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Investment Research Since 1978

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Existing Home Sales Plummet

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Existing home sales plummeted 27% in July to a new 15-year low. Existing home sales have now entered double-dip territory. At the current rate of sales, there is a surplus of more than 12 months of existing home supply—a 28 year high. … [Read more...]

This Economy is Booming

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The economic recovery in Brazil continues to gain momentum. Brazilian GDP grew at 11.4% in the first quarter of 2010. Inflation remains tame by Brazilian standards at less than 5%, employment is up smartly, unemployment is at a record low, and consumer confidence is near pre-recession highs. Contrast the strong performance of Brazil’s economy to the record high unemployment, record low employment, and very low consumer confidence in the U.S., and it quickly becomes apparent that investors need to broaden their investment horizon beyond the U.S. Diversification across sectors and market … [Read more...]

Creative Destruction

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Creative Destruction – Popularized by Joseph Schumpeter, a “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” In just 10 years, two industry titans have been knocked to the floor and replaced by a start-up and another firm that most industry pundits had written-off. The age of the Windows desktop PC is coming to a close and the age of smart phones, tablet computers, and cloud computing is beginning. But don’t put money on it. Microsoft and Dell looked like no-lose … [Read more...]

Canada – Land of the Free

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Canada, Land of Smaller Government – Jason Clemens, The Wall Street Journal “[T]he Canada of the 1970s and early 1980s—the era of left-wing Prime Minister Pierre Trudeau—no longer exists…In 1995, the federal government, led by the Liberal Party, passed the most important budget in three generations. Federal spending was reduced almost 10% over two years and federal employment was slashed 14%. By 1998, the federal government was in surplus and reducing the nearly $650 billion national debt…all government spending peaked at 53% of Canadian GDP in 1992 and fell steadily to just under 40% by … [Read more...]

Wheat Prices Skyrocket

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Wheat prices are up more than 50% in a month. Droughts in Russia, a major world wheat producer, are threatening the country’s crop.  Traders bid up wheat prices in anticipation of tighter supplies. … [Read more...]

Global House Price Imbalance

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According to The Economist, there are still six global real estate markets that are more than 30% overvalued. Australia shows the largest overvaluation at 61.1%, followed closely by Hong Kong and Spain. What happens when these market values return to fair value? Frightening. … [Read more...]

Ethanol Subsidies Four Decades Later – Still Wrong

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Survival of the Fattest – Review & Outlook, The Wall Street Journal “The best refutation of the theory of the survival of the fittest is probably the corn ethanol lobby, whose annual $6 billion in federal subsidies have managed to outlive both its record of failure and all evidence and argument…CBO reveals that it costs taxpayers $1.78 in ethanol "incentives" to reduce U.S. gasoline consumption by one gallon…Given these realities, the only mystery is how an industry that produces a fuel that no one would willingly buy has managed to be subsidized over four decades at costs that are higher … [Read more...]

An Alternative to Ultra-Low Treasury Yields

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The short end of the yield curve remains punishing for investors. Yields on two-year notes are now below the lows reached at the height of the financial crisis, and five-year notes yield a scant 1.68%. Going out longer on the yield curve still isn't an answer to paltry yields, though. Long bonds are significantly overvalued from both long- and short-term perspectives. The low level of Treasury yields is both frustrating and maddening. Policymakers are attempting to recapitalize the banking system by engineering a steep yield curve. The Fed has essentially lowered the risk-free … [Read more...]

A Raging Bull Market in MLPs

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The raging bull market in MLPs shows no signs of slowing. Since the S&P 500 peaked in October of 2007, MLPs have gained more than 33%, while the S&P 500 dropped 25%. YTD, MLPs are up 17%, compared to a loss on the S&P 500. … [Read more...]