Chris Waller, an economist and EVP and Director of Research at the St. Louis Fed, wrote on Monday that negative interest rates are a tax in sheep's clothing. Waller says: Many foreign central banks—such as the European Central Bank, the Bank of Japan and the Swiss National Bank—have implemented negative interest rates on bank reserves as a policy tool to stimulate demand for goods and services. If a bank holds a dollar of reserves, the central bank may take, say, half a cent. The hope is that a negative interest rate will induce firms to lend out the reserves by charging a lower interest … [Read more...]
The Monday Melee: Home Sales Sputter
New Home Sales Slide Again For the third month in a row sales of new homes have fallen. The AP reports: "New-home sales slipped 1.5 percent last month to a seasonally adjusted annual rate of 511,000, the Commerce Department said Monday. That rate has steadily dropped from 519,000 in February and 521,000 in January. Sales plummeted 23.6 percent in the West, which has been prone to volatile swings in sales as one of the nation's priciest housing markets." Slump in Home Buying Hits the West Hardest U.S. and Canada have Some of the Costliest Housing in the World MAP: Seriously … [Read more...]
The Monday Melee: Have Gasoline Price Hit Bottom?
Have Gasoline Prices Hit Bottom? Gasoline price plunged from mid-2014 to the beginning of 2015. Then from mid-2015 plunged again until early 2016, and since then have been rising. Are prices in a seasonal cycle, rising in the first half of the year and retreating in the second half? Or is this the end of the declines in gasoline prices for the long-term? CNBC Asks: Higher Prices Coming? Bloomberg: The New Normal U.S. Oil Imports Ticking Back Up … [Read more...]
The Monday Melee: Dividends or Buybacks?
Which Wins? Dividends or Buybacks? CNBC reports that dividends are beating buybacks: In the battle between the barons of buybacks and the divas of dividends, the divas are getting out to an early lead. The PowerShares Buyback Achievers ETF (PKW), which tracks U.S. companies that have repurchased 5 percent or more of their outstanding shares over the past 12 months, is flat this year, underperforming the S&P 500. Meanwhile, the iShares Select Dividend ETF (DVY), which follows stocks with consistently high dividend yields, has risen 9 percent in 2016. VIDEO: Dividend Payers are … [Read more...]
The Monday Melee: Troubling Earnings Season Ahead?
Earnings Could Spoil the Party Wells Fargo analyst, John Manley, CFA writes: I don’t think stock market valuation will be a negative (although it probably won’t be a positive, either). By my count, the current S&P 500 Index price to forward bottom-up consensus earnings expectations is between 15.5 times and 16.5 times. That is also between the 30-year and 20-year trailing average of that number. The good news is that valuations are probably not high enough to offset an improvement in the fundamentals. The bad news is that they are not low enough to support us if those fundamentals turn … [Read more...]
The Monday Melee: Buybacks Boosting Market
Buybacks Near All-Time Highs Forecasts for Q1 2015 show S&P 500 companies nearing all-time high stock buybacks. Almost Half of Cash Spent on Buybacks American companies have been spending lots of cash on buybacks. IB Times' Owen Davis reported in November: Of the $2.2 trillion in cash corporate America is poised to spend next year, roughly half will go directly to shareholders. Between stock buybacks and dividend increases, Goldman Sachs estimates that just over $1 trillion will end up flowing to shareholders, a 7 percent increase over 2015. “Despite weak activity during the … [Read more...]
The Monday Melee: Whither Commodities?
Gold on Pace for Best Monthly Gains Since 2012 Could Oil Hit $85 by the end of 2016? CRB Index up 2.3% Year-to-Date Brazil: Record Production as Prices Slump Reuters reports: Brazilian miner Vale SA produced record amounts of iron ore, nickel, copper, cobalt and gold as it battled a slump in global metals prices by boosting output in search of greater market share. ... Along with Australian rivals BHP Billiton Ltd and Rio Tinto Ltd, Vale has moved to ramp up output of iron ore in the face of a 28 percent drop in prices in the past year and 75 per cent over five … [Read more...]
Friday Free For All: Negative Rates a Failure
Negative Rates Don't Work BlackRock's Senior Director Peter Fisher eviscerates the idea of negative rates in this interview with Bloomberg. Gold vs Negative Rates Mining CEO lays out the future for gold in the face of negative rates. Morgan Stanley: Negative Rates a "Dangerous Experiment" This week Huw van Steenis, an analyst at Morgan Stanley said of negative rates: "It is an unnecessary and dangerous experiment to take in case there are non-linear impacts on deposit stability and financials stability writ large. The ECB's action is flipping from a positive to a negative for … [Read more...]
Can OPEC Tame Texas?
At Bloomberg, Javier Blas and Dan Murtaugh write: Saudi Arabia and Russia have taken the first step to stem the slide in oil prices. There’s just one problem: If they are successful -- and that’s a big if -- the wildcatters of Texas, Oklahoma and North Dakota are waiting to pounce. With 4,000 wells drilled and just waiting for better prices to be brought on stream, the so-called fracklog could act as a cap to any oil rally, industry executives, traders and OPEC officials said. Worse, a price recovery could effectively bail out dozens of shale companies now struggling with $30-a-barrel oil, … [Read more...]
Friday Free For All: Can Anything Reduce Health Costs?
Companies Fight Healthcare Costs, Together Companies are banding together to fight rising health care costs with group buying they hope will give them more bargaining power with providers. Louise Radnofsky reports at The Wall Street Journal: Twenty major companies—including American Express Co., Macy’s Inc.and Verizon Communications Inc.—are banding together to use their collective data and market power in a bid to hold down the cost of providing workers with health-care benefits. The newly formed alliance of companies, which cover about four million people among them, plan to share … [Read more...]
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