other stories include a look at timber and an update on Bahrain's economy.
2012-09-04 Postcard from India: Taking Frugal Engineering to the World by Team of Thomas White International
The first 25 ton truck that rolled out of Daimler's new Indian manufacturing plant in June this year was similar in most respects to other trucks the company sells across the globe. Even on a closer look, the only major difference seemed to be the name and logo on the front grill. The iconic Mercedes three pointed star logo had been replaced by a new round logo and brand name, BharatBenz.
2012-09-01 The Case for Emerging Europe by Frank Holmes of U.S. Global Investors
If history had turned out differently, the USSR wouldve taken home the most Olympic medals this year, as the total awarded to athletes from the area was 163, according to a blog on Foreign Policys website. As we all know, the Wall came down, the Soviet Union collapsed, and now Russia has to be content with its third-place position of 82 medals. Athletes from the United States were awarded the most medals (104), followed by participants from China, who took home 88.
2012-08-28 Israel and the Evangelicals by Bill O'Grady of Confluence Investment Management
On several occasions, we have noted that Israel enjoys significant leverage over U.S. policy into the November elections. Often, it is assumed that this leverage comes from the influence of American Jews on the political system. Although not unimportant, the numbers, as discussed here, suggest that the Jewish vote is barely significant in only two states, New York and Florida. Even in these two states, capturing all the Jewish voters would not guarantee winning these states.
2012-08-24 Emerging Markets Real Estate Securities: Review & Outlook by Jason Yablon of Cohen & Steers
We would like to share with you our review and outlook for emerging markets real estate securities as of July 31, 2012. For the month, the FTSE EPRA/NAREIT Emerging Real Estate Index had a total return of 2.2% in U.S. dollars (net of dividend withholding taxes), compared with 3.6% for the FTSE EPRA/NAREIT Developed Real Estate Index (net), a broad measure of the global real estate securities market. Year to date, the indexes returned 19.0% and 18.9%, respectively.
2012-08-24 Gold: First Mover Advantage by Frank Holmes of U.S. Global Investors
This week, gold bugs were rewarded with the long-awaited positive momentum in the yellow metal, and on Friday, bullion rose to about $1,670. After falling below the 200-day moving average, gold had been stuck in quicksand for several months. With the jumps in the price this week, bullion swiftly rose above this critically important long-term moving average.
2012-08-22 5 Counterintuitive Reasons Why the Investment Vehicle of the the Decade is ... Stocks by Rob Isbitts of Sungarden Investment Research
These days there are more varieties and combinations of investments than selections on a Starbucks menu -- but that's not necessarily a good thing. Now, you can invest in emerging markets, dividend-paying stocks, bonds from Africa and commodities that only farmers and professional speculators used to traffic in. Heck, clients can even tell an advisor they would like a double-long, midcap equity ETF.
2012-08-21 The Profession's Faulty Assumptions: A Top Ten List by Bob Veres (Article)
In the financial planning profession, we make a lot of assumptions about the world in order to run spreadsheet models, retirement projections and sufficiency analyses, and generally determine how much a client should save and invest for the future. But many of the industry-standard inputs into our models are (how can I say this delicately?) garbage. Here are my top ten garbage inputs, with an explanation of how we might possibly improve on them.
2012-08-21 Is Now the Time to Take Stock in Europe? by Norm Boersma of Franklin Templeton
Being a value manager in the equity space this year hasn't been an easy job. When investors are focused on capital preservation and risk is said to be "off" the table, the value proposition can certainly require some conviction. Templeton Equity Group CIO Norm Boersma knows that when certain sectors are out of favor, that's often when the best opportunities surface. To position for a time when risk is back "on," he is embracing the low market valuations present in Europe and elsewhere.
2012-08-17 Love Trade Cools as Central Banks Gold Demand Heats Up by Frank Holmes of U.S. Global Investors
Although the Love Trade (purchasing gold for coins or jewelry) is on ice for now, a relatively new gold buyer has been warming up to gold. Central bank purchases hit a record high since the official sector became gold buyers three years ago. If this trend continues over the remainder of 2012, central banks will be entering a new territory of gold buying that has not been seen since the early 1960s and since the end of the Bretton Woods System in 1971.
2012-08-14 Maybe This Time is Different by Andrew Redleaf of Whitebox Advisors
This Time Is Different, the catchy title of the popular book by economists Carmen Reinhart and Kenneth Rogoff, has also become a catchphrase summing up the world-weary wisdom of our time. Reinhart and Rogoff, in recounting eight hundred years of financial follies and investment bubbles, gleefully point out that in every case experts offered plausible arguments for dispensing with traditional rules of valuation, i.e., "this time it's different."
2012-08-13 Which Way Will the Pendulum Swing for Gold? by Frank Holmes of U.S. Global Investors
One of the most fascinating aspects when watching a sporting event like the Olympics is the historical statistics highlighting the tremendous advances in athleticism over the years. In the spirit of the events this summer, BTN Research compared gold's advancement from the beginning of the games in Beijing to the London Olympics.
2012-08-13 Morocco: Making its Mark by Team of Thomas White International
Unlike some of its North African neighbors, Morocco is not known for its petroleum reserves. But here, there is another type of oil that seems to have attracted the world's attention these days. Deep inside the country's southwestern desert lies an herbal oil extracted from the seed of a thorny tree. Argan oil, which gets its name from the Arganier tree, is said to work wonders on thirsty dry skin, and now is being sought after by the beauty-conscious men and women across far-flung continents.
2012-08-10 Dog Days by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
We now appear to be firmly in the dog days of summer. Low volume and little conviction may dominate but investors need to stay vigilant and now is a good time to prepare for the fall. The recent Fed meeting yielded no new action, but policy makers reiterated that they will act if necessary. We are skeptical that more stimulus measures will have a lasting impact. A waiting game has ensued in Europe as investors look for action following hopeful comments from various officials. But despite concerns over corn prices, central banks will continue to ease, helping to support global growth.
2012-08-09 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
India's massive power failure was a gift to both investment bankers and asset managers. There will likely be a surge in infrastructure-related financing and investment activity directed at South Asia. We also look at sovereign wealth fund transparency; the UAE funds rank comparatively well. Our allocation guidelines for North Africa focus on Morocco, where we believe we will see sustained gains for both portfolio and direct investors once the European situation stabilizes.
2012-08-08 Emerging Markets Equity Monthly Product Commentary: July 2012 by Team of Thomas White International
Emerging market equities made modest gains during the month of July, as global markets sustained the optimism from the last week of the previous month. Select markets in Asia, such as Indonesia, Korea, and Malaysia, as well as Turkey and South Africa outperformed during the month. Repeated assurances by European policymakers over further policy action helped assuage market concerns about the region's fiscal crisis worsening, though economic data continues to be relatively weak.
2012-08-08 Monthly Product Commentary: International Equity - July 2012 by Team of Thomas White International
International equities made modest gains during the month of July on repeated assurances from European policymakers that they will explore all possible steps to prevent a collapse of the monetary union and arrest further economic decline. Developed markets in Europe's Nordic region and the Asia Pacific, excluding Japan, as well as select emerging markets in Asia ended with healthy gains for the month.
2012-08-06 From Resource Curse to Blessing by Joseph Stiglitz of Project Syndicate
New discoveries of natural resources in several African countries including Ghana, Uganda, Tanzania, and Mozambique raise an important question: Will these windfalls be a blessing that brings prosperity and hope, or a political and economic curse, as has been the case in so many countries?
2012-08-06 Global Overview: July 2012 by Team of Thomas White International
Global equity prices made modest gains in July, helped by strong gains in the developed markets in Europe's Nordic region as well as in the Asia Pacific, excluding Japan. Most major emerging markets in Asia also saw price gains during the month, while Spain, Italy, and select other markets in Europe lost further ground. U.S. GDP growth for the second quarter declined below the previous quarter's pace, but was marginally ahead of expectations.
2012-08-05 Starting Fresh. by Dan Ariely of Dan Ariely Blog
We lie. We cheat. We bend the rules. We break the rules. And sometimes, as weve seen in Greece, it all adds up. But, remarkably, this doesn't stop us from thinking we're wonderful, honest people. We've become very good at justifying our dishonest behaviors so that, at the end of the day, we feel good about who we are.
2012-08-03 The Race for Resources by Frank Holmes of U.S. Global Investors
The world watched in awe as American swimmer Michael Phelps became the most decorated Olympian of all time. It's inspiring to see the incredible results of his tremendous sacrifice and commitment. Investing in global markets requires the same sort of stamina, especially at times like this week, when the month's reading on the manufacturing industry was not encouraging. The J.P. Morgan Global Manufacturing PMI of 48.4 for July was the lowest since June 2009.
2012-08-01 Welcome to Dystopia! by Jeremy Grantham of GMO
In a new quarterly letter to GMO's institutional clients today, chief investment strategist Jeremy Grantham warns: "We are five years into a severe global food crisis" that in the long term "will threaten global stability and global growth." An accompanying investment commentary by GMO head of asset allocation Ben Inker focuses on risks of eurozone equities, which he describes as "somewhere between fair value and mildly cheap" but not worthy yet of "a table-pounding endorsement."
2012-08-01 China's Growing Pains by Mark Mobius of Franklin Templeton Investments
Many feel that China is the engine for the world economy and that if it slows down, we may be doomed to a recession or even a depression. Yes, China's growth is decelerating from the double-digits of recent years; various forecasters are predicting a possible GDP growth range of 7-8% this year. However, I think it's important to emphasize that would still represent an impressive pace, and remember that China isn't the world economy's only locomotive.
2012-07-30 The Central Bank by John Petrides (Article)
Global markets responded favorably last week to comments from Mario Draghi, President of the European Central Bank, saying that he would do whatever it takes to save the euro (this reminded me of Fed Chairman Bernanke's comments in February 2009, when the Fed started its asset purchase program, and markets responded favorably soon after). Although the world awaits more details as to what Mr. Draghi's comments entail, equity markets rallied, and the yields on Spanish and Italian bonds came in.
2012-07-27 Who is Muhammad Lee? by John Scott of Saturna Capital
Who is this Muhammad Lee? (So named, as these are the most common first and last names in the world.)1,2 Where is he from? How many brothers and sisters will Muhammad Lee have in the future? What are the implications of his arrival for U.S. investors?
2012-07-27 Challenging the Paradigms of Investing by Frank Holmes of U.S. Global Investors
Global investors constantly need to be watchful of individual biases, impaired thinking and emotional reactions that can have an adverse effect on a portfolio. One of our values at U.S. Global Investors is to always be curious to learn and improve, and the Investor Alert was borne from a belief that shareholders want to understand the very subtle nuances of biases and misconceptions. I have selected a few that I believe challenge the paradigms of investing.
2012-07-27 Treading Water by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Stocks seem to be biding time until the action heats back up as summer winds down, but market-moving events can happen at any time. The US economy continues to slow and Bernanke had a relatively dour outlook before Congress. But it appears things would have to get worse before another round of easing is initiated; the effectiveness of which we continue to question. Yields in Spain and Italy indicate action may be needed sooner rather than later, but we did get positive remarks by the ECB, which led to market rallies and a big drop in yields, providing a measure of hope.
2012-07-25 Low Interest Rates Are Not Enough by Mohamed El-Erian of PIMCO
Welcome to what could be called "GGIRC," the great global interest rate convergence whereby interest rates steadily converge to zero in many countries around the world, both advanced (other than the crisis European economies) and emerging (other than the persistent financial basket cases). In theory this is a good thing for a global economy. In practice, however, the situation is much more complicated and not so benign.
2012-07-23 Quarterly Market Overview by Robert Carey of First Trust Advisors
While it is nice to get the news in real time, the need for speed on the information superhighway can lead to incomplete or erroneous reporting. Look no further than the current election campaign season where the finger pointing has already started between President Obama and Mitt Romney. Good thing the Internet has also brought us some fact-checkers to help sort things out. Helping to sort things out is what we strive to do for our clients, as well.
2012-07-21 The Lion in the Grass by John Mauldin of Millennium Wave
Today we'll explore a few things we can see and then try to foresee a few things that are not so obvious. This is a condensation of a speech I gave earlier this afternoon in Singapore for OCBC Bank, called "The Lion in the Grass." The simple premise is that it is not the lions we can see that are the problem; but rather, in trying to avoid them, it is often the lions hidden in the grass that we stumble upon that become the unwelcome surprise.
2012-07-20 July 2012 Newsletter by Harold Evensky of Evensky & Katz
FRANK SINATRA FAN? Mena chided me for starting my last NewsLetter on a negative note so I thought Id repent this time and start with something more positive. Even if youre not a Sinatra fan, this lovely and moving piece of music by Andre Rieu," a renowned Dutch violinist, conductor and composer, and his orchestra is a tribute to Frank Sinatra with My Way on his Stradivarius violin at Radio City Music Hall New York.
2012-07-20 America's Competitive Spirit by Frank Holmes of U.S. Global Investors
We believe there are many great American companies to invest in. We like those that are growing their top line revenues and paying robust dividends. Currently 47 percent of the S&P 500 stocks pay a dividend yielding more than a 10-year Treasury, demonstrating the resiliency and strength of American enterprises.
2012-07-18 Emerging Markets Equity: Monthly Product Commentary by Team of Thomas White International
Emerging market equities saw a moderate recovery during the month of June, as reduced fears about the European fiscal crisis led to a rebound in global markets. The latest agreement by European policymakers is expected to address some of the short-term challenges faced by countries such as Spain and Italy, as well as the troubled banks in the region.
2012-07-17 Impact of ETF Growth on Active Managers by Dmitriy Katsnelson, Ryan Davis of Fortigent
A paradigm shift away from active management has been in place for more than a decade. Active mutual funds held more than 19 times the amount of assets than passive strategies before the SPDR SPY ETF was launched in 1993. As seen below, they have gradually lost market share to passive vehicles, particularly in US Equities.
2012-07-11 The Ascent of South Korea by Michael Oh of Matthews Asia
One country in Asia that seems to attract less attention than it might deserve, considering its modern-day achievements, is South Korea. While index provider MSCI this year (once again) left South Korea classified as an emerging market, both FTSE and Standard & Poors have placed Korea in the developed market camp for several years now.
2012-07-10 Recession is Not Imminent by Dwaine van Vuuren (Article)
Perma-bears are bombarding us with alarm bells, sounding the doom of the US economy. We find ourselves in yet another 'summer slowdown scare,' for the third year running. In 2010 and 2011, the purported slowdowns turned out to be soft landings. Investors who ran to the sidelines stared in disbelief as the stock market roared ahead, leaving them behind. We are likely in the same position now.
2012-07-06 Are You Limited by Linear Thinking? by Frank Holmes of U.S. Global Investors
Dont be limited by linear thinking in your portfolio. As an alternative to low yielding Treasury bonds, consider resources stocks that pay dividends. Weve found that most materials, utilities and energy stocks in the S&P 500 Index pay a dividend higher than the 10-year Treasury: Materials and utilities companies yield an average of 2.3 percent and 4.1 percent, respectively, while energy stocks pay an average yield of 2.2 percent. Nonlinear thinkers have historically benefited from the inclusion of natural resources as part of a balanced portfolio.
2012-07-05 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
Investors focused on emerging markets may be well positioned to benefit from a "barbell" strategy, favoring sukuk and Southeast Asian equities. While in Afghanistan, were more inclined to tilt toward optimism than despair in the wake of military right-sizing. Both India and some Middle East countries are set to be active there. We offer other comments on high dividend yields in GCC stock markets and emerging trends in Ghanas timber industry.
2012-07-03 The Next Frontier by Mark Mobius of Franklin Templeton
In a recent interview, I was asked whether I was becoming a frontiersman in my quest for the next big investment opportunity. Its true that many of my recent investment adventures have taken place in frontier markets the smaller, less-developed cousins of the emerging markets.
2012-06-29 Fat Tails by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Stocks have moved modestly higher and may now be in a relatively large trading range. US economic growth remains sluggish and is drifting dangerously close to stall speed. Policymakers in Europe appeared to make some progress in the most recent summit, but much is left to be done and time is running out. Meanwhile, global growth is slowing and central banks are attempting to stem the decline.
2012-06-29 Unmasking the Asian Giant by Frank Holmes of U.S. Global Investors
China is far from perfect: While actors can perfect their lines and use masks to captivate an audience, smart investors know better to use a wealth of information across numerous sources to guide investment decisions. Weigh the evidence and judge for yourself. As my friend, Investment Strategist Keith Fitz-Gerald recently said in an interview, A powerful China is coming, and we have two choices. Either we're at the table, or we're on the menu. To him this means, Good news from China is good news for the U.S.; bad news from the Chinese economy is bad news here.
2012-06-26 Jeremy Grantham: US Stocks are Expensive and Bonds are Disgusting by Robert Huebscher (Article)
Jeremy Grantham, who has consistently identified overpricing in the US equity markets - he flagged both the Dot Com bubble and the irrational pricing that preceded the financial crisis, for instance - said last week that US stocks are 'a little expensive' and bonds are 'disgusting.' But his sternest warning to investors concerned the longer-term threat posed by global resource constraints.
2012-06-20 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
The OPEC meeting in Wien came-and-went, masked by bigger problems. Perhaps Iran, Iraq, and Venezuela decided that they would do injustice to their international standing if they aimed to tighten output quotes as Europe was on the cusp of imploding. We also look at how inexpensive emerging markets appear to be, while we consider the implication of Arab-market uncertainty on Turkey. Ghana may be an attractive story for the specialist investor.
2012-06-19 Cohen & Steers Emerging Markets Real Estate Securities Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for emerging markets real estate securities as of May 31, 2012. For the month, the FTSE EPRA/NAREIT Emerging Real Estate Index had a total return of 9.7% in U.S. dollars (net of dividend withholding taxes), compared with 6.4% for the FTSE EPRA/NAREIT Developed Real Estate Index (net), a broad measure of the global real estate securities market. Year to date, the indexes returned +9.8% and +7.9%, respectively.
2012-06-19 The R Word in Emerging Markets by Mark Mobius of Franklin Templeton
No matter what decision we face in our lives, there is always some type of risk involved. But when you take a few risks, the experience can often be quite rewarding. When it comes to investing, some risks are present no matter what market youre in. Its also true that there are risks that are especially important to consider when it comes to the emerging markets.
2012-06-19 South Africa: Opportunities in the Rest of Africa Beckon by Team of Thomas White International
The signs are evident all across Africa, from Kenya in the east to Ghana in the west. South African businesses are increasingly looking at opportunities in their own backyard on the African continent with newfound enthusiasm. Though South Africa still lags the U.S. and China in total investments in the rest of Africa, in recent years, the growth in investments by the countrys companies has been the highest.
2012-06-15 Falling Equity Prices Reflect the European Crisis and Slower Economic Growth by Team of Thomas White International
Heightened concerns over the European fiscal crisis and slower economic growth dragged down emerging market equity prices during May. The emergence of political parties opposed to short-term austerity measures in recent elections in countries such as France and Greece has upset the political consensus that paved the way for an agreement on tackling the crisis last year. Borrowing costs of some of the troubled countries such as Spain have increased substantially, while countries that are in better fiscal health such as Germany remain hesitant about the issuance of common euro bonds.
2012-06-15 Global Outlook Dampened Further by the European Crisis by Team of Thomas White International
Apprehensions over a worsening European fiscal crisis and concerns about slower growth in the emerging economies continued to dampen investor sentiment in May. Europes political leadership is yet to find a common ground that would accommodate the opposition to short-term austerity measures expressed in recent elections in countries such as France and Greece. There is growing expectation of a possible Greek exit from the monetary union while borrowing costs of troubled countries such as Spain have increased further, following credit rating downgrades.
2012-06-15 Schwab Market Perspective: Time for Action by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
With escalated uncertainty, sitting back can be an easy choice, but we believe investors and policymakers alike need to take action. Equities bounced off of what appeared to be oversold conditions but although the US economy appears to be holding its own, a renewed sustainable uptrend may be hard to come by until some substantive policy actions are taken around the globe. The time for decisive action in the eurozone appears to be quickly approaching as short-term solutions are no longer satiating the market.
2012-06-15 Every Economists Career Ends in Failure - The Irony of Hyman Minsky by John Gilbert of GR-NEAM
The economist Hyman Minsky held that capitalist economies are inherently unstable because investments are financed with debt, and the financial markets pricing of debt is volatile. Economies are prone to booms and busts as the cost of financing falls too far, or rises too much, revealing poor investment decisions. This has always been obvious to observers of business cycles, of which Minsky was one. Too many of his colleagues in economics ignore this, which we have found puzzling.
2012-06-15 Speed Up or Slow Down--Don't Exit the Commodities Highway by Frank Holmes of U.S. Global Investors
A positive signal received this week came from Goldman Sachs, when the firm recommended stepping back into the markets in its latest Commodity Watch. Goldman is anticipating a 29 percent return for the S&P GSCI Enhanced Commodity Index over the next 12 months and suggests investors might want to increase their position in commodities.
2012-06-14 Field Notes on Non-Traditional Markets by Douglas Clark Johnson of Codexa Capital
Saudi Arabia is now the worlds third largest holder of foreign-exchange reserves. It may be their quiet attempt to counter Irans influence with Shiism. We further offer views on China, Jordan, and Tunisia. Investors heralded Chinas rate cut last week, however modest in scope. Its common wisdom that China has the worlds largest slice of foreign exchange reserves, followed by Japan. But few appreciate that Saudi Arabia now ranks third, ahead of Russia and Taiwan. Importantly, Saudi Arabias reserve growth rate leads the world.
2012-06-12 Frontier Markets: The New Emerging Markets by Allan Conway, Edward Evans of Schroder Investment Management
In this paper, we summarise the attractive investment case for frontier markets both over the long term but also for an investment today. Frontier markets provide access to some of the most dynamic and fastest-growing economies in the world, supported by strong secular growth drivers. The investment opportunities are similarly benign as market liberalisation is accelerating and valuations look attractive in absolute terms and versus the developed and emerging world.
2012-06-07 The Absolute Return Letter - First Mover Advantage by Niels C. Jensen of Absolute Investment Advisers
Contrary to conventional wisdom, the eurozone crisis has always been a banking crisis. It only morphed into a sovereign crisis because of political incompetence. Given the rather stubborn approach of the German government to its beleaguered eurozone partners, the crisis is rapidly moving towards some sort of crescendo. It is only a question of time before one of the Southern European countries come to realise that they might be better off outside the eurozone, particularly if they are the first mover.
2012-06-04 It's All Relative by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Equities have pulled back and are flirting with correction (-10%) territory. We believed this was a needed process, and remain modestly optimistic that economic data will rebound and the market will eventually resume its move higher over the next several months. The Federal Reserve has made clear that it stands ready to act should the US economy deteriorate, or the European debt crisis escalate, but we remain skeptical. The more important issue in our view is how the coming "fiscal cliff" is addressed.
2012-06-02 Will the ECB and Fed Follow Where China Leads? by Frank Holmes of U.S. Global Investors
Every month, policymakers track purchasing managers indices (PMI) around the world as they consider fiscal and monetary actions. To us, a PMI is a measure of health of companies around the world, because it includes output, new orders, employment and prices across manufacturing, construction, retail and service sectors. Historically, weve seen Chinas PMI number leading the year-over-year change in exports by three to four months, so when the PMI has increased, a few months later, Chinese exports have historically risen, and vice versa.
2012-05-30 The What-Why-When-How Guide to Owning Emerging Country Debt by Tina Vandersteel of GMO
As GMO looks forward to its 20th year managing emerging debt portfolios, we offer our perspectives on the frequently-asked questions that have come up over the years, including: What is meant by emerging debt (external, local, corporate)? Why and when to own it: portfolio fit considerations, alpha, and absolute and relative value. How to own it: dedicated external, local, or corporate; blended; or multi asset (including emerging equities).
2012-05-29 The Bargains in Europe's Great Oversell by Bob Veres (Article)
When was the last time we saw negative headlines drive valuations as low as they have in Europe? Evermore's David Marcus, who succeeded Michael Price as manager of the Mutual European Fund, says this period of obsession with Greek debt, bank restructuring and single-digit P/Es may be known as The Great Oversell.
2012-05-29 Unraveling the Mess in Europe by Charles Lieberman (Article)
There is considerable nonsense written about the European debt crisis. Greece must balance its books, whether they remain inside the Euro or not. There are major benefits and costs to both remaining inside the Euro and to exiting. There is no silver bullet that will solve their problems easily. More broadly, banks need to be recapitalized all across Europe. This has not been done as yet, perhaps for political reasons, which only compounds the economic problems and allows them to fester. It seems like the Europeans are working towards solutions, but painfully slowly.
2012-05-26 Meanwhile, Back at the Ranch by John Mauldin of Millennium Wave Advisors
We need to tear our gaze away from Europe and look around at what is happening in the rest of the world. There is about to be an eerily near-simultaneous ending to the quantitative easing by the four major central banks while global growth is slowing down. And so, while the future of Europe is up for grabs, the true danger to global markets and growth may be elsewhere.
2012-05-22 Niall Ferguson - The West's Six Killer Apps by Robert Huebscher (Article)
For five centuries, the West dominated Eastern economies. But, beginning with the fall of the Berlin Wall in 1989, the East has now caught up, according to Niall Ferguson. It did so by downloading six "killer apps."
2012-05-21 Markets Fall on Negative Europe Sentiment by Chris Maxey and Ryan Davis of Fortigent
Worries over the European sovereign debt crisis worsened this week as Greeces political instability increased concern that the country could depart the Eurozone. Greece saw a virtual run on its banks during the week, as depositors withdrew 1.2 billion in two days on fears of massive devaluation from a return to the drachma. While this represented just 0.75% of Greek deposits, it foreshadows a potentially larger crisis if a Greek Eurozone departure becomes imminent.
2012-05-18 How Gold Demand Remains Resilient by Frank Holmes of U.S. Global Investors
Demand for gold was relatively resilient in the first quarter of 2012, with global demand falling 5 percent. Marcus Grubb, managing director of investment, calls this slight quarter decline in demand noise in the context of 22 percent rise in the price of gold compared to first quarter of 2011. Also, gold demand was very strong in the first three months of last year. Gold faced a complex quarter, as you can see by looking at jewelry demand by country. There was a significant rise in demand for jewelry from Russia, Egypt, Indonesia, Taiwan, and China, compared to the first quarter of 2011.
2012-05-16 Africa: Investing in the Cradle of Civilization, Part 3: Ghanas Golden Opportunties by Mark Mobius of Franklin Templeton
This year could prove an interesting one for Africas west coastal country, Ghana. Presidential and parliamentary elections are slated to be held by year-end, the results of which are almost sure to impact the shape of the countrys future. President John Atta Mills has stated in the press that he will take all necessary constitutional steps to ensure the conduct of free, fair and transparent elections. Im encouraged by the economys 14% growth in 2011 (thats faster than China!), and would be pleased to see evidence of more positive momentum.
2012-05-15 Fancy Hut by Liam Molloy and Bethany Carlson of Galway Investment Strategy
Frontier markets are not going to wait 30 years to take the global economy by storm. The parallels drawn between Africa today and 1980s China are apt, but the pace of the emerging market life cycle is likely to be accelerated by technology, investment, demographics, and other factors. The lack of a one-child policy leads to more favorable demographics. Africas workforce will be the worlds largest by 2040, surpassing both China and India. The payment-with-infrastructure investment approach favored by China can mean better transportation, utilities, and communication for whole communities.
2012-05-11 Here We Go Again....or Not? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Softer economic data has prompted concerns that the market may be headed for a summer swoonsimilar to the previous two years. We believe the backdrop is decidedly different (and better) this time around but investor and business confidence will continue to be important. Some appear to be hoping for weaker data in order to spur the Fed to enact QE3. We believe the bar is much higher and that the Fed should look to return to a more normal monetary stance. Complicating the overall picture and the Feds job is the coming "fiscal cliff" out of Washington at the end of this year.
2012-05-11 Looking to China to Fire Up its Economy by Frank Holmes of U.S. Global Investors
Following on the heels of renewed concern over Europes debt situation, China released its monthly economic data. Fixed asset investment, industrial production and retail sales all rose in April, yet growth was not as strong as analysts anticipated. Weak is the word to describe Chinas April figures, says CLSAs Andy Rothman in his Sinology Report. But China wants the ability to manage a stable decline to promote medium-to-long-term structural reforms as well as avoid a hard landing, says CEBM.
2012-05-09 Africa: Investing in the Cradle of Civilization: Part 2 by Team of Franklin Templeton
Africa is well known for its wealth of natural resources. These riches have attracted global investors, most notably from emerging market countries such as China, India and Brazil. Many of these investors have been seeking raw materials for their own economic development and markets for their industries. In return, many African countries have been receiving vitally needed infrastructure such as transport links, power stations, schools and hospitals, which brings into play another great African resource: a huge and youthful population.
2012-05-05 Africa: Investing in the Cradle of Civilization: Part 1 by Mark Mobius of Franklin Templeton
Africa is widely regarded as the cradle of civilization. Building on its storied history as the bedrock for humankind, Africa is also a continent of ample investment opportunity, provided you have the resolve to be in it for the long haul. My team and I look at Africa as two parts: (1) sub-Saharan Africa where South Africa and Nigeria dominate and (2) the North African markets, where Egypt is the largest. Of course the South African market is much larger and more developed than the other markets in sub-Saharan Africa.
2012-05-04 Do Emerging Markets Win, Place or Show in Your Portfolio? by Frank Holmes of U.S. Global Investors
The recovery in U.S. stocks is significant and helps restore confidence in equities. Were pleased to see markets improving, especially following a rough finish in 2011. Yet there lingers a persistent negativity toward emerging markets growth and commodities that prevents many investors from jockeying their portfolios into a position for growth. Rather, they remain spectators on the sidelines, with equity fund outflows continuing.
2012-05-04 Watchful Waiting by Tony Crescenzi, Ben Emons, Andrew Bosomworth and Lupin Rahman of PIMCO
Today, the Federal Reserve itself faces an unusually uncertain period because it lacks a complete understanding of the potential side effects of its unconventional policy actions; in particular the elongated timeline of its zero interest rate policy and its massive money printing. What matters in shaping market expectations about inflation and deflation are the credibility of fiscal policy, the prospect for real economic growth and the central banks commitment to step back from the punch bowl.
2012-04-30 Japans Quest to Replace Nuclear Energy with Natural Gas by Team of Thomas White International
During last summer when Japan was facing a severe decline in electricity generation, consumers readily answered to the governments call to reduce consumption. However, Japanese policymakers have quickly and correctly realized that such noble responses from a strongly patriotic people are not the answer to the energy challenges facing the county. Now, the new long-term energy roadmap being drawn up in Tokyo will go a long way to help Japan lighten the gloom that engulfed the country when those giant waves came ashore last year.
2012-04-27 Roller Coaster Returns by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Despite an earnings season that has been much better than expected so far, investors appear to be again focusing on more macro concerns. Europe and China are dominant concerns but US growth sustainability is also being questioned. We remain optimistic on the ultimate direction of the stock market. The Fed meeting provided no changes but did show a slightly more hawkish tilt in their economic forecasts. Meanwhile, the US government continues to play a dangerous game of chicken as election season is already in high gear and the so-called "fiscal cliff" looms.
2012-04-23 Middle East/Africa First Quarter 2012 Economic Review by Team of Thomas White International
While the Middle East and Africa (MEA) region continues to weigh the impact of the tumultuous Arab Spring uprisings, the area is facing against another challenge yet again. In addition to the existing domestic instability, a strained external environment (the Euro debt crisis) is proving to be a major threat to the regions trade, tourism, remittances and other exports receipts. According to the World Banks Global Economic Prospects report, the economic recovery seen in Morocco, Jordan and Tunisia in late 2011 is likely to stall in 2012.
2012-04-20 Weighing the Evidence of Oil and Gold Stocks by Frank Holmes of U.S. Global Investors
We believe in thinking contrarian and keeping a close eye on historical trends to discover inflection points, as stocks tend to eventually revert to their means. For example, in March 2009, we noted significant changes signaling the market had hit rock bottom; following that time through the end of the first quarter, the S&P 500 Index rose more than 100 percent. Todays extreme divergence in oil and gold stocks and their underlying commodities presents a rare opportunity: what these stocks need now are investors to take advantage of it.
2012-04-20 Emerging Markets Real Estate Securities Investment Review & Outlook First Quarter 2012 by Team of Cohen & Steers
A general moderation in inflation pressures is giving emerging market authorities more liberty to pursue policy stimulus, auguring well for domestic growth. We believe this will create opportunities for residential developers in various markets and we have increased our allocation to these companies.
2012-04-18 Monthly Product Commentary: Emerging Markets Equity March 2012 by Team of Thomas White International
After gaining during the first two months of the year, emerging market equity prices saw a moderate correction in March and underperformed the developed markets. There are renewed concerns that domestic consumption growth in some of the larger emerging economies could be lower than currently expected, and could restrict aggregate economic growth in the coming quarters. Signs of the European fiscal crisis worsening again have also dampened investor sentiment as further economic weakness in the Euro-zone would cloud the export prospects of several emerging economies, especially China.
2012-04-17 Muppet Capers by Michael Lewitt (Article)
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
2012-04-17 How to Invest in the Best Equity Region in the World by Monty Agarwal of MA Capital Management
I believe that over the next several years, the single best region to buy and hold patiently will be Africa. Africas biggest lure are its vast hordes of natural resources. It is home to: 13% of the global reserves for oil, 50% of proven gold reserves, 50% of proven iron ore reserves, and 60% of cobalt. China, perhaps one of the hungriest consumer of natural resources and a savvy investor, is buying up mining rights and signing land deals everywhere in Africa. Here are a few more metrics that look very attractive for Africa.
2012-04-17 Mind the Gap by Liam Molloy and Bethany Carlson of Galway Investment Strategy
There is almost always a gap between price and value. Over the next few years price volatility is likely to be the source of the gap as sentiment waffles from overly exuberant to downright pessimistic. In the era of the 24-hour news cycle, high frequency trading, and an ever shortening investor attention span, prices move fast. Markets are emotional creatures and have a tendency to boom and bust. There have been occasions when underlying changes of value have gone unrecognized for sustained periods, and the gap was not primarily a function of price volatility.
2012-04-17 The Elusive Equilibrium: How Financial Markets Shape Global Rebalancing by Ramin Toloui of PIMCO
The mental and organizational infrastructure in the asset management industry has been built for a world with a sharp dichotomy between developed countries and emerging markets. Effective portfolio management requires an integrated approach that eschews the traditional dichotomy between developed and emerging markets. Emerging markets account for about 36% of global output and 68% of global GDP growth, but only represent about 4% of the equity portfolios of U.S. investors. We believe the representation in bond portfolios is even lower.
2012-04-13 Dutch Disease Lite in Australias Economy by Robert Mead of PIMCO
Australia is probably more likely to feel the effects of an extended structural change in the economy as resources continue to be reallocated, rather than the effects of a full-fledged, but transitory, case of Dutch disease. China is Australias largest trading partner, and Chinas historical focus on infrastructure building has amplified the divergence in Australias two-speed economy. We believe Australias strong initial conditions should help ensure that Commonwealth Government Bonds remain one of the worlds cleanest dirty shirts for risk-averse investors.
2012-04-13 Schwab Market Perspective: Concern or Correction? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data has softened a bit lately but still indicates growth in the US. After a long stretch of relative calm in the markets, we've seen the markets pull back, possibly fulfilling the correction that was overdue. We believe the longer-term trend is higher but near-term risks continue to be elevated and earnings season could bring more volatility. The minutes from the most recent meeting of the Fed seemed to solidify that another round of quantitative easing (QE3) is not in the offing. Although the stock and bond markets initially reacted negatively, we are heartened by the rhetoric.
2012-04-13 Wheres the Beef for Gold Equities? by Frank Holmes of U.S. Global Investors
If you plan on shopping for bargains in the gold miner department, youre going to fight a crowd. Numerous global investors have been pounding the table for gold stocks, including Marc Faber who said gold shares have become extremely oversold and could rebound in the next few days and Global Portfolio Strategist Don Coxe, who reiterated that gold equities are undervalued compared to the precious metal. A big buyer has been the miners themselves. Mergers and acquisitions in the mining sector have been at an all-time high over the past two years. Theyve been willing to pay a premium too.
2012-04-11 Emerging Market Rates: A Different Cycle by Francesc Balcells of PIMCO
The business cycle in EM has been conducive to easing policy rates. Global growth decelerated noticeably in the second half of 2011, and this included most EM economies. While we expect EM local rates will move higher again as the business cycle progresses, the cyclical highs will likely be lower than the previous highs, reinforcing the secular trend towards lower rates. We like EM local rates with a strong credit quality, steep local curves and high real rates that may offer compensation for taking inflation risks. The local markets of Brazil, Mexico and South Africa all stand out.
2012-04-07 It's All About Jobs by John Mauldin of Millennium Wave Advisors
Friday's employment numbers were decidedly soft, but the unemployment rate went down anyway, and that is about the best you can say. And this being a holiday weekend, it provides us an opportunity to look deep into the employment numbers, while we put off thinking about Spain for at least a week. And who knew that being an unmarried Asian-American in the US was a risk for unemployment? Plus a few other interesting items will make for an interesting letter.
2012-04-06 Managing Expectations: Why Gold Should Thrive by Frank Holmes of U.S. Global Investors
Its been a challenging week for gold investors. As I often say, investing, like life, is about managing expectations. Over the past 11 years during golds spectacular bull run, investors should remember that price action can go both ways. What helps is to look at the historical rise and fall of gold. For example, looking at the past decade of one-day 5 percent drops in gold, you can see that this event is pretty rare. In 2006, gold dropped more than 5 percent in a day only two times. In 2008, there were three such events. Another one occurred at the end of this February.
2012-04-05 BRICS Plan for the Future by John Browne of Euro Pacific Capital
Last week, the leaders of Brazil, Russia, India, China, and South Africa met in New Delhi for their fourth annual "BRICS" summit. The meeting brought together five countries that together represent 43% of the world's population and 18% of the world's GDP. When the gathering concluded on March 29, the coalition subtly issued its latest challenge to the increasingly desperate bankers and politicians of the West. They announced more definitive plans to establish a BRICS-focused development bank, to be solely funded by the BRICS countries themselves.
2012-04-05 Global Equities: Building a Research Mosaic for the Information Age by John Longhurst of PIMCO
As a result of increasing correlations across the globe, identifying the best global franchise opportunities at attractive valuations is becoming increasingly important. We believe that taking a broader global perspective and comparing a companys valuation and growth outlook versus their global competitors is just as germane as looking at them relative to their country or region. Identifying Chinese and non-Chinese companies that will gain and lose in this process is a critical long-term challenge when constructing a global portfolio and not an easy one.
2012-04-04 Drilling Into Fuel Prices by Team of Franklin Templeton
Gasoline, deodorant, dishwashing, liquid, eye glasses, crayons.What does this list of seemingly random items have in common? They are all made from refined crude oil.1 So even if you dont feel pain at the gas pump, you probably rely on more products made with or from crude oil than youd think. And of course even non-oil based products are generally shipped via fuel-consuming transport vehicles, so youre bound to feel the pinch in the form of fuel surcharges or price hikes sooner or later.
2012-04-03 Fewer, Richer, Greener: Why Jeremy Grantham is (Partly) Wrong by Laurence B. Siegel (Article)
Is the human experience getting better or worse? This is a big question investors are rarely asked to confront, yet its answer has profound consequences for market returns.
2012-04-03 Reigniting Your Passion for the Business by Dan Richards (Article)
Successful advisors consistently tell me they've lost enthusiasm and passion for their work compared to 10 or 15 years ago. Advisors have two choices when this happens - either accept it as a sad reality or put in place strategies to rekindle the fire that burned earlier in their career.
2012-03-30 Shifting Winds-Turbulence Ahead? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Treasury yields have moved somewhat higher, while stocks have largely continued to rise. Recent correlations appear to be breaking down, which could lead to increased volatility but we remain relatively confident in equities. Perception as to the next moves by the Fed appeared to be shifting, but Bernanke reiterated their easy monetary stance. Uncertainty is rising and the Feds goal of increased clarity through more transparent communication is under scrutiny. Liquidity concerns in Europe have eased but economic risks remain, while Spain and Italy face deal with their ongoing debt crises.
2012-03-30 Does China Hold the Winning Ticket? by Frank Holmes of U.S. Global Investors
Some bears may think the odds of China being the winner among emerging markets in 2012 are also remote. Over the past few years, Chinese stocks have lagged compared to its emerging market peers. However, the Periodic Table of Emerging Markets perfectly illustrates: last years loser can be this years winner. Historically, every emerging country has experienced wide price fluctuations from year to year. Over time, though, each country tends to revert to the mean.
2012-03-28 Challenges and Change in Brazil by Team of Franklin Templeton
Brazils economy is grappling with some interesting challenges right now, such as shifts in monetary policy to cope with a possible economic slowdown and preparing to host two major events on the international stagethe 2014 FIFA World Cup Brazil and the Olympics in 2016. Marco Freire, Franklin Templetons CIO, Brazil Fixed Income for the Local Asset Management team based in Sao Paulo, isnt sharing any locals-only secrets about either event, but hes happy to share his insights on how Brazil is approaching these challenges, and to clear up some common misconceptions about Brazils markets.
2012-03-27 Success: The Enemy of Creativity by Justin Locke (Article)
Creativity and imagination are universal human traits, yet it's a common idea that certain countries are more creative than others. Can this notion have any basis in fact?
2012-03-27 One Year Into the Arab Spring by James A. Pressler of Northern Trust
The last three months marked the first anniversary of events considered unthinkable before 2010. The past year saw the outbreak of protests throughout Tunisia, Egypt, Bahrain and beyond; an outbreak of democracy not imported from the industrialized powers but home-grown. And as each dictatorship fell, onlookers checked off another successful transformation from the Arab Spring. Such waves of change felt as unstoppable as they were inevitable, and a feeling emerged that it was only a matter of time before the Middle East/North Africa (MENA) region stepped into the third era of Arab awakening.
2012-03-23 Emerging Markets Real Estate Securities - Investment Review & Outlook February 2012 by Team of Cohen & Steers
As emerging economies work through the late stages of a mid-cycle slowdown, policy markets are attempting to engineer soft landings as inflation pressures continue to moderate. Given the potential for better domestic growth in such an environment, we expect to take advantage of buying opportunities among residential developers. Our favored markets include Brazil, based on its natural resources, growing consumption trends and shareholder-friendly business environment. We particularly like the retail market, which continues to exhibit strong fundamentals.
2012-03-23 Gold and China: Where the Bulls and Bears Square Off by Frank Holmes of U.S. Global Investors
To paraphrase the great Steve Martin, todays investors are very passionate people and passionate people tend to overreact at times. An overreaction is exactly whats happened in gold and global markets in recent weeks. While market bulls have been sniffing out data points to support their case, market bears have continued to take a glass-half-empty approach. Gold and China are two areas that have been caught in the bear trap this week, but we believe the gold and China bulls still have room to run.
2012-03-21 Falling Treasuries: A Currency Perspective by Axel Merk of Merk Funds
What are the implications for the U.S. dollar and investors portfolios if bond prices continue to fall, as they have of late? Within that context, should investors care whether the U.S. retains its status as a reserve currency? Should it effect the way investors think about their own cash reserves?
2012-03-21 Reflections: Expect the Unexpected by John Gilbert of GR-NEAM
The tides of financial returns ebb and flow, and for the moment, they are flowing. Since the financial crisis of 2008-2009, the deflationary forces of excessive indebtedness prevail for a while, and then are beaten back by the determination of popularly elected governments to reflate. The financial markets no longer reward skill, so much as they react to the relative strength of governments will to offset contraction.
2012-03-19 Emerging Markets Equity Product Commentary February 2012 by Team of Thomas White International
The renewed market optimism that surfaced towards the end of last year persisted in February as well, as emerging market equities again outperformed the developed markets. Though GDP growth forecasts for most emerging economies have been scaled lower for the current year and for 2013, it is widely expected that the risk of a further slowdown in economic activity is limited. Emerging markets in Europe and the Middle East continued to lead during the month, followed by Asia and Latin America. Egypt sustained its recovery during the month while Thailand, Russia, and Chile also outperformed.
2012-03-16 February Leaps to a Multi-Decade Market Open by Doug Cote of ING Investment Management
The markets YTD success has been fueled by a dramatic reduction in global risk and upbeat economic data. The fence to contain the euro crisis has been definitively established. Oil prices are a concern, but the real economy has the wind in its sails. Though equity fund outflows continue, its never too late for investors to do the right thing.
2012-03-16 The Heart of March Madness by Frank Holmes of U.S. Global Investors
Everyone agrees that its unethical to put the firms interest ahead of its clients. More importantly, a self-serving financial attitude is a breach of fiduciary duties. It may be possible that Goldman Sachs has moral issues, but not all financial firms are morally bankrupt. Nor are thousands of executives and professionals employed in the industrymoms, dads, uncles, aunts, daughters, sonswho are hard-working and acting in the best interest of their customers.
2012-03-14 Chart of the Week: The Worlds Infrastructure Plans by Frank Holmes of U.S. Global Investors
Demand for access to basic needs, an emerging middle class and a never-ending use of global resourcesthese are the primary drivers of major infrastructure projects over the next several years. The infrastructure plans taking place across emerging markets emulate a 1950s America. As these governments help their residents pursue the American Dream of better homes, health care and quality of life, I believe the companies with a strong footprint in these growing markets stand to benefit.
2012-03-13 Europe's ?Back-door QE?: Good News for Global Bond Investors by OppenheimerFunds, Inc. (Article)
By restoring confidence in the global financial system, the European Central Bank's Long Term Refinancing Operation has allowed global bond investors to participate in attractive opportunities around the world.
2012-03-13 Europe Needs a Good Crisis by Michael Edesess (Article)
When it comes to economies in general and financial crises in particular, it's remarkable how little we actually understand. While global financial actors struggle to restructure Greece's debt and to avoid contagion throughout Europe's periphery, we should recall the lessons of the Asian-Russian crisis 15 years ago. As the writings of Joseph Stiglitz and Martin Wolf remind us - and those events illustrate - crises are part of an evolutionary process, and the afflicted economies often emerge with surprising vigor.
2012-03-13 Will he? Won't he? by Christian Thwaites of Sentinel Investments
Will oil prices hurt the economy? No Recent good news on the economy has come with warnings of possible demand destruction from higher oil. First, lets stress that QE does not cause higher oil prices. There are too many iterations between increasing bank reserves and the trading firepower needed to drive spot oil prices sharply higher. And while we have seen an increase since September, we're no higher than a year ago. During that time economic prospects dimmed then brightened MENA troubles flared, receded and then grew, and Asian demand steadily rose. But there are reasons to be sanguine.
2012-03-10 There Will Be Contagion by John Mauldin of Millennium Wave Advisors
The headlines are about Greece, but the real story is not Greece but who is next. European leaders were right to be worried only a short while ago about contagion effects of a Greek default to the entire Euro system, which of course they now say doesn't exist. This week we look at Europe, and sort through the ever more fascinating implications of the news in today's headlines.
2012-03-09 Appreciating China to its Fullest by Frank Holmes of U.S. Global Investors
While most analysts dont expect another moon shot rise in China's GDP this year, a 7.5 percent growth rate still exceeds most emerging economies and all developed nations. Advanced economy growth is expected to be meager, slowing from 1.6 percent to 1.3 percent in 2012, according to The Conference Board. For long-term investors learning to appreciate the finer points of the country, we believe China is somewhat like fine wine; it only gets better with age.
2012-03-09 Market Fatigue? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Market action has been relatively muted, notwithstanding the first 1% down day of this year. After the strong run to start the year, another pause or pullback would not be surprising but we continue to believe the upward trend will largely stay intact. Uncertainty abounds as to whether the Fed will unleash a new round of easing but liquidity remains abundant. Rhetoric continues in Washington but any substantial fiscal or tax policy action this year seems unlikely, despite the many challenges that are looming.Europe has stabilized somewhat but risks remain elevated.
2012-03-08 Oil and Gasoline Prices Rise Again: How High and How Long? by Team of American Century Investments
One year ago, we wrote on the recent up-tick in crude oil and gasoline prices which was caused by turmoil and revolution in the Middle East. A year later, were experiencing a similar rise in crude and gasoline prices. Last week, the average national cost for a gallon of unleaded regular gasoline was approximately $3.75 per gallon. One contributing factor has been the increase in tensions between Western countries (and Israel) with Iran over its continuing work to produce nuclear fuel which could be used in atomic weapons.
2012-03-06 Reviving a Chinese Bull by Pamela Rosenau of HighTower Advisors
Changes in the direction of the reserve requirement ratio (RRR) for Chinese banks, or the minimum reserves a commercial bank must hold according to central bank regulations, have a major impact on the Chinese stock market. The RRR in China had steadily climbed from eight percent in mid-2006 to its peak of 21.5% in mid-2011. The decision in November 2011 by the Peoples Bank of China to cut the ratio by 50 basis points, which was subsequently followed by another cut just last month, appears to be the beginning of a long directional move downward in the RRR as the bank continues to ease.
2012-03-02 The Protein Bomb by Niels C. Jensen of Absolute Return Partners
Population will grow from 7-8.3 billion people over the next decade. Meanwhile, arable land across the world will shrink and living standards will continue to rise, with the OECD projecting 3 billion new middle class consumers over the next 20 years. Many of these people will change their diets in favor of more animal protein. Livestock is quite inefficient in terms of converting grain to energy, so the pressure on farmers to deliver more will be immense. We conclude that agriculture should be represented in every long-term portfolio, but farm land has already risen a lot in value.
2012-03-02 Will Oil Continue Heading Higher? by Frank Holmes of U.S. Global Investors
We expect there to be corrections in the price of oil throughout 2012, just like the ups and downs commodities experience from year to year. While the world is hungry for energy, theres no free lunch on the Periodic Table of Commodities, and historically, from year to year, commodities fluctuate. Crude oil, for example, has seen its share of ups and downs: In 2008, oil lost 53 percent; in 2009, it increased a substantial 78 percent. While oil may remain elevated, use these higher prices to your advantage by owning natural resources companies that benefit from higher prices.
2012-02-28 The Outlook for Oil by Russ Koesterich of iShares Blog
Are we headed for another oil shock, and, if so, what are the investment implications? Russ tackles these questions, explaining what could cause an oil spike, why he believes crude prices are likely to stay elevated in the near term and what this means for his view of global energy companies.
2012-02-27 South Africa: Resource Nationalism Gaining Political Currency by Team of Thomas White International
Increasing government control over natural resources is not a new trend. Governments in most emerging countries, including established democracies such as India and Brazil, directly or indirectly control most of their mineral resources. But in the case of South Africa, the consequences of such decisions can reverberate far and wide. The country has one of the worlds biggest reserves of natural resources, currently valued at $2.5 trillion.
2012-02-27 Equity Gains Likely to Continue, But at a Slower Pace by Bob Doll of BlackRock Investment Management
It was a relatively subdued week in terms of economic data, with the highlight perhaps being the weekly initial unemployment claims, which were unchanged (a stronger-than-expected result). This data helps confirm that improvements in the labor market have been gaining traction. This Friday we will see the February employment report and most economists are calling for a new jobs number of 200,000 or higher with a flat or perhaps slightly lower unemployment rate.
2012-02-25 The Emotions of Fear and Apathy Create Good Buying Opportunities by Frank Holmes of U.S. Global Investors
One of the reasons money has found its way back to the market is that low interest rates and a bubble in bonds have upped the attractiveness of equities relative to other asset classes. In fact, many large-cap equities come with a higher yield. This means that investors can wait for the growth, while receiving the income. Overall, it looks like the markets dark clouds are lifting and we could be in for a period of sunny skies in the months ahead.
2012-02-24 Schwab Market Perspective: Two Steps Forward... by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
US stocks and economic data appear to be moving at least two steps forward for every step back, which we believe leads to a strengthening trend for bothalthough there are inevitable bumps along the way. We believe the agreement in Washington to extend the payroll tax through 2012 may be the last substantial economic-related agreement before the election, but there are major issues looming. The Fed continues to believe another round of easing may be appropriate, which we think could be dangerous and that they should be looking to move in the other direction.
2012-02-22 Emerging Markets Real Estate Securities by Team of Cohen & Steers
We believe that recent developments within emerging real estate markets are consistent with our macro view. As emerging economies work through the late stages of a mid-cycle slowdown, policy markets are attempting to engineer soft landings as inflation pressures moderate. Given the potential for better domestic growth, we expect to take advantage of buying opportunities among residential developers (e.g., in Brazil), and have selectively been moving in that direction.
2012-02-21 Emerging Markets Equity - January 2012 by Team of Thomas White International
Emerging market equities outperformed the developed markets by a wide margin in January, as investors became increasingly confident that weak data trends from the third quarter of last year were not an indication of a significant growth deceleration in the major emerging economies. The gains were well spread out as almost all regions participated in the uptrend. India, Egypt, and select markets in Europe that had seen the worst price declines during the second half of last year, recovered the most during January.
2012-02-18 The Enduring Popularity of Gold by Frank Holmes of U.S. Global Investors
For thousands of years, pharaohs, explorers, rulers and investors have been attracted to gold, as the precious metal has been a vital tool in building and protecting wealth. While gold naysayers focus on the day-to-day fluctuations in price, I believe gold equities and bullion will continue to enjoy maximum popularity, as the Oracle of Omaha puts it, for years to come. The allure of goldwhether it is from Fear or Lovecannot be underestimated.
2012-02-17 Oracle Is Too Cheap To Ignore Any Longer by Chuck Carnevale of F.A.S.T. Graphs
We believe that Oracle Corp. is just one of many technology titans that we believe the market is mispricing. Furthermore, we believe part of that stems from the general pessimism that has created the so-called flight to safety get out of equities. Pessimism thrives on uncertainty; and one of the main attributes of technology is uncertainty. We believe that investors seeking maximum capital appreciation at reasonable levels of risk might do well to take a hard look at not only Oracle, but the technology sector in general.
2012-02-15 Stay Frosty by Liam Molloy and Bethany Carlson of Galway Investment Strategy
The Roubiniesque blues felt globally due to a lack of confidence is not isolated to just the marginally attached and does have merit. As the economy restructured manufacturing workers in the 1980s only had a 65% reemployment rate. We feel the past few years have marked another restructuring in US the economy. Again it will likely mean unemployment will remain high as many workers may not make the transition. This time around the reemployment rate for housing related jobs and financial services will likely remain very subdued.
2012-02-14 Recession: Just How Much Warning is Useful Anyway? by Dwaine van Vuuren (Article)
In December 2011, ECRI dialled down the urgency of the timing of their call to 'within six months.' That raised the question of just how much recession warning is useful when it comes to forecasting equity market performance.
2012-02-14 3 Reasons to Underweight South Africa by Russ Koesterich of iShares Blog
In my opinion, investors should consider minimizing their exposure to emerging markets in Europe, the Middle East and Africa, otherwise known as EMEA. The big reason: emerging markets in EMEA generally have close economic ties to the euro zone, which as we all know is going through a rough spot and is likely to experience at least a mild recession this year. Drilling down to the stocks of specific emerging market countries within EMEA, Im particularly focused on South Africa as its the largest country in the MSCI Emerging Markets EMEA index.
2012-02-11 The Answer We Dont Want to Know by John Mauldin of Millennium Wave Advisors
This election is ultimately about dealing (or not dealing) with the deficit, and putting the country on a path to a sustainable budget deficit, one that is less than the growth rate of the country. As I have argued elsewhere, and will argue in future letters, that is the paramount issue. Not dealing with the deficit runs the very real risk of the bond market treating us just as it is treating Italy and any other country that gets to the point where its debt is unsustainable.
2012-02-10 Theres Value in Russias Future by Frank Holmes of U.S. Global Investors
Increasingly, Russian companies have begun paying dividends, with some companies paying as much as a 10% annual dividend. As interest rates around the world will remain low or even negative for years to come, dividends offer investors the opportunity to earn income with the potential of appreciation. Although political risks remain, we believe Russia continues to be a hotbed of opportunity for emerging market investors.
2012-02-03 In the Bullring With Gold by Frank Holmes of U.S. Global Investors
We anticipated that the Year of the Dragon would spur an increase in the buying of traditional gifts of gold dragon pendants and coins. Gold buying did hit new records, says Mineweb, with sales of precious metals jumping nearly 50 percent from the same time last year, according to the Beijing Municipal Commission of Commerce. This should serve as a warning to all of golds naysayers. Gold bullfighters bewareyou now have to fight the gold bull while fending off a golden Chinese dragon.
2012-01-31 To Fight or Not to Fight the Worlds Central Banks by Tony Crescenzi, Ben Emons, Andrew Bosomworth, Lupin Rahman and Isaac Meng of PIMCO
We are skeptical that fiscal austerity alone is sufficient for all eurozone countries to grow and remain solvent. We thus expect the ECB to continue supporting the euro area with liquidity in 2012. Recent central bank policy in China is oriented toward stabilizing growth in a political succession year, while balancing lingering inflation and medium-term systemic risks. Investors may want to hedge portfolios by looking to select emerging markets with the ability and willingness to cut policy rates both from a cyclical as well as structural perspective.
2012-01-28 The Transparency Trap by John Mauldin of Millennium Wave Advisors
We look at the shift in Fed policy, and at the balance sheets of central banks, US GDP, Portugal and the ECB, the LTRO policy, and yes, theres even a tidbit on Greece. Unemployment will be higher than we are comfortable with; it is just a product of the current environment and simple math. The US economy is in a Muddle Through range of around 2%. If not for a potential shock coming from a serious European crisis and real recession, the US should not slip into outright recession this year.
2012-01-27 Global Infrastructure Investment Commentary - December 2011 by Team of Cohen & Steers
We are entering 2012 with a positive outlook for infrastructure securities based on better-than-expected U.S. economic data and credit conditions in Europe that show some signs of stabilizing. Even so, we recognize that it will take time for the global economy to achieve sustained growth. We will continue to monitor global monetary policies, having already seen the beginning of the next easing cycle. Despite the fact that the sector still carries meaningful political and regulatory risk, we believe infrastructure companies should perform well in 201
2012-01-27 12 Trades for 2012 by Komal Sri-Kumar of TCW Asset Management
Earlier this month, I suggested that investors closely watch 12 macroeconomic and financial indicators in deciding whether the world economy is improving or worsening (12 Indicators for 2012, January 3, 2012). Some readers wrote to ask if I would discuss what those indicators would mean for investment strategies. That was the genesis of the present piece which is intended to be consistent with expectations on the economic and financial fronts.
2012-01-27 Slow Road to 'Normal?' by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Market volatility has fallen and tight correlations have loosened, indicating to us some calming of fears and increased attention on more traditional economic and earnings-related news. This is a good sign for stocks in the foreseeable future. The Fed unveiled its new communication strategy after its most recent meeting, reiterating that interest rates will likely remain extremely low for some time. The European picture is brightening slightly and there may be a glimmer of hope for stock market investors. After a soft patch, global growth may be turning around.
2012-01-27 Waist Deep in the Big Muddy by Peter Schiff of Euro Pacific Capital
As long as interest rates remain far below the rate of inflation, the U.S. economy will fail to equitably restructure itself for a lasting recovery. As a secondary effect, U.S. savers will likely continue to suffer from a lack of yield and a weakening currency. In the end, the collapse of the U.S. economy will be that much more spectacular due to the great lengths we have gone to postpone it.
2012-01-27 Heart of China Bull Beats Strong by Frank Holmes of U.S. Global Investors
With rising incomes and increasing urbanization, we believe China is pursuing the American Dream, and the government has shown great determination to build the necessary infrastructure along with a robust urban labor market. On a purchasing power parity basis, Chinas share of world GDP has risen significantly, from around 3 percent in 1985 to a current world share of nearly 16 percent.
2012-01-26 Peering Through Exxons Looking Glass by Frank Holmes of U.S. Global Investors
The emerging world will push global energy demand 30 percent higher by 2040, according to ExxonMobils Outlook for Energy: A View to 2040. The report contains some interesting projections on what may be in store for the energy sector in the coming decades. The global population is expected to reach a staggering 9 billion over the same period, but it isnt population growth that will drive the increase in energy demand. Instead, rising affluence and higher living standards in regions such as Africa, Latin America, the Middle East and India will be the biggest factors.
2012-01-25 Emerging Markets Real Estate Investment Commentary Full Year 2011 by Team of Cohen & Steers
Over the long term, we believe emerging market real estate securities are well positioned to benefit from secular trends such as expanding urban centers and the rise of the consumer class. In the near term, however, we expect volatility to continue as markets grapple with uncertainty about Europe and further deceleration in economic growth. In this challenging market environment, we continue to favor commercial landlords over developers.
2012-01-24 The Plain Facts by Herbert Abramson and Randall Abramson of Trapeze Asset Management
We believe that, while Europe will suffer a recession in 2012 on its painful path to recovery, with or without Greece, the U.S. and Canada will likely see accelerating growth this year, as will China, India and Latin America. In fact, global growth should be above 3%, supported by record high total household wealth in the world, which has doubled since 2000. China and India provide half of the worlds economic growth. And manufacturing in India and China grew in December and should continue to do so from renewed government stimulation.
2012-01-24 Africa: Opportunities and Challenges in a Growing Economy by Team of The Royce Funds
As the South African economy continues to mature and other, even less developed, economies begin to thrive, we will keep our attention focused on company fundamentals, corporate governance, and what we think are attractively undervalued businesses with the potential to grow in the global economy. As the bulk of Africa's economies are frontier markets, still progressing toward the status of developing economies, the continent as a whole represents long-term opportunities that will require patience and diligence. Its resources and demographics are likely to make it well worth the wait.
2012-01-23 Smart Strategies Looked Stupid in 2011 by Liam Molloy and Bethany Carlson of Galway Investment Strategy
The US has a confidence crisis, not a growth crisis. Jobs are being created. Consumers spending rose 6.9%. Corporate profits went up 16%. Financial leverage is low, operational leverage is high. Even with the rise in government debt, public debt service is at its lowest since the mid 80s. And all this during the year we survived a major nuclear crisis in Japan, the first-ever Treasury downgrade, revolutions in North Africa and the Middle East, several hundred thousand government layoffs, gridlock in Washington, and the effective bankruptcy of Greece.
2012-01-21 Staring into the Abyss by John Mauldin of Millennium Wave Advisors
Europe's leaders are committed to keeping both the euro and the eurozone as it is. But for it to do so, everything must change, as the wonderful quote from the 1958 Italian novel suggests. This is no easy task, as no one wants a change that will impact them negatively; and there is no change that will allow things to stay the same that does not impact all severely, as we will see. In the third part of a continuing series, we look at the actual options that are available on the menu of choices, or as one group called it, the menu of pain.
2012-01-20 It May Take a Dragon to Breathe Fire into Markets by Frank Holmes of U.S. Global Investors
Ive found many people are particularly energized about predicting a hard landing for Chinas economy, but I believe the country is no sinking ship. China isnt fast-approaching an iceberg in the dark of the night like the Titanic. Beijing has long been anticipating the ice chunks and subtly adjusting the rudder around inflation without steering the economic ship too far off course.
2012-01-19 Net1 UEPS Technologies (UEPS) Rises Over 30 Percent Rewarding Undervaluation by Chuck Carnevale of F.A.S.T. Graphs
Primary reason this is happening is because the market was grossly undervaluing this company shares. Consequently, a piece of good news stimulated an incredible 30% advance in one single trading day. Common sense would tell us that the intrinsic value of a business, even a small business like Net1 UEPS Technologies, could not logically change by a magnitude of over 30% that quickly. Unless of course, it was through a merger, that increased the size and the value of the business by that much. The win of a contract would be unlikely to have such an impact.
2012-01-19 Riding the Global Roller Coaster: The Outlook for Emerging Markets High Yield Corporates in 2012 by Brigitte Posch of PIMCO
Because many emerging market high yield companies were able to deleverage after the 2008/2009 crisis, we believe they are generally in a stronger position than their developed market counterparts. Limited financing needs should provide technical support to the overall emerging markets corporate market. In an environment where lending conditions tighten in international capital markets, domestic markets may become a source of funding for EM HY corporates.
2012-01-17 An Essential Client Conversation ?Will I be able to pay for my hip replacement at age 85?? by Dan Richards (Article)
Advisors face a big challenge in planning for boomers. Your assumptions about how long they'll live and the nature and cost of their lifestyle as they age will dramatically impact your planning decisions. Conversations with boomers about those topics and about the implications of funding health care are difficult but important.
2012-01-17 Further Improving the Use of the ECRI WLI by Dwaine van Vuuren and Georg Vrba (Article)
Last week, we described how best to use the growth figure of the ECRI's WLI to predict recessions, but we also highlighted an impediment to our research -an inability of outsiders to replicate the index. Last week, however, the formula to calculate the WLI growth figure was found. Armed with that data, we have made further progress to improving the recession-dating performance of the WLI.
2012-01-17 ProVise Bullets by Team of ProVise Management Group
The season for predictions is behind us and we thought it might be fun to come up with a few predictions that go out on a limb, both positively and negatively. Here are five semi-wild, but possible predictions for 2012. 1: Jobs, especially manufacturing jobs, return to America. 2: Switching from the economy to politics, the Republicans will hold a majority in the House, although they will lose some seats. 3: Turning to the world, the euro survives in spite of its being badmouthed over the past several months, and it strengthens late in the year. ...
2012-01-17 Dwelling In Uncertainty by John P. Hussman of Hussman Funds
When unseen states of the world have to be inferred from imperfect and noisy observable data, there are a few choices when the evidence isn't 100%. You can either choose a side and pound the table, or you can become comfortable dwelling in uncertainty, and take a position in proportion to the evidence, and the extent to which each possible outcome would affect you.
2012-01-17 A Society Moving Toward The Brink? by Chris Maxey of Fortigent
With economic growth stagnating, global indebtedness remaining stubbornly high, and unemployment refusing to budge, pressure on governments and ordinary citizens is mounting. Financial crises are notoriously difficult to recover from, but the longer-term sociological problems created by such severe declines in output pose a major headwind to the economy in 2012 and beyond.
2012-01-13 The Year that Was and The Year to Come by Mark Mobius of Franklin Templeton
From a long-term perspective, we continue to have a positive outlook on emerging economies. In our opinion, balancing growth, inflation and global competitiveness will be the task ahead for many emerging countries in the months to come. We believe that emerging stock markets could be much larger than they are today, and over the long term, their combined value could potentially exceed the combined value of the U.S., Japanese and European equity markets.
2012-01-13 What the Next Decade Holds for Commodities by Frank Holmes of U.S. Global Investors
What will happen over the next 10 years? I believe the supercycle of growth across emerging markets will continue with rising urbanization and income rates. This bodes well for commodities, especially copper, coal, oil and gold, and well continue to focus on companies that will benefit the most from these much-needed resources.
2012-01-13 Time to Climb? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
The US economy continues to expand and has recently picked up momentum. Investors have been focused on European and US debt problems, but that may set up an environment for stocks to move higher. Many challenges await Congress. We're not optimistic that much progress will be made, but the rhetoric will almost certainly heat up as late-year elections loom. Recent policy decisions in Europe provide some hope but the region's banks continue to struggle and are pulling back on lending, which likely impedes growth. In China, policymakers attempt to keep growth from dipping below healthy levels.
2012-01-10 Using the ECRI WLI to Flag Recessions by Dwaine van Vuuren (Article)
In September 2011, the ECRI proclaimed a new U.S recession would begin sometime in the coming year. It based its prediction on a host of its own internal long-leading indexes, together with its widely followed weekly leading index (WLI). I want to focus on the proper use of the WLI and examine its accuracy in recession dating, in order to put this current recession call into context.
2012-01-09 Macro Matters: Incorporating Top-Down Views in Emerging Market Equities by Curtis Mewbourne and Masha Gordon of PIMCO
From 2003 to 2011, over 50% of returns of the MSCI Emerging Markets Index came from country-related and currency-related factors. Over the next 12 months, there will be elections in countries representing just under half of global GDP. Therefore, we expect more policy experimentation, varying degrees of effectiveness, and unintended consequences. Currencies are also an important driver of EM equity returns, and the cost of hedging currencies has meaningfully declined over time.
2012-01-09 A Postcard from the Middle East & Africa by Team of Thomas White International
Retail therapy may or may not make the soul happy but it sure does make the feet sore. Young Middle Easterners though have warmed up to a retail format that promises to keep both soul and feet happy. E-commerce and online retail are getting bigger by the day across the Middle East for several reasons. For one, the region recorded the worlds fastest growth in internet usage between 2000 and 2009, and it is now home to more than 60 million internet users, which makes it a huge market for online transactions.
2012-01-09 Middle East/Africa Fourth Quarter 2011 Economic Review by Team of Thomas White International
Weakening global activity and further political uncertainty are the foremost risks that are likely to affect the Middle East and Africa (MEA) regions performance. The IMF report notes that oil exporting nations of the MEA region have benefited from continued high energy prices and are slated to finish off 2011 clocking in a GDP growth of 5% before easing to 4% in 2012. However, these countries do face a downside risk in the likelihood of fiscal and debt challenges in the developed nations that could adversely impact global activity and international oil prices.
2012-01-06 Pioneering Frontier Markets by Mark Mobius of Franklin Templeton
While emerging markets were considered a niche or exotic investment when I started investing in the late 1980s, many investors are now familiar with them and Im seeing more and more investors turning to emerging markets as a way to diversify their portfolios. Yet, emerging markets themselves are not a homogeneous zone. Within the emerging markets universe, we believe frontier markets as a whole have begun to take an impressive lead in terms of growth.
2012-01-04 ProVise Bullets by Team of ProVise Management Group
The year 2012 is upon us and looms large for a number of different reasons. Within the next few days, the first of the Presidential primaries will begin and by early November we will know who our next President is and who controls Congress, along with many State Houses. Some astrologists believe this is the Age of Aquarius and according to the Mayan calendar, December 21st will be the end of time, or as some prefer to think of it (ourselves included) the beginning of a new age. Maybe the astrologists and Mayans have something going.
2012-01-04 Fundamentals March on Despite Global Risks in 2012 by Douglas Cote of ING Investment Management
The two primary drivers of market performancefundamentals and global risksacted in opposition in 2011. It is critical to understand the hierarchy of influence of these drivers in order to understand the current market and to forecast its future direction. Although spikes in global risk may make headlines and cause temporary shocks to investor confidence, the markets path ultimately comes down to the strength of the underlying fundamentals. We expect 2012 will mark the third consecutive year that fundamentals relentlessly march forward despite ample global risks.
2012-01-03 US Recession - An Opposing View by Dwaine van Vuuren (Article)
A large number of reputable analysts and companies are forecasting a new U.S recession on the immediate horizon. Attracting the most attention is ECRI, which made a public recession call on September 30th and several television reaffirmations since. But an examination of a broader range of other composite economic indicators shows that sole reliance on ECRI's forecast would be misplaced.
2011-12-31 Remarkable Resilience by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Despite a remarkable series of crises, the stock market was roughly flat on the year. Earnings increasing, inflation decreasing, and economic data improving, the environment for a renewed upward move may be in place to start 2012. There seems to be little hope from DC for any relief in the near term, but 2012 brings an election cycle that will likely have a major impact on the future of the US. A near-term implosion in Europe seems to have been avoided but real solutions remain absent and the risks for a greater economic pullback are growing, which would likely have global implications.
2011-12-30 Hockey Stick Growth: Good for the Wallet, Bad for the Globe by Jonathan Leidy of Portico Wealth Advisors
Population growth, specifically in developing nations with burgeoning middle classes, portends significant economic growth. That leads to the now somewhat hackneyed conclusion that emerging markets will make for good long-term investments. Nevertheless, the US and the rest of the developed world will continue to shrink in relative size, and hence global significance, over the next several decades; Emerging markets, and the multi-national corporations that work with them e.g. MacDonalds, Tiffanys, and Daimler-Benz, are likely to remain very attractive investments.
2011-12-30 Case for Sustained $100 Oil by Frank Holmes of U.S. Global Investors
China, along with other emerging markets, and the European Central Bank are in the early stages of a global easing cycle, primarily by cutting interest rates to spur growth. Also, the Federal Reserve should remain stimulative. These government actions set the stage for sustained, or perhaps higher, demand for oil. Geopolitical threats remain on the horizon, and could also be a positive catalyst for oil.
2011-12-28 Where Falling Inflation Means Rising Valuations by Russ Koesterich of iShares Blog
Emerging market inflation should decelerate further in 2012 thanks to a combination of continuing slower global growth and the lagged impact of monetary tightening. With the outlook for emerging market inflation improving, my team recently ran an analysis to determine which developing countries are likely to see their valuations benefit the most from falling inflation. Here is the list, with each country ranked in order of how much they should benefit. 1. Brazil 2. India 3. Egypt 4. South Africa 5. Russia 6. Turkey.
2011-12-24 Your Three Investing Opponents by John Mauldin of Millennium Wave Advisors
Recently I have been having a running conversation with Barry Ritholtz on the psychology of investing (something we both enjoy discussing and writing about). Since I am busily researching my annual forecast issue (and taking the day off), I asked Barry to share a few of his thoughts on why we do the things we do. He gives us even more, exploring the three main opponents we face when we enter the arena of investing.
2011-12-23 Outlook 2012: Living In Interesting Times by Victoria Marklew, Asha G. Bangalore, James A. Pressler, and Ieisha Montgomery of Northern Trust
Setting aside the debate over the appropriateness of various policy directives, this Outlook considers which countries or regions are vulnerable as we head into 2012. Not surprisingly we start off with Europe, then go through the U.S., industrialized Asia, and Latin America, finishing with a brief discussion of the political powder keg that is the Middle East.
2011-12-23 Emerging Markets Real Estate by Team of Cohen & Steers
Emerging markets real estate securities had a negative return in November following an exceptionally strong October. Worries about the global economy and Europe continued to weigh on equities broadly, while signs of slowing growth in China were of particular concern to developing countries. A sharp rally in the last few days offset some of the decline, as China cut its reserve requirement ratio for the first time in three years and central banks announced a coordinated effort to provide much-needed liquidity to European banks.
2011-12-19 Emerging Markets: Yesterday, Today and Tomorrow by Mark Mobius of Franklin Templeton
Almost every market move these days seems to be tied to the latest headline coming from Europe. And the U.S. political deadlock on deficit reduction, high unemployment and fear of a recession hiding under the bed are certainly not helping investor morale. But dont throw in the towel just yet. While the ongoing turbulence in the markets has investors feeling more than a little edgy, the story of robust and resilient growth in emerging markets seems cause for optimism.
2011-12-19 Changing of the Guard: Do European and U.S. Debt Woes Signal a Shift in the Economic World Order? by Team of Emerald Asset Advisors
Industrialized nations in the West have enjoyed decades of economic prosperity and generous social safety nets. However, recent events have made it clear that shifting demographics and huge debt burdens will make it increasingly difficult, if not impossible, for many industrialized nations to maintain the same standard of living for their citizens. It seems that many formerly emerged economies are now on the verge of submerging. As citizens and political leaders in Europe and the U.S. slowly awaken to this reality, economies in many emerging markets are moving ahead at full steam.
2011-12-19 I Dont Know What to Say, Except its Christmas and Were All in Misery" by Liam Molloy and Bethany Carlson of Galway Investment Strategy
The back half of the year has seen a dramatic rise in volatility that has shaken investor confidence in the market itself. Markets have routinely seen wild swings in the futures market prior to the open in New York, before the European close, and in the last hour of trading in the US. This pattern has been an almost daily occurrence and at times seems to have no connection to actual fundamental information. The mystery of this market behavior leaves investors wishing cousin Eddie emptying his chemical toilet was the biggest source of irritation this Christmas.
2011-12-16 Early Santa Arrival? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Stocks have continued their seesaw pattern around developments in the European debt crisis. The major indices remain in the wide range we've been in for the last two years. Factors are setting up for a potential break above that range in the coming year. Expectations about progress in Washington are extremely low and near-term the biggest issues are the proposed extensions of the payroll tax cut and unemployment insurance. The increasing populist rhetoric is not helpful and any chance of major debt-reducing legislation occurring before the 2012 election seems remote.
2011-12-16 Striking Portfolio Balance with Gold Stocks by Frank Holmes of U.S. Global Investors
Back on August 22, I wrote that gold was due for a correction and that it would be a non-event to see a 10 percent drop in gold. I wrote, This would actually be a healthy development for markets by shaking out the short-term speculators. This mornings gold price of $1,590 is about 15 percent from the high, which is a little greater than predicted, but a non-event just the same. I believe the long-term story remains on solid ground.
2011-12-15 Eastern Europe Financial House Stronger than Debt-Ridden Neighbors by Frank Holmes of U.S. Global Investors
For some Eastern European investors the geographic proximity to the eurozone has been too close for comfort, with the Russian MICEX Index declining about 20 % year-to-date. However, stronger fiscal and monetary stances in Eastern Europe compared with its western neighbors warrant a 2nd look. Eastern European countries generally have experienced higher GDP growth along with less debt, so financing costs have less of a negative effect on GDP than in Western Europe. In most of Eastern Europe, every one percent increase in the cost of funding only detracts about 0.5 percentage points from GDP.
2011-12-09 Emerging Markets Bonds and Currencies in an Uncertain World by Ignacio Sosa of PIMCO
Even if global risk deteriorates significantly, emerging markets may continue to offer compelling risk-adjusted return characteristics. Emerging markets external sovereign debt, along with receiving interest rates in higher-quality EM countries, could be the best relative performers. EM currencies would likely sell off sharply in risk-off periods but would also tend to rebound robustly when risk appetite returns. Several Asian currencies are likely to be the best relative performers. Emerging markets assets remain a risk asset class and will not be immune to waves of global jitters.
2011-12-09 You Can't Print More Gold by Frank Holmes of U.S. Global Investors
As central banks print money and increase supply, currencies become devalued. Whereas in the recent past, one currency may be reduced in value compared with other currencies, this time there is global competitive devaluation as excess liquidity is put into the system. Historically, this excess liquidity has made its way to riskier assets, i.e. stocks and commodities. Gold is generally a benefactor of this flight to riskier assets as many investors see it as a store of value. This chart illustrates the interconnectivity of gold and global money supply growth.
2011-12-08 Some Perspective on Recent Stock Market Volatility by Team of American Century Investments
Both October and November exhibited substantial price volatility. For the full month of October, the index was up 10.9% on a total return basisthe best October performance for the S&P 500 in nearly 20 years. In contrast, for November the index was down -7.5% through Friday the 25th before a substantial rally the last three trading days of the month. Well take a closer look at the volatility of the S&P 500 from a historical perspective to provide some insights about market volatility its history, trends and causes.
2011-12-08 Will a Eurozone Recession Put a Damper on the World's Fragile Economic Recovery? by Team of Knowledge @ Wharton
If large parts of Europe fall into a recession, as many experts are predicting, it is likely to have negative, although varied, effects on economies around the world, including those -- like the United States -- that are struggling to recover from the global financial crisis. As European leaders hammer out yet another package of solutions this week, Wharton faculty weigh in on the impact of a eurozone recession, as well as the pros and cons of the recovery measures that are up for debate.
2011-12-08 2012: A Gut Check for Global Markets by Andreas Utermann of Allianz Global Investors
We are clearly facing a significant slowdown in economic activity in 2012, but we do not expect most developed economies to fall into recession. However, growth risks are increasingparticularly in Europe, where a recession is becoming increasingly likely. We do not expect a return of deflationary fears despite weakening growth, nor is inflation likely to be a threat in the foreseeable future. We expect rates to come down further in the euro zone and emerging markets; in the U.S., U.K. and Japan, we expect extremely low interest rates to continue.
2011-12-06 Why Shiller and Soros May Be Wrong about Farmland Investing by Robert Huebscher (Article)
Earlier this year, Yale's Robert Shiller identified farmland as an asset class in the early stage of bubble formation. George Soros, Jim Grant and Jim Rogers have espoused similarly bullish views. But advisors - even those managing the assets of very wealthy clients - shouldn't bet the farm on these expert forecasts just yet.
2011-12-05 Timber: Favorite of the Big Money by Douglas Clark Johnson of Codexa Capital
Retirement funds, life insurers, and other major institutional investors with a long-term view have been high-profile investors in timber. The benefits the asset class brings to portfolio composition include low correlation with more conventional asset classes, as well as the renewable nature of the investment.
2011-12-03 Time to Bring Out the Howitzers by John Mauldin of Millennium Wave Advisors
It is now common to use the term bazooka when referring the actions of governments and central banks as they try to avert a credit crisis. And this week we saw a coordinated effort by central banks to use their bazookas to head off another 2008-style credit disaster. The market reacted as if the crisis is now over and we can get on to the next bull run. Yet, we will see that it wasn't enough. Something more along the lines of a howitzer is needed (keeping with our WW2-era military arsenal theme). And of course I need to briefly comment on today's employment numbers.
2011-11-29 Sometimes We Lose Perspective by Scott A. MacKillop (Article)
It's been a rough ride lately for investors. Looking back over the course of my lifetime, however, what has been particularly exceptional is not recent market swings - these come and go - but rather the return one would have earned if they had been continuously invested in the stock market over the past 60-plus years.
2011-11-26 Innovation Always Trumps Fear by J Michael Martin of Financial Advantage
While the stock market is behaving fearfully, we want to examine the thesis that the human capacity for innovation is an inexhaustible source of power that routinely topples seemingly intractable challenges. Our genius for betterment has flourished in the social arrangement known as democratic, free-market capitalism. Its promise of rewards for our efforts tends to subdue our baser instincts of fear and envy, and to stimulate the powerful creativity with which we are endowed. Capitalism has raised the standard of living wherever its been tried.
2011-11-26 With Rising Wages, Will China Remain a Manufacturing Hub? by Frank Holmes of U.S. Global Investors
In 2010, countries such as Hong Kong, Japan, South Korea and Germany depended on China for data processing, apparel, and iron and steel exports. Chinas largest import partners in 2010 were Japan, South Korea, the U.S., Germany and Australia. For those companies not already doing business in China, theres one dominant factor that shows they should start: the vast domestic market. Companies may be able to find a cheaper workforce in Bangladesh, India or Sri Lanka, but being located in China allows convenient access to what is rapidly becoming the worlds largest consumer market.
2011-11-19 Print or Perish by John Mauldin of Millennium Wave Advisors
I do not think the euro will survive with the current mix of countries, nor do I think that Germany thinks so either. Greece is likely to go, as is Portugal. Can Spain really get its deficit under control in time? Do we see a two-euro world, one in the northern states and one in the southern? And to which one does France go? Looking at the politics, one might think the answer is obvious, but if you just look at the numbers, it is clearly not. France is in many respects a Mediterranean country. So many choices and none of them good.
2011-11-18 Big Shift in Gold Demand by Frank Holmes of U.S. Global Investors
In 1970, according to the latest World Gold Council (WGC) report, half of the worlds gold was purchased in two regionsNorth America and Europe. Ten years later, that figure jumped all the way to 68 percent during a period of high inflation, a weak economy and spiking gold prices. At the same time, China and India (broadly represented in the chart as East Asia and Indian Sub continent) saw their combined share of gold demand diminish from 35 percent to 15 percent.
2011-11-18 The Gold Triple Play - Volatility, Currencies and Europe by Frank Holmes of U.S. Global Investors
Resurgent investment lifted global gold demand 6 percent from the previous year to just over 1,000 tons during the third quarter of 2011, according to the latest Gold Demand Trends Report from the World Gold Council (WGC). The potent cocktail of inflationary pressures in the emerging world and the European sovereign debt fiasco left investors searching for a safe haventhey looked for it in gold.
2011-11-17 South Africa's Incredibly Shrinking Gold Production by Frank Holmes of U.S. Global Investors
Finding evidence to pop the talk of a gold bubble is much easier than finding a needle in a haystack. There are enough needles of evidence out there to fill a pin cushion. The latest Gold Demand Trends Report from the World Gold Council contained two salient visuals of how the dynamics of the global gold market have shifted from the West to the East over the past 40 years. Today well take a look at supply, and tomorrow well dive into demand.
2011-11-16 The Whole Truth and Nothing but the Truth... Kinda by Liam Molloy and Bethany Carlson of Galway Investment Strategy
Determination of fact can be a science but discerning meaning is an art. For example, we recently spoke one-on-one with a fund manager who we have a long history with. He in no uncertain terms told us to steer clear of his asset class for now and even made other suggestions. A week later, on the general shareholder call, the manager listed all the reasons why the asset class did well year to date, which was the truth-but not the whole truth.The audience did not alter the facts but it sure impacted the message. Investors need to go beyond the facts and find the substance.
2011-11-15 In a World Dependent on Crude, is Natural Gas the Savior? by Chris Maxey of Fortigent
It will be a busy week in the US with reports on inflation, retail sales, industrial production and housing starts. Inflationary pressure is likely to show further signs of easing in October, particularly as food costs continue to stabilize. Retail sales were quite strong in September, but gains for October are expected to be more muted. Earnings season is winding down, with quarterly reports expected from UniCredit, Dell, Home Depot, Walmart, Target, Vivendi, Dollar Tree and Gap. The only major central bank to meet this week is the Bank of Japan, which is unlikely to change rates.
2011-11-11 Just as Domestic Demand Picks Up, Foreign Demand Weakens by Asha Bangalore of Northern Trust
The Commerce Departments first estimate of Q3:2011 real GDP growth was 2.5% annualized. Although this headline was better than the 0.8% annualized real GDP growth in the first half of 2011, underneath the headline, the news was even cheerier. Real final sales to domestic purchasers grew at an annualized rate of 3.2% in Q3:2011, the fastest growth of this measure since the 4.9% posted in Q2:2010. So, is it onward and upward for the U.S. economy going forward? Unlikely. Although things may be looking up for domestic demand, foreign demand for U.S. exports is expected to wane.
2011-11-11 The Many Factors Fueling a Return to $100 Oil by Frank Holmes of U.S. Global Investors
The IEA says trends on both the oil demand and supply sides maintain pressure on prices. We assume the average IEA crude oil import price remains high, approaching $120 per barrel (in 2010 dollars) in 2035 (over $210 per barrel in nominal terms). Thats a distant projection but it certainly illustrates why you should consider investing a portion of your wealth in oil.
2011-11-05 Where Will the Jobs Come From? by John Mauldin of Millennium Wave Advisors
What is the role of government in creating jobs? To answer that, let's look at the data that shows us where jobs come from. And we find that net new jobs for the last 15 years came from new business start-ups. Big business is a net drag on job creation, and small businesses are a wash. Governments have seen job growth, but where does the money come to pay government employees?
2011-11-04 3 Drivers, 2 Months, 1 Gold Rally? by Frank Holmes of U.S. Global Investors
Combine the central bank purchases of gold with the fact that we are now entering the strongest months of the year for gold. While the spot gold price has differed from the S&P/TSX Composite Index of gold equities during the first 10 months of the year, their historical pattern is very similar during the last two months. November has historically been the strongest month of the year for gold equities, with mining stocks increasing 8.1 percent.
2011-11-01 What, Me Worry? by Scott A. MacKillop (Article)
As we gnash our teeth over the latest crisis du jour let's remember that difficulties do not, ultimately, prevent progress. On the contrary, over my lifetime progress has continued unimpeded despite a more or less constant stream of difficulties.
2011-10-29 Missing the Forest for the Trees? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season was good and economic data in the US has improved. Robust growth is unlikely in the near future, but the economy is improving. Investors appear to be unconvinced that the picture may be brightening. Inflation continues to run higher than we'd like to see but sustainable price gains are unlikely. The Fed continues to be extremely accommodating. Italy has the potential to be a much bigger problem than Greece. A tentative agreement has been reached for Europe, but hopes for a true long-term solution remain thin. China is likely to suffer no worse than a soft landing.
2011-10-28 How China Drives the Global Economy by Frank Holmes of U.S. Global Investors
The Chinese economy is not a bubble, but that does not mean a significant slowdown wouldnt affect the global economy, especially natural resources. This is because Chinas economic transformation over the past few decades has cast the country into the forefront of demand. PIRA Energy Group says that, in 1990, Chinas share of oil and GDP was less than 5 percent; its share of world energy was just under 10 percent. Since then, Chinas share of energy, GDP and oil has risen dramatically, with each expected to be approximately 28 percent, 21 percent and 16 percent, respectively, by 2025.
2011-10-21 Emerging Markets Real Estate by Global Real Estate Team of Cohen & Steers
Emerging market real estate stocks were hit hard in the risk-averse environment that defined the third quarter. The asset class underperformed its developed-market counterpart, which also had a double-digit decline amid slowing global growth and concerns regarding Europes unresolved sovereign debt crisis. Slowing global growth is taking some pressure off emerging markets in terms of inflation containment. A trend of policy easing appears to be underway. This could result in improved performance for recently problematic sectors. We have been incrementally adding to such sectors.
2011-10-21 Global Equity OutlookFourth Quarter 2011 by Team of American Century Investments
In this edition of Weekly Market Update, presents the teams outlook for global equity markets, based on the latest research and discussions with companies from industries and countries across the economy and the globe. The team focuses on individual security selection, building portfolios from the bottom up, rather than making top-down judgments about the economy. In their view, economic trends matter to the extent that they relate to corporate earnings power. As a result, the outlook focuses on corporate earnings and other areas they deem important to successful global equity investing.
2011-10-21 Do Bullish Investors Have an Ace in the Hole? by Frank Holmes of U.S. Global Investors
You may not be able to count cards at the blackjack table, but counting historical trends of the stock market and discovering inflection points are not only legal strategies, they are essential to successful investing. One card worth counting is the Purchasing Managers Index (PMI), which measures the manufacturing strength of any given country. A rising PMI indicates a growing economy and is considered a leading indicator.
2011-10-19 Middle East/Africa: Economic Review September 2011 by Team of Thomas White International
The MENA region continues to grapple with instability in the aftermath of the Arab Spring uprisings. The draining of public finances, elevated levels of inflation and high rates of unemployment seem to paint an unfavorable picture for the region in the short term. According to the IMF World Economic Outlook report, inflation in the region is expected to average around 7 percent in 2011 and 10 percent in 2012. In addition, the report noted the adverse impact of weaker growth in the United States and Europe on commodity prices, foreign investments and economic activity.
2011-10-15 Can 'It' Happen Here? by John Mauldin of Millennium Wave Advisors
The beginning of the end of the Weimar Republic was some 89 years ago this week. There is a stream of opinion that the US is headed for the same type of end. How else can it be, given that we owe some $75-80 trillion dollars in the coming years, over 5 times current GDP and growing every year? Remember the good old days of about 5-6 years ago (if memory serves me correctly) when it was only $50 trillion? With a nod to Bernankes helicopter speech, where he detailed how the Fed could prevent deflation, I ask the opposite question, Can it (hyperinflation) really happen here?
2011-10-14 Elevation by Liam Molloy and Bethany Carlson of Galway Investment Strategy
One region has five of the twelve fastest economies in the world, including the fastest at a growth rate of over 20% this year. This region has grown faster than the OECD countries and its consumer sector is growing 2 3 times faster than the developed worlds. A study by the Harvard Business Review in 2009 reported that publicly traded companies average return on capital was 67% higher than comparable countries in China, India, Indonesia, and Vietnam. Investors have been blissfully ignorant of Africa for decades, but the opportunity cost of ignorance is increasing.
2011-10-08 An Irish Haircut by John Mauldin of Millennium Wave Advisors
But here is the issue for Europe. The amount of money needed for Ireland is going to be a lot more than they now think, or at least are willing to admit. When Eurozone politicians worry about 'contagion,' or one country wanting the debt relief that another country gets, it is a very real worry. And rightfully so, as voters in Portugal or Spain or (gasp) Italy who are burdened by debt that is seemingly intractable will also want relief. It is not just an Irish condition, it is a human trait.
2011-10-07 Can Markets Find the Road Back to Positive Territory? by Frank Holmes of U.S. Global Investors
Can markets find the road back to positive territory? This week, wed like to point out three reasons investors should consider remaining in equities or reassessing whether to sit on the sidelines: 1. Investor sentiment is signaling the market is overextended to the downside. 2. Stocks are trading well below historical valuation trends. 3. S&P 500 dividend yields are higher than the 10-year Treasury yield.
2011-10-07 On Teflon and Emerging Market Currencies by Andrew Foster of Seafarer Capital
Investors can distinguish between the fundamental health of EM credit which is, as some have suggested, strong and the still fragile currencies of those markets. Rapid unwinding of capital flows may do quick damage to local currency EM bonds, wiping out fixed income investors expectations for current income. EM credit denominated in U.S. dollars may be a viable alternative. EM currencies may offer desirable diversification, and they may even be a good investment but they remain speculative, and should not be considered a safe haven.
2011-10-01 Tough Choices, Big Opportunities by John Mauldin of Millennium Wave Advisors
There is a pattern, and the United States is no different than Greece or Ireland or Italy or Japan or any other country in history. Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang! confidence collapses, lenders disappear, and a crisis hits. There's a limit to how much the bond market is going to let us borrow. As we approach that limit and we're not there yet, we have time, thank God we can make choices about how we want to deal with the problem. But the problem is too much debt and too high a deficit.
2011-09-30 Schwab Market Perspective: Perception vs. Reality by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data continues to reveal sluggish activity, and markets have been increasingly trading in a risk-on, risk-off mode. The Fed continues to try to stimulate greater economic growth, most recently with the announcement of operation twist. We have serious doubts this will engender any broad upturn. We continue to look toward Washington to move beyond short-term rhetoric and provide some serious long-term plans that allow businesses to have more confidence in the future. European policymakers continue to delay any real action, increasing the risks of an escalation of the debt crisis.
2011-09-30 Extreme Divergence Between Coal Rocks and Stocks Unwarranted by Frank Holmes of U.S. Global Investors
Coal was relatively flat for the quarter, but whats interesting is that coal companies were severely discounted. Over the last two years, coal stocks and the commodity have closely tracked each other, until this summer, when worries about a global slowdown caused coal stocks to fall off a cliff, not once, but twice, in August and again in early September. This extreme divergence between coal companies and the commodity seems unwarranted when the long-term drivers of coal remain supportive.
2011-09-24 Catastrophic Success by John Mauldin of Millennium Wave Advisors
Rick Perry touched the third rail of Social Security and called it a Ponzi scheme, which of course immediately made him the leading candidate in the shoot the messenger category. Behind the rhetoric, I look at some actual numbers. Not the unfunded liabilities, thats too easy. Lets look at what a heartless, uncompassionate man President Roosevelt was when he started Social Security. And of course, we must start off with the results of the FOMC meeting, which has me feeling not at all amused. What are they thinking? Apparently, they are seeing the results from another, alternative universe.
2011-09-23 Turkey Gets an Upgrade by Frank Holmes of U.S. Global Investors
The IMF offered a sober assessment of the global economy this week when it released the September 2011 update of its World Economic Outlook. The IMF stated the global economy is in a dangerous new phase, citing two main downside risks: The possibility the crisis in the eurozone will be too much for the regions policymakers to handle, and soft economic activity in the U.S. is due to a weak housing market, deteriorating financial conditions and a political impasse regarding fiscal consolidation. Accordingly, the IMF cut its projections for global growth to 4 percent through 2012.
2011-09-23 Extreme Moves Leave Markets in Rare Territory by Frank Holmes of U.S. Global Investors
Many investors have used gold and other commodities as a haven from recent volatility, buoying prices while equities sunk, but even those investments werent immune to the wave of selling. The U.S. dollar, in contrast, was up 2.2 percent. Much of the dollars rally came after the Fed announced the creatively named Operation Twist. The Fed will sell $400 billion of short-term securities and buy an equal amount of long-term debt. The goal is to push down long-term interest rates, which would spur economic activity.
2011-09-22 World Running Low on its by Frank Holmes of U.S. Global Investors
Did you know that Chinas energy demand is set to grow so dramatically over the next 25 years that its consumption is expected to be 68 percent higher than that of the U.S.? That was only one of the findings of the U.S. Energy Information Administration (EIA). In its new International Energy Outlook 2011, the EIA reports that throughout the world, energy consumption is expected to rise by 53 percent from 2008 through 2035 driven by robust economic growth and expanding populations in the developing countries.
2011-09-20 With the Economy Weak, the Fed Steps Up to the Plate by Chris Maxey of Fortigent
With the Fed potentially considering new easing measures this week, economists paid particular attention to last weeks inflation reports, looking for any clue that the Feds current programs are feeding higher inflation. Thus far, the Fed is in the clear, but there is budding inflationary pressure under the surface that is raising cause for concern. In August, the Consumer Price Index rose 0.4%, led by higher food and energy prices. That follows an equally strong increase of 0.5% in July. Consumer prices received a slight reprieve earlier in the summer, but that softness is dissipating.
2011-09-17 Twist and Shout? by John Mauldin of Millennium Wave Advisors
What in the wide, wild world of monetary policy is the Fed doing, giving essentially unlimited funds to European banks? What are they seeing that we do not? And is this a precursor to even more monetary easing at this next weeks extraordinary FOMC meeting, expanded to a two-day session by Bernanke? Can we say 'Operation Twist?' Or maybe 'Twist and Shout?'
2011-09-13 Balance Grasshopper by Jeffrey Saut of Raymond James Equity Research
Over the weekend Greece did not default, although for over a year I have expressed the view that Greece has to default; a stance I continue to embrace. This morning, however, rumors are swirling again about a Greek default along with hints that Germany is not going to prevent it. That leaves the pre-opening futures down over 20 points, which would represent a retest of the selling-climax lows. While I am hopeful this will be a successful retest, consistent with the October 1978/1979 bottoming sequence, if 1100 is decisively broken it would imply the rally from the March 2009 lows is over.
2011-09-10 Preparing for a Credit Crisis by John Mauldin of Millennium Wave Advisors
This week we turn our eyes first to Europe and then the US, and ask about the possibility of a yet another credit crisis along the lines of late 2008. I then outline a few steps you might want to consider now rather than waiting until the middle of a crisis. It is possible we can avoid one but whether we do depends on the political leaders of the developed world making the difficult choices and doing what is necessary. And in either case, there are some areas of investing you clearly want to avoid. Finally, I turn to the weather and offer you a window into the coming seasons.
2011-09-09 Americas: Economic Review August 2011 by Team of Thomas White International
While markets have calmed after the anxiety caused by S&Ps downgrade of U.S. debt, economic indicators for most countries in the Americas region remain subdued. 2nd quarter growth declined for most countries and full year forecasts are being revised lower. The subdued global growth outlook has dulled the prospect for continued growth in export earnings while consumer spending in some of the larger economies is increasingly being restrained by higher interest rates and the heightened economic uncertainties. Nevertheless, inflationary risks have declined, except most notably in Brazil.
2011-09-09 Schwab Market Perspective: What's Next? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
The economic debate continues between the recession and slow growth camps. We lean toward the latter but the argument may be just splitting hairs. The more important issue is what this sideways movement may mean for the market and jobs growth. There seems to be more disagreement among Fed members than we've ever publicly seen. Theyve laid out potential further stimulus but we believe their effects are likely to be limited. The European crisis continues to fester and some hard choices may need to be made sooner rather than later. Slowing European economies however, could help emerging markets.
2011-09-08 Middle East/Africa: Economic Review August 2011 by Team of Thomas White International
According to the IMF, global economic prospects have taken a downturn in the wake of a weaker U.S. economic recovery, uncertainty surrounding the Euro-zones fiscal stability and relentless turmoil in the Middle East and North Africa (MENA) region. In recent weeks, the MENA region has been in the spotlight yet again, with the Libyan revolt against Muammar Gaddafis 42-year long dictatorship gaining momentum. The IMF has been keeping a close watch on developments in the strife-ridden country and is yet to determine the uprisings impact on the Libyan economy.
2011-09-07 More Readers Questions Answered by Mark Mobius of Franklin Templeton
We have begun to see signs that the overheated Chinese economy may moderate in the not-too-distant future. We believe that inflation in China could reach a peak in the near future as a result of the Chinese governments decision in July to increase pork supply by releasing a portion of their strategic pork reserves. By releasing more pork supply into the market, the government hopes to combat rising pork prices. That move, combined with an easing growth rate, could subsequently lead to the end of the central banks current tightening monetary policy cycle in the near term.
2011-09-03 How to Find Opportunities from Blood, Debt & Fears by Frank Holmes of U.S. Global Investors
For the long-term investor, the risk/reward profile for owning stocks appears positively skewed. Equity investors have suffered through one of the most difficult decadesrivaling even the Great Depressionwhile bond investors have enjoyed a 30-year bull market. Long-term mean reversion is a powerful tool that investors can use to help them attain their long-term goals.
2011-08-26 Valuation Gap Makes Gold Miners Attractive But All Miners Arent Created Equal by Frank Holmes of U.S. Global Investors
Goldwatchers were reminded golds volatility works in both directions this week, with prices falling more than $100 an ounce in just one day. We forecasted the selloff last week, explaining a 10 percent correction would be a non-event. Once again the CME Group hiked the exchanges margin requirements for gold investment to shake out overleveraged speculation. This is a positive for long-term investors.
2011-08-23 A Fundamental Investment Strategy for Today's Environment by Robert Huebscher (Article)
We spoke with Tim Hartch and Michael Keller, who are co-managers of the Morningstar 5-star BBH Core Select Fund (BBTEX) from Brown Brothers Harriman. The fund's strategy is strictly bottom-up, with investments in established, cash-generative businesses that are leading providers of essential products and services with strong management teams and loyal customers.
2011-08-22 Dont Dismiss Emerging Markets by Milton Ezrati of Lord Abbett
Fears about emerging market investments have grown of late. Todays doubts have three sources. 1) Many once popular emerging equity markets have failed to keep up with their impressive past gains. 2) The emerging economies look more vulnerable than previously to the ills of inflation and the associated slowdown in the pace of growth. 3) Valuations look much less compelling than they once did. But if all these factors keep emerging markets from repeating the phenomenal gains of the last 1020 years, investors would make a mistake to dismiss them out of hand.
2011-08-20 The Recession of 2011? by John Mauldin of Millennium Wave Advisors
If we are headed into recession, and I think we are, then the stock market has a long way to go to reach its next bottom, as do many risk assets. Income is going to be king, as well as cash. Well know several things. Recessions are by definition deflationary. Yields on bonds will go down, much further than the market thinks today. And while the Fed may decide to invoke QE3 to fight a deflation scare, the problem is not one of liquidity; it is a debt problem.
2011-08-19 The Silver Lining for Markets and the U.S. Economy by Frank Holmes of U.S. Global Investors
There is a silver lining: Despite all the negative news out there, the global economy will continue to grow. In fact, the U.S. economy has had several positive developments recently. The four-week average for unemployment claims dropped to 402,000 during the week ending August 13. There is still a large chunk of America unable to find a job, but that group has shrunk 13 percent since August 2010 and is about 40 percent of peak 2009 levels.
2011-08-16 Matt Ridley Makes a Case for Optimism by Laurence B. Siegel (Article)
Matt Ridley's new book, The Rational Optimist, uses powerful examples from history and compelling logic drawn from economic theory to remind us that human achievement is cumulative, and the future looks bright, particularly for the less fortunate in the world. It is especially welcome at this discouraging moment in time.
2011-08-15 Emerging Asia Pacific: Economic Review July 2011 by Team of Thomas White International
China, India, Taiwan and Philippines and other Asian economies seeing inflation accelerate to new highs in June. In most of these countries higher fuel costs and food prices were the primary culprits. While large economies such as India and China hiked interest rates aggressively, many countries increased bank reserve ratios to drain excess liquidity and rein in credit growth. The lone exception to the inflation-ridden scenario in Asia was Indonesia. Indonesia has successfully navigated inflationary pressures by allowing its domestic currency to strengthen strongly.
2011-08-15 Developed Asia Pacific: Economic Review July 2011 by Team of Thomas White International
Reconstruction spending in some key countries in the region, like Japan and New Zealand, also played a key role in improving labor markets. In Australia, however, labor markets turned sour as job losses inched up during the quarter. Inflationary pressures have become acute in Singapore and Hong Kong mainly due to labor shortage and a relentless rise in property prices. Economies that depend on China for their export industries are worried about a weakening in the Chinese economy in the quarters ahead.
2011-08-15 Middle East/Africa: Economic Review July 2011 by Team of Thomas White International
Inflation has been the highest in the MENA regions due to capacity constraints and food prices. While rising costs of food and oil have increased inflationary pressures in South Africa, Israels inflation rate has breached the target range set by its central bank. In addition, South Africa is witnessing strained consumer demand, while growing economic disparity despite lower unemployment rates has triggered social unrest in Israel. Jordan is also battling pricing pressures and is looking to bridge its wide funding gap by raising capital with the issuance of its first Islamic debt instrument.
2011-08-15 Return to Recession.or Recovery? by Liz Ann Sonders of Charles Schwab
Soft economic data has caused talk of a return to recession to grow, leading to a return to the risk-off trade and a spike in volatility. We believe these fears and the market reaction are overdone and indicators still point to growth, but risks are high. The chorus calling for a new quantitative easing (QE3) program from the Fed has grown. We believe it's unlikely at this point. The European debt crisis continues to damage investor confidence as policymakers appear to be consistently behind the curve. Meanwhile, the economic slowdown could ultimately help emerging markets.
2011-08-12 Buy, Sell or Hold? Relax and Don't Panic by Frank Holmes of U.S. Global Investors
There was more blood in the streets Monday as the world continued to digest S&Ps downgrade of US debt, the two-week market selloff, and the likelihood the US economy could possibly slide back into recession. These concerns, combined with continued political/economic struggles in the eurozone from socialist policies, have created a potent concoction of fear across global markets and sent volatility skyrocketing Monday to its highest level since the May 2010 Flash Crash. While many investors are running for the exits, others have chosen to ride the wave of volatility or buy depressed shares.
2011-08-12 Developed Europe: Economic Review July 2011 by Team of Thomas White International
Sovereign debt problems on both sides of the Atlantic kept the global investment community anxious in July. While the U.S. government struggled to build political consensus on the terms for having its debt ceiling raised, European leaders negotiated hard to push their domestic agendas through, while deciding on the exact nature of another aid package for Greece. Eventually, concerns about a Greek debt contagion eased slightly after the country was given a 109 billion bailout, which included provisions for lower interest rates and longer repayment periods.
2011-08-05 Advisor Alert - Placing This Week's Selloff Into Context by Frank Holmes of U.S. Global Investors
The major market indices were lower this week. The Dow Jones Industrial Average lost 5.75 percent. The S&P 500 Stock Index decreased 7.19 percent, while the Nasdaq Composite fell 8.13 percent. Barra Growth outperformed Barra Value as Barra Value finished 7.53 percent lower while Barra Growth decreased 6.88 percent. The Russell 2000 closed the week with a loss of 10.34 percent. The Hang Seng Composite Index finished lower by 6.80 percent, Taiwan fell 9.15 percent, and the KOSPI declined 8.88 percent. The 10-year Treasury bond yield closed 24 basis points lower at 2.56 percent.
2011-07-30 The 2011 Gold Season is Just around the Corner by Frank Holmes of U.S. Global Investors
September has traditionally been the beginning of the gift-giving season for gold. This is the time of year when gold jewelers are the busiest. The Muslim holy month of Ramadan begins in August and concludes with generous gift-giving in early September. Then its Diwali, known as the festival of lights in India, Christmas in the U.S., and Chinese New Year. The key to this seasonal strength over the past few years has been demand from China and India.
2011-07-30 Shifting Focus by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Some economic indicators are starting to perk up while corporate earnings have been strong as we wind down reporting season. Stocks will move higher in the coming months once confidence is restored. Whatever the near-term outcome of the debt debate, the US still has deficit issues to deal with and hard choices must be made to ensure economic stability for years to come. Europe finally arrived at their debt deal, but it likely falls short of what will eventually be needed. Meanwhile, China is key to emerging market performance and continues to deal with inflationary concerns.
2011-07-22 Will China?s Real Estate Market Become the World?s Problem? by James Pressler of Northern Trust
There are significant imbalances in the Chinese real estate market and that this constitutes a large asset bubble that is reaching the end of its run. While there may not be one defining event that marks its collapse, over the next twelve months we expect a marked rise in NPLs within the smaller provincial and regional banks, and some high-profile defaults. And while this will not necessarily mark the end of the Chinese miracle, it will provide a substantial shock to development policies and perhaps a renewed drive toward a more sustainable, domestically-driven economy.
2011-07-22 Resource Limitations 2: Separating the Dangerous from the Merely Serious by Jeremy Grantham of GMO
Last quarter I tried to make the case that the inevitable mismatch between ?nite resources and exponential population growth had ?nally shown its true face after many false alarms. This was made manifest through a remarkably bubble-like explosion of prices for raw materials. Importantly, prices surged twice in four years, which is a most unbubble-like event in our history book. The data suggested to us that rarest of rare birds; a new paradigm. And a very uncomfortable one at that.
2011-07-21 Running in Place by Christopher J. Singleton of Kanawha Capital Management
Financial markets have been choppy this year, as investors wrestle with many of the same issues they faced a year ago. Once again, the specter of a double dip here in the US has collided with renewed fears of a European financial crisis. It is a testament to the severity of the last recession that, two years after its official end, the recovery remains grudging and uneven. This is hardly surprising. History tells us that downturns prompted by financial crises linger much longer than garden-variety recessions. Why? Primarily because the crisis severely interrupts and alters the flow of credit.
2011-07-19 Since when did Debts and Deficits become One and the Same? by Chris Maxey of Fortigent
By early August, the US Treasury will run out of room under the debt ceiling and risks defaulting on its debt. There is growing concern, as evidenced by recent reports from Moody?s and Standard & Poor?s, that a deal will either not get done in time or will not suffice in fixing what is turning into a runaway fiscal freight train. Politicians are determined to play a quick and easy game of Russian roulette with the debt, not realizing that their attempts to undermine each other?s credibility in advance of next year?s elections are extremely dangerous.
2011-07-19 Show me your Favorite Sacred Cow and Shoot It by Liam Molloy and Bethany Carlson of Galway Investment Strategy
Alan Simpson was talking to Eliot Spitzer on CNN?s In the Arena about balancing the national budget when he said ?show me your favorite sacred cow and shoot it.? He?s attained notoriety for his criticism of Social Security. But when asked to list some cows to slaughter, he went on to describe how the tax loopholes and subsidies for various fuels in his home state of Wyoming (where he served as a US Senator for 18 years) need to be closed. That ability to go beyond our own personal bias and focus on the greater good is something investors should keep in mind when viewing markets.
2011-07-19 Urbanization: Building a New World by Mark Mobius of Franklin Templeton
Over the next few decades, I believe we are likely to see an increase in several types of infrastructure investments due to rapid urbanization, which drives the increasing global demand for resources, mainly from emerging markets. Rapid urbanization in emerging markets, driven by rural populations migrating to cities in search of work and better opportunities, has put pressure on resources and prompted governments to pump money into a range of urban infrastructure-related sectors such as housing, transportation, sanitation, water, electricity and telecommunications.
2011-07-16 Commodities 2011 Halftime Report by Frank Holmes of U.S. Global Investors
Commodities don?t all perform in the same way. In any given year, a particular commodity will go gangbusters and outperform the group. However, that commodity will typically come back to Earth and underperform the following year or the year after that. This is why active management is important when investing in commodities. Active managers can benefit from rotating from winners to laggards or by investing in the companies which produce, farm or mine commodities most effectively.
2011-07-15 ProVise Bullets by Ray Ferrara of ProVise Management Group
With all the conversation about healthcare reform, sometimes we lose focus on what law is currently in effect. For those with Health Savings Accounts (HSAs), the annual cap on deductible contributions will be slightly higher in 2012, going to $6,250 for an individual with family coverage and to $3,100 for those insuring a single life. Anyone born prior to 1958 can put in an extra $1,000. On the other side of the equation, the limit on out-of-pocket costs for deductions, co-payments, etc., will rise to $12,100 for family coverage and to $6,050 for individual coverage.
2011-07-15 On Brazilian Investment by Andrew Foster of Seafarer Capital
In my last commentary, I presented some basic evidence that suggested that Brazil?s long-term record of capital investment is not particularly impressive. Specifically, Brazil?s rate of ?fixed capital formation? was cumulatively 16.9% of GDP over the past two decades. This is the lowest rate among the vaunted ?BRIICS? emerging markets; it also falls below that of the U.S. at 18.2%. In my view, this figure is both surprising and disappointing. It?s surprising because a developing country such as Brazil should have great scope for productive investment.
2011-07-12 Middle East/Africa: Economic Review June 2011 by Team of Thomas White International
The Arab Spring brought with it waves of revolution, disrupting economies of almost all the countries in the Middle East and North Africa (MENA) region. While governments of Tunisia and Egypt look to pick up the pieces, continued rumblings of unrest are heard from Bahrain, Libya, Syria and Yemen. The World Bank expects the lowest growth in Egypt and Tunisia, clocking in at 1 percent and 1.5 percent respectively, in 2011. However, despite uncertainty, these two economies are projected to improve in 2012 and witness economic expansion of around 5 percent in 2013.
2011-07-08 India's Demand for Iron Ore Made of Steel by Frank Holmes of U.S. Global Investors
Much has been made of China?s insatiable appetite for the world?s natural resources but demand growth from another Asian giant is changing the dynamics of the global steel market. Indian demand for steel grew 10 percent last year, helping push global demand to a record 1.4 billion tons in 2010. This rise has been driven by the Indian government?s focus on building out the nation?s infrastructure. According to an Urban Land Institute and Ernst & Young publication, ?Infrastructure 2011,? initiatives in India have been extensive.
2011-07-08 Don't Miss Your Chance to Catch a Bull Market by Frank Holmes of U.S. Global Investors
Many people missed the market?s enormous appreciation during the latest equity bull market because they were late to the game or chose to sit on the sidelines. The sideline is a crowded place these days as investors have been reluctant to fully embrace equities. Household savings for the past 12 months totaled $711 billion, the highest level ever recorded in dollar terms. You can see from the chart that?s roughly double the amount of savings recorded following the Tech Bubble. In fact, household debt-to-savings ratios are currently at levels so low, they?ve not been seen since the mid-1990s.
2011-07-05 Is Europe?s Debt Crisis a ?Lehman Moment? for America? by Mohamed A. El-Erian of PIMCO
Europe?s debt problem is a headwind for what remains a disappointing U.S. economic recovery. There is now broad-based recognition of America?s persistent economic weakness. The Federal Reserve has been forced again to revise downwards its growth projections for both 2011 and 2012. In order to avoid a repeat of the total Lehman paralysis in the face of an external shock to the U.S. economy three conditions must be met: a banking system that remains robust, no disruptions to money market funds and limited blockage to the plumbing of the country?s payments and settlement system.
2011-07-02 China Opens World's Longest Cross-Sea Bridge by Frank Holmes of U.S. Global Investors
When the new Qingdao Jiaozhou Bay Bridge opened to traffic this week in China, it made the Guinness World Records for the longest cross-sea bridge in the world. The 26.4-mile long and 110-foot wide bridge stretches across the bay, linking the Huangdao district to the city of Qingdao and Hongdao Island. China spent 17 years planning and designing the engineering marvel to be able to withstand the bay?s high salt content and icy winters. Yet, it only took four years to build, with at least 10,000 workers on the construction team.
2011-07-01 Eye on Washington: Oil and Food Price Manipulation by Monty Guild of Guild Investment Management
We have been saying for some time that the developing world is now exporting higher-priced products abroad and contributing to inflation. A recent WSJ article and video discusses how higher wages and higher commodity costs are resulting in the end of low cost goods from China. We recommend that investors repurchase Malaysian equities as their market looks poised to move higher. U.S. equities also look like they are set for a rally that could last four to six weeks, so we recommend them for a trade. We also remain committed to our bullish recommendations on Japan and India.
2011-07-01 On The Importance of Sustained Capital Investment Part 2 by Andrew Foster of Seafarer Capital
This commentary revisits the topic. It presents basic evidence to support the idea that sustained capital investment is critical in the context of developing markets. The data presented below is gathered from several countries, so as to allow for comparison across emerging markets. Admittedly, the workings of macro economies are highly complex, and drawing detailed conclusions about them is tricky. Nonetheless, national statistics do reveal the general outline of an economy and its underpinnings. That?s how I intend to use the data here ? to make broad inferences only.
2011-07-01 ProVise Bullets by Team of ProVise Management Group
There are a little over 30 days left before the U.S. will technically default on its debt. Congress is still playing Russian roulette with the economy and the stock markets. We have seen what this type of Russian roulette has done to the stock market over the past eight weeks. The Republicans have talked about tax cuts and spending cuts, while the Democrats have pushed for increased taxes and smaller spending cuts. Although this would have been a perfect time for a serious debate on tax reform at both the individual and the corporate level, both of these seem to have been pushed to the side.
2011-07-01 Schwab Market Perspective: Dealing with Debt by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Global governments are dealing with rolling debt crises equaling shaky investor confidence. We are concerned that many of the solutions weigh on growth prospects, but are hopeful about short-term resolutions that restore business confidence and lead to more investment and hiring. The Fed continues to hold steady, keeping short rates near zero and likely reinvesting maturing Treasury securities after QE2 ends. Greece passed the austerity package required to get short-term funding but much more is needed. And while the focus has been on Europe, it may be time to focus on the Asian region.
2011-06-27 Higher Commodity Prices and the End of Economic Growth Without Inflation by Mihir P. Worah of PIMCO
Global inflationary patterns may shift amid higher commodity prices. We expect commodity prices to be generally rising going forward, though with volatility and differentiation among commodities. Emerging markets going through a particularly commodity and energy intensive phase of growth may affect what developed-world consumers pay for commodities. Currencies are another factor. If developed-world policymakers attempt to make their economies more competitive via a cheaper currency, that could lead to higher inflation for those that are net importers.
2011-06-25 Playing Cat and Mouse with Global Oil by Frank Holmes of U.S. Global Investors
Oil markets took another dose of global geopolitics this week when the International Energy Agency (IEA) unexpectedly announced that it would be releasing 60 million barrels of oil from strategic petroleum reserves (SPR) around the globe. Thursday?s surprise announcement gave oil prices a 4.5 percent hair cut and oil prices closed Friday at $91.25, down 20 percent from their April 29 peak.
2011-06-24 On the Importance of Sustained Capital Investment, Part 1 by Andrew Foster of Seafarer Capital
I have placed greater emphasis on identifying companies that maintain steady investment programs. I prefer companies that are committed to the careful but consistent development of the markets in which they operate. My premise is that such companies are more likely to generate sustained, long-term growth.
2011-06-24 What?s Driving Platinum? by Frank Holmes of U.S. Global Investors
Following a substantial 90 percent increase since the financial crisis, platinum prices have been sluggish. During the first six months of 2011, the metal gained only a few basis points. Platinum has significantly lagged silver (up 15.72 percent) and gold (up 7.72 percent), but has outpaced palladium, its closest relative. In recent days, the market has discounted the metal because of weaker car sales in the U.S. According to the WSJ, Japan?s earthquake shut down car production, and higher vehicle prices and continued bad news about the U.S. economy prevented consumers from purchasing cars.
2011-06-24 RCM China Update: Following in the Footsteps by Mark Konyn of Allianz Global Investors
China has replaced Japan as the Asian economic champion, causing some to suggest that China will follow many of the steps taken by Japan during its economic emergence. Dr. Mark Konyn says the dynamics of the relationship between China and Japan are critical for Asian prosperity.
2011-06-23 Greek Drama and the Eurozone's Future: Wharton's Franklin Allen Weighs In by Team of Knowledge @ Wharton
After a week of political drama within his Socialist Pasok party and a new wave of violent riots in the streets, Greek Prime Minister George Papandreou survived a vote of confidence, helping to pave the way for his plans to unleash further austerity measures to keep the country afloat. It has been just over a year since he shepherded in a multibillion-euro rescue package from the International Monetary Fund and the European Union, which commits Greece to several more years of drastic budget cuts and will save it from defaulting on its staggering debt.
2011-06-17 Is Gold About to Have Its Status Upgraded? by Frank Holmes of U.S. Global Investors
Central banks have been on a gold buying spree. Mexico, Russia and Thailand, were adding to their gold reserves. And in 2010, central banks became a net buyer of gold for the first time in 21 years. Central bank gold buying could soon be matched with other global banks if gold?s quality as an asset gets upgraded to Tier 1 status by the Basel Committee on Banking Supervision. The BCBS is an international banking supervisory committee that provides a forum for determining global standards to ensure that banks all around the world have adequate capital.
2011-06-17 Will Gold Equity Investors Strike Gold? by Frank Holmes of U.S. Global Investors
While the party continues for gold bullion prices, stocks of gold companies have been a no-show. The NYSE Arca Gold Bugs Index (HUI) has fallen more than 13 percent year-to-date and the Philadelphia Gold & Silver Index (XAU) has toppled more than 16 percent. Companies such as High River Gold Mines, Jaguar Mining and NovaGold Resources are off 45 percent from 2007-2008 highs. This has been exacerbated in recent weeks making it a hot topic of discussion among investors. This chart shows gold equities of all market capitalization sizes were holding up quite well until late April.
2011-06-15 GOLDRelic or Real Money? by J Michael Martin of Financial Advantage
In the past 10 years, the price of one ounce of pure gold has risen from less than $300 to $1,500, far outpacing the return on stocks and bonds. And yet, in most gatherings of professional investors it is not respected. Why is that? What drives the price of gold, anyway? And is gold really an appropriate investment in the 21st century? We set out to better understand this unique metal. Well explore the reasons that some consider gold an important asset class with unique and valuable investment characteristics, while many professionals regard it as a sort of investment sideshow.
2011-06-15 ProVise Bullets by Team of ProVise Management Group
The more things change, the more they remain the same. That trite expression has been applied to many different things. We are applying it to what may be an early stage tech ?bubble?. Almost every investor is familiar with LinkedIn coming out at $45 per share then jumping to $120 per share in the first day of trading before settling in at $90 per share. Other examples abound. The very popular Facebook is estimated to be worth $76 billion. We have to admit that at least some of the tech companies are actually making money today with viable ideas, but the valuations still seem a bit absurd.
2011-06-13 Middle East/Africa Economic Review May 2011 by Team of Thomas White International
The fiscal stability of the Middle East and N.Africa region continues to be threatened by social pressures, yet rising inflation on the back of increasing fuel and energy prices and high levels of unemployment remain the main causes of concern. According to the Regional Economic Outlook report by IMF, the region is expected to grow 3.9 percent in 2011. The oil exporting countries are anticipated to record better growth thanks to high oil prices and production, while oil importing nations such as Egypt, Morocco and Jordan are expected to expand at a much slower pace.
2011-06-10 Searching for the Market's 'Sweet Spot' by John Derrick of U.S. Global Investors
One of U.S. Global Investors? ?sweet spots? is investing in global small-and mid-cap companies. We generally define these companies as having a market capitalization between $1 and $10 billion. Ten billion sounds like a lot but is relatively small compared to market caps of companies such as Apple ($301 billion), Johnson & Johnson ($181 billion) and Coca-Cola ($149 billion). We like small and mid-cap companies because they tend to be less volatile than micro-caps, but still nimble enough to grow at faster rates than large companies.
2011-06-10 World's Greatest Infrastructure Projects by Frank Holmes of U.S. Global Investors
Cities around the world take turns owning the title for the tallest skyscraper, the longest bridge or the deepest mine. Covering nearly every continent of the world, here?s our current list, which I?m sure will change over the next few years.
2011-06-10 Pause or Panic? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data has deteriorated to the point that talk of a double dip recession has returned. The risk of another recession is low as most indicators remain well in expansion territory. Several factors are contributing to a soft patch, but a rebound is likely in the latter part of 2011. Along with talk of recession risk, chatter about the need for QE3 by the Fed has increased. The bar is quite high for QE3, but it is very likely the Fed will not let its balance sheet shrink in the near-term. Global growth is decelerating as well, with China tightening and Japan dealing with reconstruction.
2011-06-07 Broken Records by Doug MacKay of Broadleaf Partners
Since February, the markets have been hitting new recovery highs, succumbing to market pressure, then reversing course and moving on to higher highs. The pattern is beginning to feel a lot like a broken record.Currently, we've been experiencing a renewed downtrend, with the market off 6% from its April highs. While these moves are normal following a 30% plus advance in just eight months The truth, however, is the uninterrupted steady gains we experienced from August through late February may be far more unusual for the markets than the back and forth gyrations of the past three months.
2011-06-02 Still Chugging Along: The Market that Could by Team of Eagle Asset Management
The global economic recovery is moving along but there remain some areas of concern. Our managers? discussion included such things as rising commodity prices, real estate problems and perhaps most interesting to readers, how they have investment portfolios positioned. Included in the roundtable were Bert L. Boksen (Small/Mid Cap Growth); James Camp (Fixed Income); Ed Cowart (Equity Income/Value); Todd McCallister (Small/Mid Cap Core); Jack McPherson (Small Cap Core Value); Eric Mintz (Small/Mid Cap Growth); Richard Skeppstrom (Large Cap Core); and Stacey Serafini Thomas (Small/Mid Cap Core)
2011-06-01 An Investment in Infrastructure by Team of Columbia Management
Neglecting infrastructure can have tragic consequences. Think about the I-35 bridge collapse in Minneapolis, levees breaking in Missouri or the San Bruno gas pipeline explosion. These and many other examples illustrate the type of destruction that can occur if the country?s aging infrastructure is not addressed. At the same time, demand for new infrastructure is growing exponentially in emerging markets. Data highlighting the scale of construction, transport, logistics and communications development are so large they render relevant context difficult to comprehend.
2011-05-28 Global Infrastructure a $6 Trillion Opportunity by Frank Holmes of U.S. Global Investors
Each week, more than one million people are either born in or migrate to cities. Much of this rapid urbanization comes from the emerging world, putting tremendous pressure on that country?s feeble infrastructure. Merrill Lynch estimates that $6 trillion will need to be spent by selected emerging market countries over the next three years to meet the basic needs of these citizens. Water, transportation and energy investments will consume the bulk of these funds, 82 percent of total projected spending. Nearly every emerging market country Merrill researched will make an investment in all three.
2011-05-28 Railway Revolution Builds China's Consumer Culture by Frank Holmes of U.S. Global Investors
China is building the world?s largest network of high speed rails. Since opening the first high speed line between Beijing and Tianjin in 2008, the country has laid down more than 4,600 miles of new tracks. This is three times more than Japan, where the bullet train was invented. Once completed near the end of this decade, the high speed rail system will connect more than 250 Chinese cities, span 18,641 miles and reach roughly 700 million people. Currently, the high speed rail network connects about one-third of China?s cities. That figure is set to nearly double over the next two years.
2011-05-27 Abu Dhabi by Mark Mobius of Franklin Templeton
Abu Dhabi is the capital of the United Arab Emirates (UAE), the federation of seven emirates including Dubai. The UAE?s combined economy is large compared to its relatively small size?it has a population of around five million, of which 1.6 million live in Abu Dhabi. Per capita GDP in the UAE is more than US$40,000, and that number is significantly higher for Abu Dhabi, mostly because of the incredible earnings from oil and gas. Each day, Abu Dhabi produces more than 2 million barrels of oil, and its oil reserves are now estimated at nearly 98 billion barrels, the sixth largest in the world.
2011-05-25 Bull Case Nobody Makes by Bill Smead of Smead Capital Management
We feel compelled to make a US stock market bullish case which feels as good to this writer as avoiding tech stocks did in late 1999. It is so lonely that it is divine. Andy Grove, former Intel CEO, college prof John Maynard Keynes said, ?When everyone knows that something is so, it means that nobody knows nothin?.? We believe the majority has put their assets into investments that will provide defeat, insecurity and failure. Out of this comes a very optimistic bull case which is available to those who have courage to look foolish in the short run and avoid today?s popular asset allocation.
2011-05-18 Oman by Mark Mobius of Franklin Templeton
I recently visited Muscat, the capital of Oman. Oman has a very strategic position in the Middle East, controlling the tip of the Musandam peninsula even though the peninsula is separated from the rest of Omanby land belonging to the United Arab Emirates (UAE). That tip points right into the Straits of Hormuz, which is the choke point for oil leaving Saudi Arabia, Qatar, Iran, Kuwait, Iraq and the UAE from the Persian Gulf to the Arabian Sea, leading to the Indian Ocean. On a clear day, you can see Iran from the tip of the peninsula. Oman?s military, therefore, has to protect that waterway.
2011-05-17 Pippa Malmgren on Inflation and its Geopolitical Impact by Robert Huebscher (Article)
The Cold War may have been over for a quarter century, but the inflation-driven challenges that characterized that historical era are heating back up. Today, global volatility is back, according to Pippa Malmgren, who says that commodity-driven inflation will lead to political instability in emerging markets.
2011-05-17 Inflation What Me Worry? by Scott Brown of Raymond James Equity Research
Despite rampant hysterics about "runaway inflation" in recent months, core inflation has remained at a moderate level, inflation expectations remain well-anchored, and there is little inflation pressure coming through the labor market. Is it time to declare victory? Not just yet, but the inflation outlook still does not appear to be particularly troublesome.
2011-05-13 Visiting a West African Gold Mine by Frank Holmes of U.S. Global Investors
This week I?m back on the continent of Africa. Along with 20 analysts from investment firms around the world, I spent a total of 17 hours traveling to Tasiast, Mauritania, kicking the tires and checking out Kinross Gold?s open pit operations there. Kinross is among the top 10 gold mining production companies in the world. According to the CPM Gold Yearbook 2011, the company produced 2.2 million troy ounces of gold in 2009, nearly 3 percent of the world?s total.
2011-05-13 Market Turbulence Increasing by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
We are entering a traditionally tough period for the market and economic data has been raising questions about the sustainability of the recovery. While still optimistic on the longer-term outlook, there could be more choppiness in the near term as markets adjust to a changing environment. The Fed continues to buck the global trend by maintaining loose monetary policy, which contributed to a weaker dollar. But lately the dollar has gotten a lift as QE2 comes to an end, contributing to a rout in commodity prices.
2011-05-13 Three Reasons to Believe in $100 Oil by Frank Holmes of U.S. Global Investors
After selling off nearly 14% last week, oil prices finished this week slightly higher at $99.65 per barrel. While the end result was a net positive, the volatility continued. Oil reached $104/bbl, then fell to around $96, before nesting just below $100. As an investor, this volatility can be difficult to handle. Throw in the uncertainty of today?s geopolitical environment, and investors feel the need to downsize their positions in commodity investments, such as oil. Markets could remain volatile in the short-term, but here are three long-term indicators to support $100+/bbl oil prices.
2011-05-10 Emerging Europe: Economic Review by Team of Thomas White International
The International Monetary Fund in its latest report observed that the economic recovery in Europe as a whole is proceeding modestly. However, the agency noted that the pace of growth varied substantially across countries in the region. The large emerging European economies in the region are performing at or above capacity, according to the agency. Preliminary data showed that the Euro-zone economy expanded at a better-than-expected pace in April, allaying concerns that the recent rate hike by the European Central Bank would strengthen the euro and slow down German export growth.
2011-05-10 Developed Europe: Economic Review April 2011 by Team of Thomas White International
A widely anticipated European Central Bank (ECB) rate hike and Portugal?s plea for a bailout in early April failed to dampen investor optimism surrounding the steady, albeit fragile recovery in Developed Europe. However, around mid-April, equity indices in the region did register a sharp fall in response to the news of another jump in the Euro-zone inflation rate, but recovered quickly to remain in an uptrend for the rest of the month. After recording its highest level for 28 months in February, inflation in the Euro-zone climbed further to 2.7 percent year-on-year in March.
2011-05-10 Middle East/Africa: Economic Review April 2011 by Team of Thomas White International
According to research by the World Bank, unrest in the Middle East and North Africa has affected economic growth in the region, which previously had been expected to zoom upwards in 2011 until the turmoil began. In its economic forecasts in January, the World Bank had projected that the region, which had come out of the 2009 global recession, would enjoy a rise in gross domestic product (GDP) from 3.3 percent in 2010 to 4.3 percent in 2011. In stark contrast now, some of the affected countries like Egypt will have a growth rate as low as one percent.
2011-05-07 Don?t Turn Out the Lights on Commodities Just Yet by Frank Holmes of U.S. Global Investors
The prices for many commodities suffered the worst week in recent memory this week. Oil prices dipped below $100 per barrel, gold fell below $1,500 an ounce and silver gave back much of the past month?s gains by falling to the $35 an ounce level. The prices for other commodities such as sugar, tin, nickel, aluminum, lead and copper also pulled back. Immediately, headlines on websites such as Marketwatch, Bloomberg and SmartMoney read ?Has the Commodity Bubble Popped?? and ?Imploding Commodities Complex.? In our opinion, not likely.
2011-05-05 Corn Price Increases Tell a Story About Why Commodity Prices Are Rising by Team of American Century Investments
In case you haven?t been watching, the price of corn for delivery in July (a futures price set on the Chicago Board of Trade) rose 35% just in the month of April from $216 to $293 per metric ton. As both a commodity and agricultural product, the demand and pricing of corn can provide interesting insights into whether inflation is rising, why and (if so) what factors are driving it. In this Weekly Market Update, we?ll take a look at the market dynamics for corn, what is driving recent price increases and how this is likely to unfold over the remainder of this year and beyond.
2011-05-02 Schwab Market Perspective: Making Sense of a Mixed Bag by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season is winding down and is largely positive and CEO confidence is high. This points toward a continued improving labor outlook but could mean more grinding in the stock market. Housing remains moribund but the market seems to be largely dismissive. A ratings warning on US debt rattled the stock market but bond markets were relatively unmoved. Issues need to be addressed, but they are more likely to affect money flowing into the economy and highly unlikely to result in failure to pay obligations. Meanwhile, the Fed is striving to communicate more effectively-but about what?
2011-04-29 Coal Use in China Shines Light on Growth by Frank Holmes of U.S. Global Investors
International coal prices hit $124 per ton this week, the highest levels in five months, as strong demand from reconstruction projects in Japan and reduced supply from flood-ravaged Australia has made coal supply tight. The floods in Queensland, Australia cut the country?s output of coal by 15 percent and other big coal producers such as Indonesia, South Africa and Colombia are experiencing similar production cuts due to floods of their own.
2011-04-26 Why Demographics will Drive Global Growth by Sam Parl (Article)
When economic pundits trade heated predictions about the massive economic shifts we see internationally, it is easy to forget the subtleties that shade their forecasts. One such shadow overhanging any intelligent debate about our global economic future is global age demographics, according to Harvard Professor Richard Cooper.
2011-04-26 Portfolio Strategy by Bradley Turner of Chess Financial
At the outset of the second quarter, the major trends that have shaped our portfolio strategy since last summer remain largely intact. These include: A global economy that is experiencing a two-track recovery. Growth in the developed markets is generally subdued while growth in the emerging markets is more robust. Inflationary pressures continue to build as evidenced by price increases in many commodities, notably food and oil. Interest rates have begun to move higher, either due to central bank actions (e.g., China, India) or specific country risks (e.g., Portugal).
2011-04-26 Africa: Challenges and Outlook by Mark Mobius of Franklin Templeton
In this post, I will discuss what I think are Africa?s key challenges. Corruption is a major problem in Africa. However, accusations of corruption against African governments could also be lodged against entities in the developed world that seek to buy the influence of these governments. One important development has been the Cardin-Lugar amendment to the Dodd-Frank finance reform bill in the U.S., requiring that oil, natural gas and mining companies registered on the New York Stock Exchange disclose any payment made to a foreign government for the purpose of the commercial development.
2011-04-25 The Greatest Speculators by Brian S. Wesbury and Robert Stein of First Trust Advisors
It?s as predictable as birds flying south in the winter. When gas prices rise, politicians (most recently, President Obama), feign outrage and then threaten to ?investigate? the ?speculators.? The irony is that these politicians are the real speculators ? making a bet that they can use government to create wealth. No government in the history of the world has made it work, but they keep on trying ? with other people?s money. In one sense, this is all about economic and financial literacy. Of course there are investors who speculate on energy prices. Thank goodness.
2011-04-25 Yemen: Different Sort of Story by Douglas Clark Johnson of Codexa Capital
Yemen may now be worth a second look by the private sector, with the pending departure of Ali Abdullah Saleh from office. While the country?s distorted economy puts limits on growth, its international context could soon take a more constructive turn. The key is broad-based GCC participation in the economy, something that was never seriously on the table while President Saleh was in office.
2011-04-21 Equity Investment Outlook by Team of Osterweis Capital Management
The bifurcation of the market, with small caps outperforming large caps, has led to a valuation disparity between overvalued small caps and undervalued large caps, which we believe can be profitably exploited. We, and others, have observed for some time that many excellent, growing large cap stocks are quite cheap relative to both the overall market and to more richly priced smaller companies. We expect that, over time, more investors will agree and large cap stocks may then begin to outperform the general market, as they have to a modest extent this year.
2011-04-21 Banking Sector in India: Counting on Credit Growth by Team of Thomas White International
In 2008, when the global banking industry was being shaken by the tremors of the unfolding financial crisis, only one bank in India felt the aftershocks, and this, only because one of its overseas subsidiaries had made an opportunistic bet on debt issued by the failed investment bank Lehman Brothers. While the market valuations of all the leading banks in India slipped as equity prices tumbled, their businesses were not affected and their balance sheets remained healthy. Most domestic commentators continue to hold up this as evidence of the inherent strengths of the Indian banking industry.
2011-04-21 Equity Market Review and Outlook by Richard Skaggs and Thomas Davis of Loomis Sayles
The global equity bull market continued in the first quarter despite significant global strife. Most major US indices posted total returns of about +5.0% to +8.0%. Continuing the trend since the March 2009 low, small cap and mid cap stocks outperformed their larger brethren. US markets were among the best in the world, although the MSCI World Index also posted a solid gain of 4.9%. Emerging markets were among the weaker equity asset classes. As the returns demonstrate, however, emerging market stocks remain the winners by a wide margin over the past five- and ten-year periods.
2011-04-21 Africa: Opportunities in Nigeria, Ghana and Kenya by Mark Mobius of Franklin Templeton
Those who are optimistic about Africa say that after many years of colonialism, it is beginning to demonstrate its potential. The continent does have its detractors, who say that while it may have been free of colonial rule for 60 years, the continent continues to battle poverty, corruption, AIDS and armed conflict. However, while Africa does have challenges, I am encouraged by another side of Africa that is gradually emerging with the development of capital markets, consumerism and technology.
2011-04-19 Managing Exposure to Extreme Markets by Geoff Considine (Article)
Volatility in the equity markets has subsided, courtesy of a strong bull market and fading memories of the 2008 financial crisis. Risks remain, however, ranging from the turmoil in northern Africa to sovereign debt instability in Europe. Investors can take advantage of the complacency in the equity markets by purchasing inexpensive insurance against adverse events.
2011-04-19 The Bell Tolls in Washington by Chris Maxey of Fortigent
Earnings season brought about a week of choppy trading in the equity market, resulting in the S&P 500 index falling 0.6% and the Dow Jones Industrial Average dropping 0.3%. Economic data throughout the week was mixed, but the impact of higher gas prices is being felt across the economy. Small businesses recorded a severe hit to sentiment last month after the small business optimism index sank from 94.5 to 91.9. A host of concerns, from declining sales expectations to trepidation about the future of the economy, were culprits behind the weakening.
2011-04-19 Emerging Europe: Economic Review March 2011 by Team of Thomas White International
Upbeat forecasts from the European Commission as well as stable financial and economic conditions in European economies indicated that the recovery is on track in the region despite the tragic developments in Japan, increasing oil prices, and the continuing political unrest in the MENA region. Equity markets also seem to be signaling that the sustained pace of global economic recovery will offset these developments. The decision by seventeen Euro governments to strengthen the ?440 billion rescue fund and to lower interest rates on Greece?s bailout helped allay fears of a lingering debt crisis.
2011-04-19 Developed Europe: Economic Review March 2011 by Team of Thomas White International
Despite several discouraging developments in March, such as the fighting in Libya, the tsunami devastation and nuclear scare in Japan, as well as the resignation of the Portuguese prime minister, Developed Europe stabilized, following an initial bout of volatility, seemingly shrugging off these events and, instead, focusing on the positive economic data from the region. Portugal?s sovereign debt crisis has been simmering for a while now, and given the scale of the country?s problems, the latest setback was not exactly a surprise to investors.
2011-04-19 Americas: Economic Review March 2011 by Team of Thomas White International
The economic repercussions to the Americas region from Japan's earthquake are expected to be limited. Though Japan is a large trading partner the percentage share of Japan in their total external trade is low. However, some of the large manufacturers, especially in electronics and automobiles, may face slower output because of shortage in supplies from Japan. Similarly, the escalation of political unrest in the MENA region, have not yet caused a flare up in energy prices. Though retail prices of gasoline have risen, they are not considered high enough to cause damage to consumer spending.
2011-04-19 Middle East/Africa: Economic Review March 2011 by Team of Thomas White International
The turmoil in the Middle East region continues, with Libya exploding into civil war, and troops from the Gulf Cooperation Council being called in to suppress the protests in Bahrain. In terms of the economic repercussions, stock markets in the MENA are estimated to have lost around $140 billion in market capitalization during the last month. According to the Arab Monetary Fund, the market capitalization of 16 Arab bourses was valued at $862 billion on March 4, compared with $1.002 billion on January 25, a day before the political crisis in Egypt triggered upheaval across the Middle East.
2011-04-16 Will China's Economy Overheat? by Frank Holmes of U.S. Global Investors
China?s GDP growth continued at a blistering pace during the first quarter of 2011, rising 9.7 percent from the previous year. Once again this outpaced many forecasts and reignited the discussion of China?s overheating economy. While its robust growth may raise a few eyebrows, the economy isn?t in danger of ?red-lining.? Andy Rothman points out that the first quarter growth figures ?[aren?t] dangerously high given the GDP growth rate and strong income growth? After rising nearly 8 percent during 2010, inflation-adjusted urban incomes rose 7.1 percent during the first quarter.
2011-04-16 Inside Information by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season gives an 'insider' look at economic growth. Businesses see and react to changes in the economy before the broader macro data show a clear trend. The Fed has floated some trial balloons about reining in its extremely accommodative policies, the time for which is overdue. Budget issues remain a problem at all levels of government, but likely wont derail the recovery at this time. Despite ongoing debt problems in peripheral European nations, the ECB hiked interest rates. Europe still faces significant issues that make it more likely to underperform other areas of the world.
2011-04-15 Concerned About Inflation? by Brad Sorensen of Charles Schwab
Inflation has become a bigger topic of discussion among investors and in the media as of late. While we have noted in numerous publications that we don?t believe inflation is a near-term concern due to a number of factors, investors are wondering how to position themselves should inflation start to take hold. First, despite common perception, gold has not historically been a very good hedge against inflation. Due to the possibility of gold prices being a bit extended after the recent run, we don't recommend gold as an investment for those concerned about inflation.
2011-04-14 Spring Quarterly Commentary by Alan T. Beimfohr and John G. Prichard of Knightsbridge Asset Management
Just when the bull market was heating up, world events conspired to take it back down. It has been said that stock purchases are made with logic and stock sales made with emotion. Monsieur Pascal expressed similar thoughts a century-and-a-half prior to the founding of the NYSE. In the first quarter, the MENA (Middle East North Africa) rebellions followed by the Fukushima Dai-Ichi nuclear problems provided the rationale for reassessment of risk. Although this reassessment resulted in a 7% correction, by quarter?s end virtually all had been recovered.
2011-04-14 Pacific Basin Market Overview by Team of Nomura Asset Management
Asian equity markets began the year in a particularly volatile state as they came to terms with regional inflationary pressure, unrest in the Middle East and North Africa, and the natural disaster in Japan. Notwithstanding these negative factors, most markets in Asia rebounded in late March to end the quarter on a positive note. The MSCI AC Asia Pacific Free Index including Japan, however, decreased by 1.4% in the first quarter of 2011, while the MSCI AC Asia Pacific ex Japan Free Index increased by 1.5%.
2011-04-13 Finding the Energy to Succeed by Christopher J. Singleton of Kanawha Capital Management
In early March, the bull market marked its second anniversary. Stocks have rebounded from their lows of 2009, but not without some big gyrations along the way. Last spring, the rebound was briefly yet violently interrupted by fears of an economic reversal. This year we have also experienced some volatility, although the catalysts are different. The pullback in 2010 stemmed from concerns about job growth and the European debt crisis. Those fears have largely been supplanted by others. Today, the speed bump relates to the unrest in North Africa and the Middle East and the surge in oil prices.
2011-04-13 Fixed Income Investment Outlook by Team of Osterweis Capital Management
Investors sometimes walk a fine line between either over-reacting to temporal changes, which ultimately don?t have a lasting impact on either the economy or the markets, or underestimating the impact of real risks that can bring about lasting and meaningful changes. Currently, the main areas of concern are the Japanese triple disaster, the Middle Eastern/North African ?Arab Spring,? and inflation. While we do not believe the Japanese and Middle Eastern situations pose a real threat to financial markets long term, we do believe inflation may.
2011-04-12 Seizing The Narrative by Scott Brown of Raymond James Equity Research
Later this month, Bernanke will hold his first post-FOMC press conference. The press conference is meant to present the Federal Open Market Committee's current economic projections and to provide additional context for the FOMC's policy decisions. The real goal is to reclaim the narrative. The Fed was caught off guard by the criticism and second guessing it received in 2010. These press conferences should help clear things up regarding monetary policy not that well receive clear signals of future Fed policy moves rather, well get information on how the Fed will decide what to do.
2011-04-12 Equity Market Review & Outlook by Richard Skaggs and Thomas Davis of Loomis Sayles
The global equity bull market continued in the first quarter despite significant unrest across parts of Northern Africa and the Middle East, a massive earthquake in Japan, sovereign debt issues in Europe, and inflationary pressures in certain emerging economies. US markets were among the best in the world, although the MSCI World Index also posted a solid gain of 4.9%. Emerging markets were among the weaker equity asset classes. As the returns demonstrate, however, emerging market stocks remain the winners by a wide margin over the past five and ten year periods.
2011-04-11 Bond Market Review & Outlook by Thomas Fahey, Teri L. Mason and David W. Rolley of Loomis Sayles
The power of easy money policy to dampen volatility is evident in the global bond markets. There has not been any systemic credit spread widening or major jump in risk aversion on the back of the significant political upheaval or natural disaster. The collective investor conclusion seems to be that the impact of the losses will not derail global growth, and Japanese reconstruction may even contribute to it later this year. Specifically, Chinese growth still looks on track for a strong year, and labor markets in the US have at last begun to show something like a normal recovery.
2011-04-11 Despite Near-Term Risks, Stocks Remain Resilient by Bob Doll of BlackRock Investment Management
The preponderance of the economic and market-related news skewed to the negative last week, with an additional earthquake in Japan, rising oil prices, an interest rate hike by the European Central Bank (ECB), escalating debt problems in Europe and increasing noise about the since-averted potential federal government shutdown. Despite this backdrop, however, US equities remained resilient and were roughly flat for the week, with the Dow Jones Industrial Average up marginally to 12,380, the S&P 500 Index down 0.3% to 1,328 and the Nasdaq Composite down 0.3% to 2,780.
2011-04-08 Important Recent Developments by Louis-Vincent Gave of GaveKal
It seems obvious to us that we are approaching a tipping point. The rise in commodity prices and risk assets does not seem to be compatible. Neither does the rise in commodity prices, equity prices, and inflation expectations and overly easy central banks. The recent surge in certain currencies to two standard deviations above their purchasing parities should also have economic consequences. So the situation does not seem stable from a bottom-up perspective. And from a top down perspective, it seems obvious that the recent period of exceptionally easy fiscal policies should come to an end.
2011-04-08 Near-term Outlook For A Troubled World by Victoria Marklew, Richard Thies and James Pressler of Northern Trust
Although 2011 is only three months old, the world has changed dramatically. Along with the evolving European debt crisis, seemingly -isolated Tunisian protests grew to varying levels of upheaval throughout the Arab world, and an historic earthquake and subsequent tsunami have left Japan?s outlook under a cloud of uncertainty. Each of these situations is significant in its scope and magnitude, but by focusing on just the key elements, the main risks can be appreciated.
2011-04-08 Why High Oil Prices Are Likely Here to Stay by Frank Holmes of U.S. Global Investors
A number of forces continued to push oil prices higher this week, reaching their highest levels in the U.S. since September 2008. One factor fueling the run has been the continued decline of the U.S. dollar. Oil and the dollar historically are negatively correlated. This means that a rise in oil prices generally coincides with a decline in the dollar, and vice versa. The U.S. dollar has seen a dramatic decline since the beginning of the year as oil prices have moved some 30 percent higher. This could be due to fact that roughly two-thirds of the U.S. trade deficit is related to oil imports.
2011-04-07 China Part II ? Looking Beyond Its Shores by Mark Mobius of Franklin Templeton
China?s latest 5 Year Plan is focusing on growing the domestic economy with a focus on harmony. A lot of the foreign investments and the large capital inflows into the Chinese market have all been focused on tapping into one of the world?s largest consumer markets. However, what many are missing is that China is the world?s fifth largest investor in terms of outbound direct investment at about US$56.5 billion in 2009. Last December, China announced US$16 billion in deals in India and this year, Chinese officials pledged to purchase as much as 6 billion Euro worth of Spanish gov bonds.
2011-04-06 Let Them Eat Crude by Robert Stimpson of Oak Associates
World events over the past month have received a lot of media attention, but few accounts have emphasized the long-term effects on equity markets. The revolts in Tunisia, Egypt, Libya, unrest in Bahrain and Yemen, and the earthquake in Japan are significant for equity investors going forward. While most of the media have focused on the human aspect of the events, the influence of food inflation, rising oil prices, and the state of the US dollar have been overshadowed by the regime changes and nuclear disaster in Japan.
2011-04-06 Sell in April and Go Away? by Monty Guild and Tony Danaher of Guild Investment Management
Heading into April 2011, we thought it timely to hoist up for consideration a point in stock market lore that says sell in May and go away. According to the Stock Traders Almanac, the market has been strongest over the years from November 1 to April 30. That stretch of time has seen average returns of 9.2 percent from the Dow Jones Industrial Index since 1950 compared to an average loss of 1.2 percent from May through October. By this standard, the current surge in the markets that took off at the beginning of September 2010 is a good bit ahead of schedule.
2011-04-05 Two Critical Lessons from Japan An End-of-Quarter Letter to Clients by Dan Richards (Article)
Given recent events in Japan and North Africa, many clients are looking to their advisors for direction on what they should do. This template for an end-of-quarter letter is intended to be a starting point for your letter to clients.
2011-04-02 Above the Fray by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Attacks on Libya and recovery efforts in Japan have dominated the headlines, but behind the scenes US economic growth remains solid and we remain optimistic on the stock market. Commodity prices have backed off a bit and the Fed is likely to see QE2 through to its June 2011 end. Of particular concern is the unwillingness or inability for Congress to agree on a budget that addresses the growing deficit issues in the US. Japan has a significant debt burden with which to deal as it rebuilds, while Europe is struggling to come up with a comprehensive plan to deal with the eurozone debt crisis.
2011-04-02 Expert Roundtable on Inflation: Should You Be Worried? by Mark W. Riepe, Liz Ann Sonders, Rob Williams, Michael Iachini & Brad Sorensen of Charles Schwab
Inflation is a rise in the general level of prices of goods and services; your money buys less. With oil and other commodity prices rising, the Federal Reserve's current easy monetary policy and the economy picking up, many investors are worried about inflation. Mark Riepe, head of Financial Research and president of Charles Schwab Investment Advisory, led a roundtable discussing why Wall and Main Street may have different perspectives on inflation. The roundtable also covers our inflation outlook, ways to protect your investments and inflation-savvy investments you might want to consider.
2011-04-01 The Bedrock of the Gold Bull Rally by Frank Holmes of U.S. Global Investors
Naysayers started calling gold a bubble back when prices hit $250 an ounce and though gold?s bull market has tossed and flung the bubble callers around for almost a decade now, their voices have only gotten increasingly louder as prices broke through $1,000, $1,200 and now $1,400 an ounce. However, gold prices appear asymptomatic of the signs generally associated with financial bubbles.
2011-03-31 Why Africa, Why Now? by Larry Seruma of Nile Capital Management
There are a number of reasons that Africa is an excellent investment opportunity ? Nile discusses a few that highlight why now is a good time to invest in African markets.
2011-03-30 Syria: The Latest Victim of the Arab Spring by Maya Senussi and Rachel Ziemba of Roubini Global Economics
Though Syria previously looked relatively sheltered from unrest elsewhere in the region, protests, now in their second week, are shaking the legitimacy of President Bashar al-Assad's regime. The violence perpetrated by security forces is likely to undermine promises of reform and political change, putting a question mark over the ultimate survival of the regime. The biggest rallies have taken place in the impoverished southern city of Dara?a. However, the uprising has spread to bigger cities around the country, including Damascus, Aleppo, Latakia, Homs and Hama.
2011-03-30 Middle-Class Middleweights to be Growth Champions by Frank Holmes of U.S. Global Investors
Over the next 15 years, the number of children in middle-class households in emerging market cities around the world may grow 10 times faster than those in developed countries. This future generation living in places such as China, Latin America and South Asia should drive the demand for goods and services, housing and transportation that extend beyond the basic necessities of life. In McKinsey's report, ?Urban world: Mapping the Economic Power of Cities,? the researchers focus on demographic and economic trends to determine which cities will provide the most economic growth in the future.
2011-03-28 The Shorts Get Whipsawed by the VIX by Brian S. Wesbury and Robert Stein of First Trust Advisors
Getting to fair value would require the US equity markets to rise 31% from Friday?s close. That assumes no further gain in profits after Q1. These results are pretty robust. If we stress test for rising rates, the 10-year Treasury yield would need to rise to 6.5%, with no intervening increase in profits for the model to show equities are at fair value already. We stand by the forecast we made at the start of the year that the Dow should hit 14,500 by year-end 2011, while the S&P 500 strikes 1575. In other words, short the shorts ? equities are still cheap. And watch out for the VIX, too.
2011-03-28 Equities on the Rise Despite Geopolitical Risks by Bob Doll of BlackRock Investment Management
Risk assets (and equities in particular) powered to a strong week of gains, with the Dow Jones Industrial Average climbing 3.1% to 12,221, the S&P 500 Index advancing 2.7% to 1,314 and the Nasdaq Composite rising 3.8% to 2,743. Although a number of near-term risks remain (particularly related to the unpredictability of escalating unrest in the Middle East), we maintain our view that equity markets are likely to continue their longterm trend of outperformance.
2011-03-26 Unintended Consequences by John Mauldin of Millennium Wave Advisors
Governments around the world need to be alert and make difficult choices to deal with a world excess liquidity. From an investor?s point of view, enjoy the current ride in emerging markets but recognize that they are high beta to the U.S. economy and stock markets. The next time the United States goes into recession?and there will be a next time?it is likely that emerging markets will suffer significant losses. So, emerging markets are a trade and not a long-term investment.
2011-03-25 Profit Margin Squeeze and Inflation Risk by Doug Short of Doug Short
A major risk factor for margin squeeze is the increase in commodity prices over the past several months. The latest turmoil in the North Africa and the Middle East has now put oil prices in the spotlight. At present, in light of the unemployment rate and the ongoing demographic shift, the rise in commodity prices probably poses more risk of margin squeeze than run-away inflation. Some degree of cost-push inflation may be a near-term risk, but the demand-pull inflation we saw in the 1970s is difficult to evision in the US economy of this decade.
2011-03-25 Unrest and Turmoil = Rising Oil Prices by Monty Guild and Tony Danaher of Guild Investment Management
Nine of the eleven nations sharing land or water borders with Saudi Arabia (SA0 have had demonstrations. Trouble is likely to surface in SA because much of the country?s wealth is located under lands where Shia Muslims are in the majority. The ruling House of Saud is Sunni Muslim. The distrust and bad blood between the two sects predates oil discovery and is not likely to be solved with oil money. The political events are about freedom from repression but also represent a basic struggle between these two Muslim groups for control of revenues from the huge oil fields in that part of the world.
2011-03-25 What's Driving Russia's Outperformance? by Frank Holmes, John Derrick and Tim Steinle of U.S. Global Investors
All ten sectors of the S&P 500 Index increased this week. The best-performing sector for the week was energy which rose 4.08 percent. Other top-three sectors were technology and materials. Financials was the worst performer, up 0.50 percent. Other bottom-three performers were utilities and healthcare.
2011-03-24 Revolution is in the Air: What Upheaval in the Middle East Means for China by Edmund Harriss of Guinness Atkinson Asset Management
The long term growth story in China and Asia remains unchanged. Economic reform and liberalization accompanied by investment and rising wages are creating consumer markets in the world?s most populous region. Higher oil prices inevitably hurt a region that is based so heavily on manufacturing and has a high dependency on imported oil, but this will not result in sustained damage to the economic model. The region?s finances are strong both at the national and at the corporate levels. After good stock performance in both 2009 and 2010 we believe this could provide a good entry opportunity.
2011-03-23 As The World Turns by Scott Brown of Raymond James Equity Research
Japan?s earthquake/tsunami/nuclear tragedy and heightened tensions in the Middle East and North Africa have led to some concerns about the global economy, and in turn, the strength of the U.S. recovery. A weaker Japanese economy and supply-chain disruptions are detrimental to U.S. growth, but moderately and only short-term in nature. Developments in the Middle East and North Africa are more uncertain, but are likely to keep oil prices relatively elevated. None of this is expected to jeopardize the U.S. recovery, but it could keep growth from being as strong as was hoped for just a month ago.
2011-03-22 Emerging from Developed Profit Pools by Gregory A. Nejmeh of HS Management Partners
Much has been debated about the anticipated growth of the emerging markets and the tectonic shifts in political, economic and military force that such changes may yield. While the implications are significant, we are also mindful that economic activity in developed markets not only make them worthy of investor attention, but provide the stability of cash flows that will facilitate multinationals ability to invest in developing markets. We take a holistic perspective and appreciate the size and scope of developed market profit pools as a means of self funding developing economic participation
2011-03-21 This Is, Because That Is by John P. Hussman of Hussman Funds
The market action of the past two weeks contrasts with the generally uncorrected advance of recent months. I suppose it's possible for investors to characterize the recent decline as a "panic" if they press their noses directly against their monitors, but in that case, they really do have a short memory. The pullback has been negligible relative to the action of the past several months, and is indiscernible in the big picture. As of Friday, the market remained in an over valued, bullish, rising-yields syndrome that has typically been cleared much more sharply than anything we saw last week.
2011-03-21 Equity Market Bounce-Back -- Don't get Too Excited by David A. Rosenberg of Gluskin Sheff
Between the put-to-call ratio and the 40% share of stocks trading below their 50-day moving average, the U.S. stock market became hugely oversold. Plus we had the skew from the quadruple-witching session. And the cease-fire announced in Libya and the FX intervention to reverse the yen?s strength provided some fodder for the shorts to cover. But trend lines have been broken, portfolio managers have little cash to work, and according to a ML-BAC survey, we had a net 67% of global portfolio managers overweight equities against their position. Plus, the world is still a very uncertain place.
2011-03-21 Saudi Arabia: More Secure Than It Appears by John Browne of Euro Pacific Capital
As revolution spreads throughout North Africa and the Middle East, many fear that the forces that toppled regimes in Tunisia, Egypt, and possibly Libya, will spread to the Gulf oil states, particularly Saudi Arabia. The specter of radicalized Islamist elements taking control of the world?s second largest oil producer is a justifiably harrowing prospect. However, Saudi Arabia?s political dynamics are very different from the Middle Eastern states that are in revolt. Understanding these forces should assure us that a doomsday scenario is unlikely.
2011-03-19 Middle East Politics and Oil: The Influences on Global Interest Rates, Credit Spreads & Stock Prices by Tom Fahey, Ryan McGrail, Richard Skaggs and Joseph Taylor of Loomis Sayles
The market has added a substantial risk premium to the price of oil given the unrest in the Middle East and North Africa. Prices have increased by more than 20% since December 2010; half of that increase occurred during the past three weeks in reaction to unrest spreading to Bahrain, one of the Gulf States. Market participants have raised their probability calculations for black swan events. There may be excess pessimism in the market, as reflected in increased concerns about unrest spreading to the other Gulf States. Those concerns are potentially overblown.
2011-03-19 How the VAR Model and Japan?s Tragedy Affect Investors by Frank Holmes of U.S. Global Investors
The threat of disaster from the damaged Fukushima nuclear power plant unleashed a ferocious sell-off of Japanese equities, but the damage to other major markets has been limited. Already experiencing a slight pullback prior to the events on March 11, U.S. equities and emerging markets have held up quite well. The MSCI Emerging Markets Index has only pulled back 2 percent since the earthquake and the S&P 500 Index only 3 percent.
2011-03-19 Japan: An Update by Joshua Demasi of Loomis Sayles
Globally, the crisis could lead to higher food and energy prices: Japan will not be contributing to the global food supply, its oil imports have been increasing, and a shift from nuclear energy to gas and other sources is plausible. We believe that in isolation, the turmoil in Japan will have a negligible impact on global GDP; however, if oil prices and unrest in the Middle East and Northern Africa were to accelerate markedly, the confluence of events could hamper global economic recovery.
2011-03-18 Has the Game Changed? by David A. Rosenberg of Gluskin Sheff
An object at rest will remain at rest unless acted on by an unbalanced force. An object in motion continues in motion with the same speed and in the same direction unless acted upon by an unbalanced force. This is otherwise known as Newton?s first law of motion. In market parlance, this implies that a trend remains in force until such time as an exogenous shock causes it to either stall or reverse. Economic, geopolitical, and natural disaster events aside, equity markets around the world have definitely broken their intermediate-term uptrend.
2011-03-17 Could Gasoline Price Increases Affect the Economic Recovery? by Team of American Century Investments
The recent political uprisings in N. Africa have had a major impact on oil and gas pricing here in the U.S. Increases in energy prices have a negative impact on consumer disposable income and confidence, not just in the U.S but globally. When gasoline prices spiked in July 2008, consumer spending posted its biggest one month decline since September 2001. Higher energy prices also contribute to increases in the overall rate of inflation. These are risk factors in terms of sustaining our current economic recovery, bringing down unemployment, and continuing to drive growth in corporate earnings.
2011-03-17 Focus on Japan Overshadows Fed Decision by Brad Sorensen of Charles Schwab
To no one's surprise, the Fed kept interest rates at near zero and maintained its scheduled purchases of Treasury securities (also known as quantitative easing, or QE2). We're growing more concerned that the Fed is keeping interest rates low for too long, leading to potential problems down the road. With the market currently reacting to the tragedy in Japan and the ensuing market volatility, it's important to avoid acting hastily.
2011-03-17 Forgetful by Doug MacKay and Bill Hoover of Broadleaf Partners
The S&P 500 fell by roughly 16% from April to July last summer, and then moved sideways until people started to discount the prospects of the Fed engaging in QE2. As the markets picked back up following the recognition that the Fed would stay easy given high unemployment and very little inflation and the elections afforded a more balanced political agenda, leading economic indicators began to follow suit, the economy firmed once again, and the stock market finished up 15% for the year. Today, the situation, while different, nevertheless rhymes.
2011-03-16 Special Update?A Word on Japan by Milton Ezrati of Lord Abbett
No one pretends to know what the immediate future holds, not even Japan?s nuclear engineers. Fear that has caused a general sell-off in markets. The huge uncertainty has raised risk premiums and sent investors for a time in the direction of safe havens, such as government bonds though Europe's particular problems compound the uncertainty about European sovereigns in this regard. The weight of uncertainty has fallen hardest on stocks connected to the nuclear industry. There is a need for investors to look beyond the immediate emergency to at least seven basic points:
2011-03-12 Domestic Equity Market by Frank Holmes of U.S. Global Investors
The figure below shows the performance of each sector in the S&P 500 Index for the week. Four sectors increased and six decreased. The best-performing sector for the week was utilities which rose 1.5 percent. Other top-three sectors were telecom services and consumer staples. Energy was the worst performer, down 4.0 percent. Other bottom-three performers were materials and technology. Within the utilities sector the best-performing stock was Constellation Energy Group which rose 6.8 percent. Other top-five performers were Exelon, First Energy, DTE Energy, and Duke Energy.
2011-03-12 Volatility on the Rise by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Geopolitical unrest and rising inflation concerns have conspired to increase market volatility. We remain bullish on US stocks and believe that this recent increase in consternation will ultimately be healthy for stocks. The US government keeps kicking the debt can down the road, while the Fed seems unconcerned about inflation and is intent on completing QE2. We believe changes are needed at both entities to foster sustainable economic growth. The European debt crisis is bubbling up again, while the ECB is talking interest-rate hikes. Future growth depends on the path of both issues.
2011-03-11 The Middle East: A Youthful Reawakening by Mark Mobius of Franklin Templeton
The upheavals in the Middle East and N.Africa can be attributed to rising food prices, unemployment, corruption and political stagnation. Unemployment has stayed high and waves of new young job seekers entering the labor market have not been absorbed. As in many emerging markets, the populations in MENA countries are young. Most politically explosive is that an increasing number of the unemployed are high school and university graduates. It is important to note that the recent protests have come not from the lowest income levels but from middle-class and educated Arabs seeking fair treatment.
2011-03-11 Middle East turmoil not yet a significant threat to the global economy by Team of Thomas White International
The political unrest spreading across the Middle East and the resultant disruptions to the regional economy are not considered very significant for the global economic prospects for this year. Though oil prices have reacted on fears of lower supplies from the region, there have been no actual disruptions so far and any perceptible deceleration in global economic growth is expected only if prices shoot up further. It is widely believed that, unless the agitations spread to the region?s major oil producers like Saudi Arabia, the prospect of a sustained upsurge in energy prices is limited.
2011-03-11 Middle East/Africa: Economic Review February 2011 by Team of Thomas White International
With countries led by autocratic rulers marred by stagnation in the economy, high unemployment rates and poor human rights records, protests in the region sparked off in classic ?domino effect? style. With rumblings being heard from countries like Iran, Syria, Jordan, Yemen and Morocco. The economic repercussions of the protests and the unseating of these regimes are yet to be calculated. The first obvious impact would be on oil prices. With the entire world economy hinging on the oil rich Middle East, the seismic shift in the political landscape of the region will be monitored closely.
2011-03-11 Europe: Economic Review February 2011 by Team of Thomas White International
Various data released in Feb. confirmed once again that the economic recovery in Europe is gaining momentum. Nevertheless, investor sentiment on the continent, and indeed everywhere in the world, remained largely subdued during the month due to the growing political uncertainty in the Middle East and N.Africa region. Since rising food, raw material, and crude oil prices have already pushed up inflation to worrying levels in most parts of Europe, the recent surge in oil prices amid the protests in Libya and some MiddleEastern countries eclipsed encouraging signals about the Euro-zone economy.
2011-03-10 Turmoil in the Middle East: Should It Have Been Predicted? by Team of American Century Investments
The turmoil began, when a young Tunisian college graduate immolated himself on December 17 after being harassed by police as he attempted to sell fruit on the street. Some claim the vendor, Mohamed Bouazizi, did not have the money needed to bribe police officials to continue peddling and earn a living. He died on January 4, sparking deadly demonstrations and riots throughout Tunisia (now called the Jasmine Revolution) in protest of social and political issues in the country. And just 10 days later, on January 14, President Zine El Abidine Ben Ali was forced to step down after 23 years.
2011-03-09 Fisher Could Dissent if Oil Prices Maintain Upward Trend by Asha Bangalore of Northern Trust
Dallas Fed President Fisher indicated yesterday that he would vote to scale back/discontinue the Fed's Treasury securities buying program of $600 billion at the March 15 FOMC meeting. Last week, Chairman Bernanke indicated that only under conditions of sustained growth, expanding payrolls, and inflation readings that are consistent with price stability would the Fed consider terminating the program. Economic data indicate that the Fed is not close to meeting these. In his opinion, the Fed's job "is done" and continued purchases of Treasuries may result in raising inflation expectations
2011-03-09 Jasmine Dreams in China? by Adam Wolfe of Roubini Global Economics
The ?days of rage? sweeping through the Middle East and North Africa have raised questions about the possibility of a similar movement erupting in China. At a glance, the ingredients for uprising appear to be present. Online calls for a ?Jasmine Revolution? in China resulted in a massive staging of security forces at the planned protest sites, which could be taken as a sign of the Communist Party?s insecure grip on power. Like several of the governments, China?s ruling elite is plagued by corruption and is preparing for a transfer of power.
2011-03-09 Readers? Questions Answered Part VI by Mark Mobius of Franklin Templeton
It?s been a while since I answered some readers? questions. Questions addressed: What are your main criteria when picking a sector and the company in a particular sector? Most of the small companies in India are family-owned. Does this create a problem? What are your thoughts on Africa? What is your view on the Baltic States? Which sectors do you think are the most interesting? What is your view on the Brazilian and the Mexican equity markets for 2011?
2011-03-08 Five Strategies for Older Clients by Robert Huebscher (Article)
What do a woman who volunteered with the Peace Corps in Africa, a teacher from Spanish Harlem who took up Samurai sword fighting, and a former IT manager who earned a medical degree at age 76 have in common? They are all part of a group that David Monday calls 'second-half champions.' Monday offers a five-part plan for building a practice that caters to today?s reinvigorated seniors.
2011-03-08 Consumer Confidence Turns Back Down by David A. Rosenberg of Gluskin Sheff
According to an RBC consumer outlook poll, one in three U.S. households is already ?significantly? cutting back on spending because of rising gasoline prices. And this was a survey taken at a time when the national average price at the pumps was around $3.20 per gallon ? wait and see what happens when it costs four bucks to fill up the tank ? that is the pain threshold for 41% of the consumer sector as per this poll.
2011-03-07 Random Post-Employment Thoughts and Consensus On Oil Impact by David A. Rosenberg of Gluskin Sheff
The consensus is that the U.S. labor market is healing. That may well be the case but the slack in the job market remains huge allowing for a structural rise in the unemployment rate. Only 15% of the recession job losses have been recouped despite the fact that expansion has surpassed the downturn. The consensus is that the world economy has gotten used to high levels of oil prices so this latest run-up in crude poses little risk to the economic outlook. But it is change that matters to growth, not levels. As for the macro impact, do not understate the potential for economic contraction.
2011-03-03 Equity Markets and Oil Prices by Asha Bangalore of Northern Trust
The turmoil in the Middle East and North Africa has led to higher oil prices. Brent crude oil was trading at $116.99 ($113.07 on 3/1/2011) as of this writing and West Texas Crude was quoted at $101.68 ($99.63 on 3/1/2011). The Libyan crisis has raised oil prices significantly in the last three trading days. The crisis in the region commenced the day after a Tunisian man set fire to himself on January 21, 2011.
2011-03-03 Emerging Markets Vision 2020 by Mark Mobius of Franklin Templeton
There will always be unforeseen factors and circumstances that might become catalysts for greater changes in the global landscape, as we have seen from the current unrests in the Middle East.. No one knows what will happen in the future, but below is some of what I envision for the emerging markets landscape in the next decade.
2011-03-01 Investment Commentary by Bob Doll of BlackRock Investment Management
Escalating turmoil in the Middle East and North Africa caused oil prices to spike higher last week and stock prices to fall. Oil prices went over the$100 a barrel mark and despite a late-week rally, stocks ended the week noticeably lower. In many ways, it could be argued that a stock market correction was overdue-before last week, the US stock market had gone 107 days before experiencing a peak-to-trough decline of 3.5%, a new record. Our long-term view is that while shortterm volatility is likely to persist, the growing geopolitical risks are unlikely to derail the global economic recovery.
2011-03-01 Differentiated Change in the Middle East and North Africa by Mohamed A. El-Erian of PIMCO
For two months, developments in the Middle East and North Africa (MENA) have taken most by surprise. What started as an protest in Tunisia has developed into a regional phenomenon that has toppled regimes and is threatening others. Indeed, every day seems to bring an historical event that is changing the region and impacting the global economy. Governments across the globe have spent weeks playing catch up in the midst of unthinkable developments in MENA. They have organized emergency evacuations of citizens and constantly responded to realities on the ground, including the violence in Libya.
2011-03-01 The Good, The Bad and The Ugly by David A. Rosenberg of Gluskin Sheff
The good: The manufacturing data in the U.S. continues to improve, at least within the confines of the major diffusion indices. The bad: The U.S. income and spending numbers were hardly stellar. It remains to be seen how much of the weakness was weather-related, but consumer spending dipped 0.1% in January ? the first decline since Apr 2010. The fact is that consumers kept a lid on their spending even with the fiscal windfall in Jan, pushing the savings rate up to a four-month high of 5.8% from 5.4% in both Nov and Dec. The ugly: The housing sector remains in the dumpster.
2011-03-01 The Absolute Return Letter by Niels C. Jensen of Absolute Return Partners
Two remarkable events unfolded during the month of February. One cleared the front pages all over the world. The other one barely got a mention - outside of its home country that is. Both have the ability to derail the economic recovery currently unfolding. The first one is not surprisingly the uprising in the Middle East and North Africa. The other one is perhaps less obvious; we are referring to the Irish elections. We take a closer look at both of those events and what the implications may be for financial markets.
2011-03-01 The 10% Problem by Nathan Rowader of Forward Management
Many investors continue to expect 10% returns ? but these days, are doing well if they earn 5%. They need to understand why major shifts in the global investment climate are challenging them to reset return expectations and reboot their plans. After six decades of double-digit average U.S. stock market returns, many American investors may have come to expect that they will earn similar returns going forward. And why wouldn?t they? From 1948 to 1978, for example, the U.S. stock market generated an average annualized total return of 10.7%.
2011-02-28 Stay Positive - It's The Right Thing To Do by Brian S. Wesbury and Robert Stein of First Trust Advisors
The gloom is hard to miss: Libya, oil prices, budget battles, a pull-back in stock prices, or downward revisions to GDP?and about how these will cause weaker growth (or even a recession) ahead. But the world is always full of potential events that could cause a panic, recession, even a depression. The world is never perfectly ?safe.? If nuclear war broke out or if Saudi Arabia got into a nasty civil war, the risks to the US economic environment and the stock market would rise immeasurably.
2011-02-28 When Inflation Fuels Deflation by Chris Maxey of Fortigent
Global macroecon concerns led to the sharpest weekly sell off in the S&P500 Index in three months. For the week, the S&P 500 Index was down 1.7% and the Dow Jones Industrial Average fell 2.1%. A multitude of catalysts were behind the selloff, including concerns about the situation in Africa and the Middle East, surging commodity prices, in particular crude oil, and finally, a feeling that equity valuations were moving into overbought territory. There were only a handful of important domestic economic releases last week, including several data points on housing and the state of the consumer.
2011-02-28 Moment of Surrender: Regimes Fall, Oil Prices Spike by Liz Ann Sonders of Charles Schwab
Geopolitical tensions swell along with oil prices, pushing the stock market lower. The absence of a longer-term oil- supply shock suggests the price spike could be short-lived. Consumers will take a hit, but the broader economy should avoid a double-dip recession.
2011-02-25 What Really Drives the Market by David A. Rosenberg of Gluskin Sheff
Well, we used to say there were four key drivers: 1. Fundamentals; 2. Fund flows; 3. Technicals; 4. Valuation; Then we introduced another one last week: 5. The Fed?s balance sheet; Now that is not going to be included in any of the Graham & Dodd textbooks, that is for sure. But since Dr. Bernanke embarked on his non-traditional monetary maneuvers two years ago, there has been an 86% correlation between the S&P 500 and the movement in the Fed?s balance sheet. And now there is a sixth: 6. Corporate earnings surprises Yes, this works with a 90% historical accuracy rate.
2011-02-25 Asia Insights from EM Analyst Conference by Allan Lam of Franklin Templeton
Many tend to focus on China and India, the two rising Asian economic powers, and there are reasons why we believe both, which are currently among the top five largest economies in the world will likely be among the top three in 2020. Land and labor costs remain cheap in China. In addition, the country appears to have a competitive edge in terms of work ethics, relatively flexible labor laws and excellent logistics. India?s strength is in its young, growing and increasingly well-educated population, which is fluent in English. This has enabled the country to become a leader in IT consultancy.
2011-02-25 Oil And Vinegar by Scott Brown of Raymond James Equity Research
Higher oil prices have raised new concerns about the strength of the economic recovery. If sustained, the rise in gasoline prices will restrain the pace of economic growth noticeably, but does not appear to be large enough (so far) to derail the expansion. Meanwhile, a federal government shutdown looms as lawmakers bicker over the future path of expenditures. Austerity at all levels of government is well-intentioned, but is not advisable at this point in the economic recovery.
2011-02-25 Worry ... Friend or Foe? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Interest rates have moved higher, inflation concerns are growing, debt issues remain and global tensions are heightened. All valid concerns, but in our opinion not enough to derail stocks?although they could potentially in the future. Violence in the Middle East and North Africa is creating tension in global markets, but there are other concerns for emerging markets as well. Europe is becoming a bifurcated situation, with investors distinguishing between those with debt issues and those without.
2011-02-24 Will the Oil Price Be a Game Changer? by David A. Rosenberg of Gluskin Sheff
First Tunisia. Then Egypt. And now Libya. What makes Libya different from a market?s perspective is that we are now talking about an oil exporter in the sudden grips of political upheaval. In this domino game, the next critical country we have to keep an eye on is Bahrain. The risk of further unrest is rising, especially with sectarian issues in full force in Bahrain. This means that oil prices at a minimum will retain a geopolitical risk premium. Bottom line: there is still more near-term upside potential than downside risk for the oil price (and most energy stocks).
2011-02-23 It's All About the Timing by David A. Rosenberg of Gluskin Sheff
The calendar of events that could create recurring bouts of market volatility is coming into closer view: February 25: Irish elections. Is a default coming? March 4: U.S. government shutdown; this is the date that the latest resolution expires. The hardliners in the GOP are digging in their heels over $60 billion of spending cuts. April 1: U.S. nonfarm payroll report for March. The jobless claims data suggest no improvement from poor February results. Then end of QE2 and the knowledge that movements in the Fed?s balance sheet in the last 14 months have had an 86% correlation with the S&P 500.
2011-02-22 Fiscal Contraction is Coming ... This is a Key Theme by David A. Rosenberg of Gluskin Sheff
Well, if you haven?t yet heard, major budgetary restraint is coming our way in the second half of the year, and so we would recommend that you enjoy whatever fiscal and monetary juice there is left in the blender. There isn?t much that is for sure. The weekend newspapers were filled with reports of how the conservative wing of the Republican party have banded together to ensure that spending cuts will be in the offing. The state and local governments are already putting their restraint into gear.
2011-02-22 The Global Economic Impact of this Weekend's Developments by Mohamed A. El-Erian of PIMCO
In the short run, regional developments will be stagflationary for the global economy. In the next few days, markets will react to the changed outlook for the region and the global economy. Over time, market apprehension is likely to give way as the impact of greater long-term stability in a key part of the world is felt.
2011-02-22 Investment Commentary by Bob Doll of BlackRock Investment Management
The bearish view of the current rally is that it is liquidity-driven and based on artificial propping-up by overly easy monetary and fiscal policy support. While we agree that the stimulus from the Federal Reserve and other policy makers has been an important pillar in helping to restore economic growth and drive risk asset prices higher, we also believe that the economy is transitioning into a self-sustaining expansion. In our opinion, this environment of improving growth, low inflation and a supportive policy backdrop continues to represent a ?sweet spot? for risk assets.
2011-02-21 Bahrain: Time to be Truly Business-Friendly by Douglas Clark Johnson of Codexa Capital
Now more than ever, Bahrain needs to figure out how to be truly ?business friendly.? If the nation?s economic strategy relies on the enthusiasm of the international business community, regaining global confidence will be critical to providing economic opportunity of any degree, let alone parity among citizens. The government has a very full plate.
2011-02-13 Rich Valuations and Poor Market Returns by John P. Hussman of Hussman Funds
At present, my view on monetary policy is that the inflation outlook following the completion of QE2 will be quite unstable, because small changes in interest rates are likely to induce very large changes in the willingness of individuals to hold base money. Any external upward pressure on interest rates beyond a fraction of a percent will have to be rapidly offset by a large reduction in the outstanding monetary base in order to avoid a deterioration in the value of money relative to goods and services (i.e. inflation).
2011-02-12 Balancing Act by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Strong US economic signals and solid earnings continue to provide a positive backdrop for stocks. We expect pullbacks if optimistic sentiment gets too elevated, but remain optimistic about the stock market. Inflation concerns are rising, but the Federal Reserve is unlikely to react with tighter policy. There's not much it can do to fight commodity inflation, but Treasury yields are rising in response to headline inflation, even with little near-term risk of companies passing on rising costs.
2011-02-10 Betting Against the House; Is This the Time to be Going Long? by David A. Rosenberg of Gluskin Sheff
Housing starts are at around 550k annualized units right now and household formation averages in the 1.1 to 1.2 million range. At what point do you think this dovetails and a housing recovery takes place? Great question. This is one overextended U.S. stock market, that is for sure. We have a dividend yield on the S&P 500 of 1.8% with a 10-year bond yield at 3.7%. The dividend yield, by the way, is where it was at the market peak in October 2007. The cyclically-adjusted P/E ratio on the S&P 500 is now 23.3x, where it was back in May 2008. At the lows, it was trading at 13.3x.
2011-02-10 Inflation: Say Goodbye to Buying Power by Monty Guild and Tony Danaher of Guild Investment Management
Economy watchers see its growing presence in official government statistics. Yet you won?t hear government officials admitting it. It?s too politically unpleasant ? and threatening ? to do so. Official spin and fantasy aside, the reality is that inflation is here and here to stay for quite a while. That means the buying power of the dollar is declining and being experienced on a daily basis.
2011-02-03 Egypt by Mark Mobius of Franklin Templeton
Stock markets in Egypt have been closed since January 30 and those in the Middle East/North Africa (MENA) region declined substantially between January 25 and February 1 as sentiment among some investors turned negative amid the political uncertainty. Other investors have been seeking an opportunity to buy stocks at low prices. The geopolitical ramifications of this unrest are many, not only for Egypt but also potentially for the rest of the world, and for the most part will probably be positive since political reform has been long overdue in the region.
2011-02-02 Unrest in Egypt, Uncertainty in the Region by Rachel Ziemba and Ayah El Said of Roubini Global Economics
Egypt?s political direction could have profound effects on regional stability?potentially involving, the Israeli-Palestinian conflict and efforts to contain Iran?s nuclear ambitions?with broad economic and financial ramifications. The recent economic and political developments do not bode well for Egypt?s debt, and this contagion could continue to spread within the region, leading to the persistent underperformance of local currency debt and equity markets. Regarding wider implications, the oil market remains the key link between instability in the Middle East and the global economy.
2011-02-01 Egypt, Dollars and History by Brian S. Wesbury and Robert Stein of First Trust Advisors
When the Fed prints too many dollars, the inflation that results often shows up in commodity prices first. When it lifts energy commodities, countries and regions of the world which export oil typically benefit and have largesse to throw around. Egypt is an oil producer and a large refiner. So, rising energy prices are neutral to slightly positive for the nation?s economy. Food prices are a different story.
2011-01-31 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
In addition to strong corporate earnings being reported last week, there was also the government?s estimate of GDP growth for the fourth quarter of last year. The headline number showed a growth rate of 3.2%, which was lower than expected. The reason though was a rundown in inventories and an improving trade deficit. These are inherently positive developments, which perversely count against growth in the calculation.
2011-01-29 Schwab Market Perspective: Confidence Climbing by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Although still relatively low, confidence is returning to businesses and consumers. We believe this confidence is well-placed and could portend healthy gains for the economy and the market as the year matures. Risks remain: commodity prices are rising, housing is still moribund, and federal and local governments have severe fiscal budget crises to deal with. Confidence in developed international markets is still lagging.
2011-01-28 Thought Leaders of the Islamic Crescent by Douglas Clark Johnson of Codexa Capital
I single out thinkers based in the Islamic Crescent (roughly stretching here from Ankara to Kolkata), arranging them first by geography, then in the rank order set by Foreign Policy. Our text summarizes the magazine?s material, supplemented with our own observations and updates. We note qualifications and challenges to the list at the end of our roster.
2011-01-26 World Bank Says Developing Countries Driving Global Growth by Team of American Century Investments
During the recent Great Recession, developing countries such as China and India played a key role in sustaining global economic growth, while developed economies struggled to cope with issues such as the subprime market meltdown, sovereign debt issues, and soaring unemployment numbers. In the coming years, developing nations will continue to play an increasingly important role in driving the global economy.
2011-01-24 Currency Wars: View From Beijing by Douglas Clark Johnson of Codexa Capital
Any belief in Washington that the Chinese will allow the yuan to appreciate meaningfully beyond their pre-determined framework belies a certain naivete, in our view. First, of course, is the ancient Chinese stance that any such directives constitute meddling in internal affairs. We see two overriding themes that provide more contemporary context for Chinese economic decision-making: civil stability and social security.
2011-01-22 And That's The Week That Was by Ron Brounes of Brounes & Associates
With another corporate earnings season moving into high gear and equities riding a seven week winning streak, a healthy bit of skepticism (not necessary pessimism) has crept into the investor mindset. Some analysts still want to see more revenue growth as opposed to cost-cuts in the earnings reports. Others fear that ?the trend is your friend? may be a nice guide, but investors may be disregarding the ongoing debt issue in the EU and the rise in interest rates throughout emerging markets.
2011-01-18 Headwinds Ahead by David A. Rosenberg of Gluskin Sheff
It is difficult to understand why it is that everyone is so whipped up about U.S. growth prospects. Even the latest set of data points has been less than exciting. Retail sales, payrolls, and consumer confidence have all been below expected and all of a sudden we see that jobless claims are moving back up. We have federal fiscal support, which at the margin is subsiding. And we have massive monetary support, and on this the Fed is going to be facing much more intense congressional scrutiny going forward. At the same time, about half of last year?s GDP growth was inventory accumulation.
2011-01-17 Is Bank America the Most Sued Company in America? Sol Sanders on Charting the Arab Dark by Christopher Whalen of Institutional Risk Analyst
With more than half of Tunisia's population under 30, increasing unemployed youth want more. It remains to be seen who will come out on top in Tunis. But across North Africa - from Egypt to Morocco - underground religious Muslim opposition festers. Alas! in Tunisia, as elsewhere, the Iranian mullahs' total corruption and Saudi Arabian hypocritical lifestyle notwithstanding, the Islamicists' appeal is growing.
2011-01-15 Further Fuel? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Stocks may be vulnerable to a near-term pullback thanks to elevated sentiment, and earnings season could provide an impetus for some profit taking. The economy appears to be strengthening and we remain optimistic. Despite signs of growth, the Fed seems insistent on letting QE2 play out, pointing to continued high unemployment and housing. The new congress also has to deal with these issues, while attempting to pare deficit spending. International exposure is important, but we recommend taking some profits and rebalancing if your emerging-market exposure gets above your target allocation.
2011-01-14 2011 Outlook: International and Emerging Market Equities by Benjamin Segal and Conrad Saldanha of Neuberger Berman
We anticipate modest but positive global economic growth in 2011. Economic growth in emerging markets should benefit developed-market firms with global reach as well as emerging-market companies. Issues we are closely watching: the potential for currency/trade wars, asset bubbles and inflation in the emerging markets, increasing regulation and possible negative impacts of monetary tightening. Many overseas corporations are profitable and healthy, with cash available for M&A, higher dividends and other corporate activities.
2011-01-11 Global Outlook and Strategy by Team of Loomis Sayles
After being challenged in November by renewed Eurozone sovereign debt concerns, global risk markets ended 2010 on a strong note. The key to the late-2010 and early-2011 optimism was the potential for the two biggest engines of global growth ? the US and Chinese economies ? to pull together this year.
2011-01-08 Forecast 2011: Better than Muddle Through by John Mauldin of Millennium Wave Advisors
Mauldin reviews his prior-year forecast. He was right on currencies and gold, but missed the bull market in equities. For 2011, he likes gold relative to the euro, pound and yen, but is less bearish on the pound than he was a year ago. He fears the Kamchatka volcanoes (in Russia) will trigger a spate of bad wealth which will lead to scarce resources and inflation. He is optimistic about the job market and employment, and forecasts that the US economy will grow 2.5-3% in 2011. He fears, however ,that structural problems in the work force will leave many untrained for employment.
2011-01-02 Hangovers by Isbitts of Emerald Asset Advisors
The overhang of US unemployment, long-term inflation, and risks of temporary overheating in the Commodity and Emerging markets is a wicked one, so the best posture for 2011, and most years for that matter, is to be invested, but with a net to catch you when you fall. However, the longer out one looks, and the wider the breadth of investment themes one is permitted to consider, the more the truly dynamic secular investment opportunities become visible. The ability and willingness to see the "forest" over the ever-present "trees" is the best advice I can give you.
2010-12-29 Deciphering Debt by Dr. Victoria Marklew, Richard Thies, James Pressler and Dr. Asha Bangalore of Northern Trust
2011 is likely to raise more issues about debt, with periodic market panics about debt sustainability and bailouts. We offer this primer on the issue of debt ? specifically the various measures and the roles they play in determining a country?s risk of facing some form of debt-related crisis. Metrics to assess indebtedness of nations are classified as solvency and liquidity measures. Each are discussed, as is the special topic of the banking sector and its relation to public debt. We give our view of global public-debt-related challenges in 2011.
2010-12-23 Some Thoughts on Market Timing by John Mauldin of Millennium Wave Advisors
I have real doubts that there will be ?hundreds of billions? of losses in the municipal bond market. It would take a default by almost every major municipal issuer, and a lot of small ones, to create a hundred billion in defaults, something not likely to happen. States will be forced to make spending cuts. Mauldin also cites three sources who he "highly respects" who advise to hedge US equity portfolios going into 2011.
2010-12-22 2011 Outlook: Fixed Income by Fixed Income Investment Team of Neuberger Berman
Entering 2011, there is no shortage of potential issues that could ignite periods of extreme market volatility. While short-term market gyrations are unsettling for both novice and experienced investors alike, for the year as a whole, we believe the outlook for the economy and the fixed income market is generally positive. In particular, certain non-Treasury sectors have compelling fundamentals going into the New Year. In our opinion, these areas could benefit generally from an increased risk appetite, should investors seek incremental yields given a continued low interest rate environment.
2010-12-22 Will Egyptian Elections Scare Would-Be Investors? by Nouriel Roubini of Roubini Global Economics
In Egypt, although the National Democratic Party (NDP) has a solid grip on power, the election cycle is adding to policy uncertainty that could worsen prospects for the foreign investment needed to kick-start domestic investment and diversify growth away from consumption. As RGE notes in its 2011 Global Economic Outlook, policy implementation delays in Egypt could add market volatility and restrain inward FDI as investors monitor the country?s political risk.
2010-12-21 Demographics and Sovereign Debt by Team of American Century Investments
Events surrounding what the press calls the European Sovereign Debt Crisis have been in the news for much of the past year. Unfortunately, this label masks an underlying major contributing factor: demographics. The combination of long life expectancies, relatively early retirement ages, generous retirement benefits and a shrinking base of workers to support the growing proportion of retirees in the population will put tremendous burdens on the budgets of these countries.
2010-12-17 Kicking the Can Down the Road by John Mauldin of Millennium Wave Advisors
A collapse of a major European bank could trigger counterparty mayhem in the US banking system, at least among our major investment banks. The ECB is now earnestly continuing to kick the can down the road, buying ever more debt off the books of banks, buying time for the banks to acquire enough capital. If the ECB were to keep this up, even in a deflationary, deleveraging world it would eventually bring about inflation and the lowering of the value of the euro against other currencies. One country after another in Europe is coming under pressure. This week the debt of Belgium was downgraded.
2010-12-14 Year-end Letter to Clients: Investment Advice from Winston Churchill by Dan Richards (Article)
For the past 18 months, my draft letters have been designed to balance some of the extreme pessimism among many investors with an objective, positive outlook - the draft year-end letter for 2010 continues with that goal. In it, I borrow from Winston Churchill's insight into the difference between optimists and pessimists.
2010-12-06 Cutting Through the Noise by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data is rarely clear-cut, but we believe the weight of the evidence indicates a strengthening US economy. The negative rhetoric surrounding the Federal Reserve's recent decision reached a crescendo, but while we were among the first to voice our belief that it wasn't necessary, we believe the dire warnings of potential consequences from a second round of quantitative easing (QE2) are overblown. The European debt crisis continues to plague world markets. Finally, we believe the European Central Bank (ECB) needs to be more proactive instead of continually reactive.
2010-12-04 Decoupling, Further Defined by Andrew Foster of Matthews Asia
Emerging market equities? particularly those sectors most associated with decoupling themes?are now subject to elevated valuations. It appears that some investors have grown overly convinced that decoupling is a one-way, short-term bet. Don?t bet on it. Instead, take your time, and set any expectations for decoupling over the longest horizons.
2010-12-04 And That's the Week That Was... by Ron Brounes of Brounes & Associates
Retail Ireland, retail, China, retail, tax cuts, retail, QE2, retail, jobs, retail. Yes, investors have plenty on their minds these days. Hopefully, the news from retail can continue to compensate for some of the more concerning dynamics at play.
2010-12-03 The Dirty Dozen by Niels C. Jensen of Absolute Return Partners
In the following I list a number of risk factors which I believe investors should give serious consideration, but I do not for one second pretend for that list to be exhaustive. Neither should you read anything into the order of which those risk factors are listed. If you want my assessment of how to rank the various factors, you need to take a look at the risk scatter chart at the end of the letter.
2010-12-03 Texas, Ireland and Ten Little Indians by John Mauldin of Millennium Wave Advisors
Mauldin contrasts the plights of Iceland and Ireland in dealing with excessive leverage. Iceland devalued its currency, while Ireland must accept a bailout package. Iceland's economy is recovering; Ireland's may take years. Mauldin compares the situation in Spain and Portugal to those two countries. The stronger EU countries must rescue the weak, just as Texas is being asked to rescue fiscally troubled states like California.
2010-11-29 A Time to Invest in Africa by Nile Capital Management of Nile Capital Management
In this report, I will summarize my answer to the often-asked question: ?Why is this a good time for investors to focus on Africa?? I also will explain why the best way to participate in African markets and manage their risks is through an actively managed fund that offers ?feet-on-the-ground? expertise in Africa.
2010-11-29 Not Fade Away: European Debt Crisis Hits Markets by Liz Ann Sonders of Charles Schwab
Optimism is waning as global concerns are taking center stage, notably in the euro-zone. Investors shouldn't be complacent, but should heed the more-positive message coming from the US economy.
2010-11-16 Touch of Grey: Market Takes a Breather by Liz Ann Sonders of Charles Schwab
My best guess as to the scenario that is unfolding is that the economy is gaining traction, which could cause the Federal Reserve to pull QE2 into the dock sooner than expected. It could also lead to a lift in the dollar, a related pullback in commodity prices, and rising bond yields. Given the high correlation recently between bond yields and stock prices, if yields were to continue to rise, they could take stock prices up with them; especially if the reasons are a better economy and lessened deflation fears.
2010-11-12 Down the Home Stretch by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data has shown signs of strengthening. We believe we could be emerging from the soft patch and that stronger-than-expected growth could be in the offing. The elections are done and the Federal Reserve made its move, but the question remains as to whether much-needed confidence returns to businesses. Additionally, housing remains a problem that may not be helped substantially by either event. Competitive currency devaluations are dominating the international conversation, while investors are flocking to emerging markets, making us a bit skittish in the near term.
2010-11-03 Four Rather Sick Patients by Niels C. Jensen of Absolute Return Partners
The world is in an unprecedented situation in which all four major trading currencies (EUR, GBP, JPY and USD) face serious challenges. Not all four major currencies, however, can fall at the same time. Currencies are unique in the sense that they are relative as opposed to absolute trading objects. You don't just buy dollars. You buy dollars against some other currency. The scaremongers may have their day in the sun, but ultimately common sense will prevail and currency traders will have to go back to focus on housing starts again.
2010-10-30 Schwab Market Perspective: So Now What? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
The Federal Reserve and upcoming elections are in sharp focus and results and actions in these two areas could determine whether the momentum seen since September can continue. Earnings season was better than expected and the market reacted as such. But confidence remains a major issue, with brewing mortgage-related problems and continued uncertainty around tax policy causing consternation. Debt remains a major issue that's just now being addressed and protectionism still threatens economic expansion. China remains a bright spot for global growth.
2010-10-28 What the G-20 Achieved by Komal Sri-Kumar of TCW Asset Management
A key item on the agenda last weekend during the meeting of G-20 finance ministers was the U.S. desire to have member nations' current account deficits and surpluses limited to 4 percent of GDP. A country with a bigger surplus (e.g., China) would have to let its currency appreciate. The United States, however, cannot insist on deciding on the size of QE2 based purely on domestic considerations, accuse Chinese authorities of currency manipulation, and expect other countries to provide a level playing field for American exports all at the same time.
2010-10-27 Reflections: Venturing into a New Frontier by Mark Mobius of Franklin Templeton
Frontier markets are the next emerging markets. These economies are more domestic-oriented, with a limited number of publicly listed companies; hence, frontier market investments tend to be primarily limited to private equity. Quality of company management is a frequent concern. Frontier market investing therefore often requires additional time and due diligence to assess the quality of corporate management teams, including more frequent on site visits to evaluate businesses effectively.
2010-10-27 Maddison?s Forecasts Revisited: What Will the World Look Like in 2030? by Andrew Mold of VoxEU
Developing countries have enjoyed strong economic performance over the past decade ? often growing twice as fast as OECD economies. This column asks whether developing countries will continue to outpace rich countries over the coming two decades. Updating Angus Maddison's famous projections, it forecasts a world starkly different from that of today. The world's poor countries, according to the forecast, will account for nearly 70 percent of global GDP in 2030.
2010-10-26 Emerging Market Uprising: What it Means for Investors by George Magnus of Boeckh Investment Letter
This special report by George Magnus, a senior economic advisor at UBS Investment Bank, takes a look at some key economic and investment issues regarding emerging markets and China. Magnus, who has just completed a book on emerging markets, argues that while EMs have boomed in recent years, there are a number of unresolved problems which suggest the past may not repeat, and investors must be careful.
2010-10-21 Readers' Questions Answered Part IV by Mark Mobius of Franklin Templeton
Mark Mobius responds to reader questions on initial public offerings, non-listed entities, China's 20-year prospects, and markets in Thailand, Indonesia and Sri Lanka.
2010-10-19 Developed Markets and Capitalism in Crisis by Robert Huebscher (Article)
We are not in a globalized world today, according to Ian Bremmer. "The state is back," said the 40-year old president and founder of Eurasia Group, a political consulting firm. Both in the U.S. and throughout the world, governments are exerting their influence through regulation, trade restriction, subsidies, and bailouts, and are threatening the nature of free markets.
2010-10-06 And That's the Week That Was... by Ron Brounes of Brounes & Associates
The economy remains unsteady as an uncertain labor picture continues to limit consumer activity. And yet, corporations have accumulated trillions of dollars in cash and money markets yielding near 0 percent have forced managers to seek other options. Looking ahead, the Fed's stimulus debate wages on although many expect a more limited bond buying program than the $1.7 trillion one offered last year. As for the markets, companies still have lots of cash looking for a home and hopefully equities have more room to run.
2010-10-01 And That's the Week That Was... by Ron Brounes of Brounes & Associates
So much for ?sour? Septembers. This year, ?super? September is more appropriate. The bulls were out in force last month as equities experienced their best September since 1939. The week was met with some profit-taking and quarter-end window dressing (is that still allowed?) as investors eyed an uncertain Fed policy and a heated election season.
2010-09-25 Pushing on a String by John Mauldin of Millennium Wave Advisors
The Fed will move forward with aggressive quantitative easing (QE), unless economic growth reaches 1.5 percent to 2.0 percent. The Fed's QE efforts thus far have been ineffective, because funds remain on banks' balance sheets. Future efforts would likely lower interest rates or possibly devalue the dollar, but it is unlikely it will stimulate growth.
2010-09-20 The Islamic Triangle: Tilting Toward Opportunity by Douglas Clark Johnson of Codexa Capital
The Islamic Triangle - the space between Casablanca, Istanbul and Muscat - may not be a top priority for most global money managers, but perhaps it should be. At just over $1 trillion, the Islamic Triangle's total market capitalization is just a bit less than Brazil's or India's. Among major markets, it compares with Australia or Switzerland. Relative to GDP - a sign of an equity market's importance to a local economy - the number is nearly 60 percent, relatively low, but indicative of the region's structural potential over time.
2010-09-07 August Jobs Report ? No Sign of a Double Dip by Scott Brown of Raymond James Equity Research
As with most of the recent data reports, the August employment report was consistent with a near-term slow patch in economic growth, but not a double-dip. Private-sector growth in nonfarm payrolls remained positive, and figures for the previous two months were revised higher. However, while the job numbers were better than expected, the pace is nowhere near where we'd like it to be.
2010-08-30 Views on Developing Markets by Team of First Eagle Funds
As the developed world stumbles from crisis to crisis, many developing countries seem poised to continue taking a greater share of the world's wealth. This trend, however, is not an automatic signal to invest. China, India and Brazil, the most sought-after developing markets, now demand double-digit multiples, and have higher inflation and monetary growth than developed markets. These factors suggest that the margin of safety is significantly smaller in developing markets than in developed markets.
2010-08-28 And That's the Week That Was... by Ron Brounes of Brounes & Associates
Despite the increased boardroom confidence (dealmaking), investors carried their bearish tone into Friday?s session with many anticipating a weekly close below the critical 10k level on the Dow. Somehow they perceived good news in a downwardly revised GDP release and comments from Bernanke that future Fed stimulus may be in order. In reality, the light volume these days may imply little conviction for any direction in the markets and the real tone will not be set until after Labor Day when vacations end and traders are back at their desks in full force.
2010-08-27 Perception Versus Reality by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Market volume continues its traditional August swoon, making it difficult to gauge much from stock market action. Economic data continues to tell a mixed story, as growth slows and risks rise. Confidence is key to consumer spending, business investment and stock market performance. The Federal Reserve and the government are attempting to instill that confidence in the American public, but so far have had little success. Emerging markets continue to show signs of growth and China's market has been performing well. Germany also has posted some nice numbers lately, but Japan remains a concern.
2010-08-24 Carts and Horses by Peter Schiff of Euro Pacific Capital
In a CNBC debate last week, former Labor Secretary Robert Reich presented a set of contradictory beliefs that unfortunately reflect the conventional wisdom of modern economists. In a discussion with Wall Street Journal columnist Stephen Moore, Reich correctly and comprehensively listed the reasons why American consumers could spend so lavishly before the crash of 2008 and why they can no longer keep up the pace.
2010-08-24 Urbanization, Past and Present by Douglas Clark Johnson of Codexa Capital
The discovery of an 18th century ship reminds us that the United States was once itself an emerging market. This suggests cues for today's investors as the world's population fills more and more megacities. Continued urbanization will have important implications for resource use and infrastructure development.
2010-08-20 EM Corporate Debt: Ready for Prime Time by David I. Robbins and Javier Segovia of TCW Asset Management
Emerging Market corporate debt is rapidly growing into a significant asset class backed by the world?s fastest-growing economies. These bonds benefit from strong fundamentals, improving credit quality, declining default rates and superior prospects for economic growth across most of the emerging world. One of the most compelling aspects is their consistent outperformance relative to other fixed income asset classes since 2002. Currently, they offer a yield pick-up over comparably rated corporate issues in the U.S., despite the fact that they frequently enjoy stronger credit fundamentals.
2010-08-14 The Gulf Oil Spill Disaster by John Mauldin of Millennium Wave Advisors
The ecological destruction from the oil spill that was first feared is not going to be as bad as once thought, for a variety of reasons. It is not good, but it is not the unmitigated disaster it could have been. The government should have allowed certain ships to assist in the cleanup. The ban on offshore drilling should be lifted.
2010-07-28 Grey Owl Capital Management's Q2 Letter by Team of Grey Owl Capital Management
The equity and fixed income markets are still modestly overvalued. In addition, the economic recovery may only have been a mirage that the slow dwindling of the government stimulus will reveal. The majority of Grey Owl's equity portfolio is made up of 'high quality' companies ? those with consistent earnings growth and low financial leverage. Japanese-style deflation and 1970s-style stagflation are both possible given the slow private sector growth, increasing government regulations, growing government debt loads, and expansive monetary policy.
2010-07-13 Cage Match by Jeffrey Bronchick of Reed, Conner & Birdwell
Contrary to public opinion, there is enormous opportunity for an investor today to focus on the business and valuation details of a particular investment while everyone else is running around trying to tie the world together into some neatly gift-wrapped strategy that can be easily quantified and traded by a computer algorithm. Yes, it can be frustrating when everything seems to go down on a day when the market goes down, but no one said this is easy. And when it gets that easy, you should be selling into it.
2010-07-09 In the Shadow of the Dragon by John Downs of Euro Pacific Capital
For investors, the Chinese push into frontier markets may offer promising returns in the medium-term. For example, emerging market bonds have rallied every quarter since the end of 2008, and posted record inflows this year. Unfortunately, accessing frontier markets has historically been difficult for small investors. Poor accounting practices, corruption, lack of local knowledge, and illiquidity are risks to be considered. For the right investor, though, there are increasing opportunities to invest in these markets via enterprising Chinese firms.
2010-07-03 The Dismal Science Really Is by John Mauldin of Millennium Wave Advisors
Yesterday's unemployment numbers were very bad, and Mauldin explains how they were calculated and the implications of adjustments, such as the birth/death model. Personal income was also down, which is a very rare occurrence. Other indicators, including the money supply, are not indicative of economic growth. The Fed will act aggressively to thwart deflation.
2010-06-28 Mohammed El-Erian on a Disappointing G-20 Compromise by Mohamed A. El-Erian of PIMCO
Mohammed El-Erian digests the 'unusually long communiqué from the G-20 Summit in Toronto.' El-Erian expresses his concerns about the future of a post?global financial crisis world that is in desperate need of better cross-border policy coordination and harmonization.
2010-06-25 World Cup Fever in Africa by Mark Mobius of Franklin Templeton
The outlook for Africa is positive. It has stirred the interest of countries like China, India and other fast-growing emerging markets, which require increasing resources for their growing economies, as well as countries like Russia and Brazil, who look to expand their enterprises into global operations. South Africa, acting as a representative for the continent through the World Cup, has shown that it can host an international event to international standards, and this bodes well for the region's future investment prospects.
2010-06-16 The Economics of the World Cup by Nouriel Roubini of RGE Monitor
Although the short-term gains from hosting the World Cup are rather limited, if the event goes well and the country avoids labor strikes and other destabilizing events, it could provide a chance for South Africa to showcase its institutional development and help cement its longer-term recovery. There are, however, several structural challenges to overcome, such as limited access to services, transportation bottlenecks, worsening demographics and extensive inequality, which could hamper the country's potential output growth.
2010-06-10 The 'Yield' Theme Continues Unabated by David A. Rosenberg of Gluskin Sheff
Fixed-income is woefully under-represented in U.S. and Canadian household balance sheets, while the average baby boomer is 55 years old and as a result is at an age where capital preservation strategies win out over a strict capital appreciation focus, which worked so well in the 80s and 90s. The market moves in 16- to 18-year cycles. Sadly, this secular down-phase in the equity market began in 2000 when the major averages hit their peak in real terms, so the best we can say now is that we are probably 60 percent of the way into it.
2010-06-01 Margins Peak, Gold Saves Lives by David A. Rosenberg of Gluskin Sheff
There is no ?get-out-of-jail-free? card when it comes to the places where market prices could go during this period of pullback in investor risk appetite. The appetite for risk usually comes back because the Fed cuts rates. This time around, we may have to see more balance sheet expansion and more money printed. Gluskin still loves the bond market, but gold is a very good hedge here just in case we are wrong on the inflation call or if the markets begin to anticipate the massive reflation efforts that are still to come.
2010-05-26 Renewed Risks and Multi-Speed Global Recovery to Restrain World Trade Flows by Nouriel Roubini of RGE Monitor
Global trade growth is unlikely to reach its pre-recession highs in the short term, with exports of several trade-dependent economies, particularly emerging markets, growing at a slower pace due to weaker import demand in the U.S. and EU amidst consumer deleveraging, fiscal austerity and slow recoveries in labor markets and household wealth. In the medium term, however, structural reforms in emerging markets and surplus countries to increase domestic demand will boost trade among emerging markets, as well as global trade flows, changing their direction and composition.
2010-05-17 Volatility on the Rise by Liz Ann Sonders of Charles Schwab
Volatility in stocks has increased during the past several weeks as investors have grappled with numerous global concerns. Is this the start of a longer-term problem or is it just a short-term phenomenon? Developments in the housing and job markets hold the key to further economic improvement. Meanwhile, the European debt crisis was addressed with a massive package, but long-term issues remain, and China's rapid growth rate could lead to overheating and inflation.
2010-05-13 Reader' Questions Answered by Mark Mobius of Franklin Templeton
Mark Mobius responds to reader questions on emerging markets. Mobius notes that global markets tend to react to headlines in the short-term. At the end of the day, however, each country and each company has its own set of dynamics and fundamentals. Research is about identifying the differences among them. Key differentiating factors are often the basis for success in the long run. He also comments on the Greek debt crisis, political stability in Poland, reforms in Colombia and the recent death of Nigeria's president.
2010-05-13 Driving Without a Spare by Mohamed A. El-Erian of PIMCO
Mohamed El-Erian recounts the results of last week's PIMCO Secular Forum on the three- to five-year outlook for the global economy and the markets. Participants concluded that we are heading toward a world that is re-regulated, de-levered, and growing less rapidly in the industrial countries. It will be a world in which concerns about the dark side of globalization temper enthusiasm for its net benefits, and in which politics matter a lot for markets and the economy. The drama playing out in Europe these days is a vivid illustration of this general secular characterization.
2010-05-08 The Center Cannot Hold by John Mauldin of Millennium Wave Advisors
Citing a paper from the Bank for International Settlements, Mauldin says increasing sovereign debt has two consequences - higher interest rates for that debt and lower growth rates for the underlying economies. Growth in sovereign debt at its current rate is unsustainable and poses systemic risks for the global economy. Fiscal austerity is the only solution, and that seems unlikely, particularly in the case of Greece.
2010-05-01 Resilience Resonates by Liz Ann Sonders of Charles Schwab
The stock market has absorbed numerous body blows recently, but continues to chug along?waiting for a big price correction to buy could be detrimental. Economic data remains solid, confounding some recovery skeptics and providing the Fed ample reason to slowly return to normalcy. European debt problems are growing and concerns over contagion are rising; there's no quick fix, and some politically unpopular decisions are going to have to be made.
2010-04-22 Demystifying Romania by Mark Mobius of Franklin Templeton
Franklin Templeton sees tremendous opportunities for growth and investments in Romania, and will soon expand operations there. Romania and other Eastern European countries are transforming their economies from state-dominated socialist economic models to systems driven by market forces and private enterprise. Romania joined the European Union in 2007 and is undergoing substantial reforms that should strengthen capital markets in the country. Like other countries in Eastern Europe, however, Romania was hit hard by the recent financial crisis and needed a rescue package.
2010-04-22 U.S. Politics and Bank Reform Legislation by Monty Guild and Tony Danaher of Guild Investment Management
Election years often bring wild political actions as politicians defend their poor records by blaming anything that comes to mind. If the rhetoric against banks is not too strong, the rally could continue. If the rhetoric gets out of hand, we will see a market correction for a few weeks with a resumption of stock price increases later in the year. Guild continues to invest in Asian growth countries, oil, gold, and export driven companies who can grow earnings while shipping products worldwide.
2010-04-21 The Bernanke Put: Creating Tetrodotoxin Investors by Cliff W. Draughn of Excelsia Investment Advisors
The 'Bernanke Put' of low interest rates over an extended period of time has effectively lured investors to pursue greater and greater levels of risk without critically thinking about the ramifications of upcoming mortgage resets, consumer spending versus income, credit contraction, valuations, and unemployment. Our country has never experienced leverage of this magnitude. In this environment, we must remember the lesson from Benjamin Graham: 'The margin of safety takes priority over all other investment considerations.'
2010-04-20 It's Census Time: Where in the World Are We Growing? by Team of American Century Investments
International population forecasts provided by the U.S. Census Bureau provide directional insights that can be useful to investors. The U.S. will continue to be a dynamic, growing and expanding country from a population perspective well into the 21st century. One implication is that we can deal with concerns over our rapidly growing government debt by growing out of the problem. In addition, despite the recent gloom caused by the housing bubble bursting, real estate values are likely to recover and continue growing long-term as a result of population growth.
2010-04-19 Demographic Trends for the Long Term by Chris Maxey of Fortigent
The world is entering a period of rapid aging unlike any we have previously seen. According to a recent report by Neil Howe and Richard Jackson there are several key implications due to an aging population. As populations age, decreased mobility and adaptability will restrain economic growth and entrepreneurship, leading to higher public deficits as governments shoulder a greater percentage of health and retirement costs. Fortigent also examines the impact of the SEC investigation of Goldman Sachs on equity markets, and the week ahead.
2010-04-16 Our Quarterly Review by Jonathan A. Shapiro of Kovitz Investment Group
With only a few temporary setbacks, the stock market has continued its move higher since touching its most recent low in early March 2009. Much hand wringing has been done over the S&P 500's approximately 75 percent move since that time, but lost in translation is the fact that prices last March implied a pending financial and social breakdown. These panic-driven prices bore little resemblance to actual or going concern business values, and measuring from that point clearly overstates and exaggerates the return. The worries facing the U.S. and many other regions are still prevalent.
2010-04-07 Iraqi Oil: A Riddle in the Sands by Nouriel Roubini of RGE Monitor
Iraq has the potential to be a major source of new oil in the next 5 to 10 years, but the process of scaling up production faces many obstacles. Modernizing and expanding the country's energy infrastructure will be costly, given Iraq's fiscal position, and this may tempt the government to extract as much revenue as it can in order to meet the country's fiscal vulnerabilities. And as Iraq's oil production gradually climbs, it will face pressure from OPEC to adhere to quotas. Given these uncertainties, Iraq's plans to more than double output within 5 years seem very optimistic.
2010-04-07 We Expect China to Remain Strong by Monty Guild and Tony Danaher of Guild Investment Management
China will not melt down in the near future, as some fear. Chinese exports have fallen in recent years, but infrastructure building and consumer spending will help pick up the slack. While bad real estate loans may become a problem in China, the problem should be well-contained. And provinces can raise taxes in order to pay off loans. Guild and Danaher also comment on instability in Mexico, Alan Greenspan's recent Congressional testimony and global markets.
2010-04-06 Emerging Markets: High Growth does not mean High Returns by Dan Richards (Article)
Recent research explores the return payoff of investing in emerging markets such as Brazil, Russia, India and China, writes Dan Richards. Contrary to popular beliefs, investing in high-growth emerging markets has produced inferior returns to those obtained from slower growth economies.
2010-04-01 The U.S. Bond Market is Losing Steam by Monty Guild and Tony Danaher of Guild Investment Management
Smart investors will buy stocks on dips, sell their long term bonds denominated in the euro and the U.S. dollar, and shift into shorter maturity bonds or into stocks that can grow. Investors should consider selling all long term bonds of any type. Guild and Danaher favor foreign stocks in Singapore, Thailand, Indonesia, and Malaysia. They also favor export-driven companies in developed countries, and commodity producers globally, especially oil companies that are increasing their production. Gold is in a trading range, and should be bought for below $1090 per ounce.
2010-03-29 Central Banks in 2010 - The Cacophonous Sound of Exit Music by Asha Bangalore of Northern Trust
Recent developments suggest that the uncertainty of the past three years has left central banks skittish. Otherwise strong economies have been slow to normalize rates and central banks that are following inflation targets have been more willing to risk breaches than growth. The remainder of the year will be characterized by differing exit strategies and their intended and unintended consequences. As central banks around the world begin tightening before the Fed and the ECB, there will be further implications for global capital flows and exchange rates.
2010-03-20 The Threat to Muddle Through by John Mauldin of Millennium Wave Advisors
Mauldin criticizes Krugman's call for a 25% tariff on Chinese imports, and instead predicts that China will allow its currency to appreciate 5-7% per year for the next several years. Protectionism, he says, is the biggest threat to global recovery. In defense of his argument, Mauldin says similar tariffs could be imposed if the euro, Yen and the Canadian dollar continue their current trends. The larger problem is the growing US deficit, which must be dealt with in the medium term, or there will be no long term.
2010-03-16 Latest Unemployment Report Reveals the Growing Problem of the Long-Term Unemployed by Team of American Century Investments
Four out of 10 unemployed workers are designated as long-term unemployed, meaning that they have been seeking a job for at least six months. This rate exceeds any other since the 1940s. As we have evolved towards a service- and knowledge-based economy, people with at least an undergraduate degree have fared better both in terms of lower unemployment rates and higher wages. This trend has become even more pronounced during the recession that began in December 2007 relative to the past two periods of peak unemployment in June 1992 and 2003.
2010-03-15 3 Main Lessons of Psychology by Dan Ariely of Predictably Irrational
Psychology teaches us three main lessons. First, that the environment has a large, as yet unrecognized effect on our behavior; second, that out intuitions about what drives our behaviors are flawed; and third, that our emotions play a large role in our decision-making. These lessons have important implications for economics, and show us the importance of experiments and empiricism in economic research.
2010-03-11 Jordan: Optimism in the Heart of the Middle East by Mark Mobius of Franklin Templeton
Mark Mobius recounts a recent trip to Jordan in search of investments. Jordan is a modern democratic constitutional monarchy with the king as head of state. It has a highly educated population of about 6.1 million and a growing middle class. Government policies focus on economic reform and growth. The country's 20 percent of GDP annual spending on education makes it one of the highest education spenders in the region. Jordan's health care system plays a key role in the national economy, and professional women are able to attain high status.
2010-02-13 Between Dire and Disastrous by John Mauldin of Millennium Wave Advisors
Mauldin discusses the Greek debt crisis and the options for resolving it. A Greek default "would bankrupt the bulk of the European banking system," but that is unlikely, he says. He cites Niall Ferguson's recent article in the FT and argues that the Greek crisis is a precursor to other countries facing similar sovereign debt problems.
2010-02-05 Greece: Opportunities despite the Challenges by Mark Mobius of Franklin Templeton
Mobius recently traveled to Greece and discusses its fiscal problems and the likely path of tax increases and reduced government spending.
2010-02-04 Happy Peasants and Miserable Millionaires: Happiness Research, Economics and Public Policy by Graham of VoxEU
What measures of human wellbeing are the most accurate benchmarks of economic progress and human development? This article presents new research suggesting that while people can adapt to be happy at low levels of income, they are far less happy when there is uncertainty over their future wealth. This may help explain why different societies tolerate such different levels of health, crime, and governance, and why US happiness plummeted during the global financial crisis but has since been restored despite incomes remaining lower.
2010-02-02 Stiglitz: U.S. Economy Will Falter without More Stimulus by Susan B. Weiner, CFA (Article)
The U.S. government has botched its handling of the economy over the last eight years, according to Nobel Prize-winning economist Joseph Stiglitz. He explained how the U.S. created the global recession - and how we can get out of it - in a public presentation on his new book, Freefall: America, Free Markets, and the Sinking of the World Economy.
2010-01-19 Inflation Myth and Reality by John P. Hussman of Hussman Funds
It is in this context that we should consider inflation risks over the coming decade. At present, inflation risks are hardly considered to be problematic by Wall Street. From the standpoint of the nex
2009-12-22 The Danger of "Expert Advice" - Financial or Otherwise by Kim Snider (Article)
A study by three neuroscientists at Emory University finds that when given expert advice, the decision-making part of our brain shuts down. That's not a big deal if the advice we are receiving is good. But what if it isn't? In this guest contribution, Kim Snider explores the problems with relying too heavily on supposed experts, and how to counsel clients who fall into this trap.
2009-12-22 Staggered Return to Global Growth by Paul Kasriel of Northern Trust
2009-11-17 Client Gifts that Stand Out by Dan Richards (Article)
Having trouble with ideas for holiday gifts for your clients? Dan Richards offers four strategies for selecting a gift with a meaningful impact.
2009-11-10 Letters to the Editor ? The ?V? Points Downward by Various (Article)
In a letter to the Editor, a reader responds to our article, The "V" Points Downward.
2009-10-06 Ten Tips from Advisors Down Under by Terry Bell (Article)
The question for advisors is what's going to happen to their role and how they can best adapt to a changing world. Irrespective of the details, change will continue. Perhaps the Australian experience can provide a few pointers for US advisors.
2009-09-22 Disaster Management, The Green Beret and Lamaze Way by Mariko Gordon (Article)
Few of us respond as easily or effectively as we might like in the face of disaster. In this guest contribution, Mariko Gordon takes a look at why, and offers three things to keep in mind the next time you're in the midst of a crisis, financial or otherwise.
2009-09-15 Five Reasons to Avoid the Gold Rush (Updated) by Vitaliy Katsenelson (Article)
The reasons why one should sell the cat, pawn the mother-in-law, and use the proceeds to buy gold are well known. However, in this guest contribution, Vitaliy Katsenelson offers arguments why one should think twice before jumping in bed with the gold bugs, or at least remain sober while determining gold's weight in the portfolio.
2009-07-14 Some Signs of Life and Hope for a New Recovery by John P. Calamos and Nick P. Calamos (Article)
Calamos Investments' co-CIOs John P. Calamos, Sr. and Nick P. Calamos discuss the current market climate, implications of Fed and government actions, and investment opportunities in the shorter- and longer-term. Global governmental policies have restored a degree of confidence in the financial markets and many key financial metrics are back to pre-Lehman levels. Many investment opportunities will be available in the future. We thank them for their sponsorship.
2009-06-09 Simon Johnson on Obama?s Achilles Heel by Eric Uhlfelder (Article)
While he agrees with much of what the US administration is doing to confront the economic crisis, Simon Johnson, the former chief economist of the International Monetary Fund, fears that present policy is not addressing a key issue: the overwhelming influence of the finance industry in US economic affairs. He likens this imbalance to what we see at the core of many emerging markets crises.
2009-06-02 Building Personal Connections with Clients by Dan Richards (Article)
Over the past few months, we've all read about "the new frugality" that has become part of our culture. Consumers are rethinking their spending plans - yielding some surprising results about how people decide their priorities in tough times. Dan Richards looks at the implications of this trend for financial advisors.