The venerable Goldman Sachs is pounding the table for another round of quantitative easing (QE)—see here. The bank thinks more QE is necessary because the recent slowdown in economic activity is more than a temporary phenomenon. While the economy may be weakening, the efficacy of such a remedy is suspect. Credit conditions are nowhere near distressed, interest rates are at or near record lows, and there is over $1 trillion in excess reserves that lay dormant on bank balance sheets. Another round of QE is unlikely to encourage a sustainable economic recovery. Even Goldman admits as much. The … [Read more...]
More Trouble in the PIIGS Pen
Despite the best efforts of European policy makers, the CDS of the Euro-area’s PIIGS countries continue to signal severe stress. Ireland is the latest country to come under pressure from financial markets. Irish CDS have recently reached a new high. The market is anticipating that a default may be the only sustainable solution for some of these countries. … [Read more...]
Japan’s Lost Decade
Japan’s ‘Lost Decade’ Wins Fresh Attention – James Mackintosh, Financial Times “The 1990s were certainly bad for Japan. Gross domestic product rose at half the rate of slow-growing France and a third that of the US. The Nikkei 225 index halved from its peak above 36,000…On paper, the 2000s too look dire: GDP rose only 10 per cent from 2000-08, just over half the UK or US level, even after Japan belatedly addressed its troubled banking system and embraced limited quantitative easing. But as economist Andrew Smithers points out, the ageing of the population affects the data. GDP per person of … [Read more...]
Gold Nears All Time High
Up 14% YTD, gold is once again on the verge of hitting another all-time high. … [Read more...]
Need Yield?
Do you invest in stocks for income? Is your portfolio focused primarily on U.S. stocks? If so, you might consider diversifying globally. The dividend yield on the U.S. stock market is one of the lowest yields in the world. In the chart below, I show the yields of 23 of the world’s major stock markets. The dividend yield on U.S. stocks is only 2.11%, compared to an average of 3.09% and a high of 5.45% in Spain. The U.S. is the sixth-lowest-yielding stock market in the group. If you invest in stocks for dividends or income, a global approach is advisable. When you take a global approach to … [Read more...]
Consumers: TV Not a Necessity
T.V. sets are falling out of favor with consumers and fast. According to a recent study released by the Pew Research Center the percentage of Americans who consider television a necessity dropped 10 percentage points from 2009. The drop was the largest among a group of 12 items covered in the Pew Study. Ironically though, while fewer consumers consider a television set a necessity, T.V. ownership per household reached a record in 2009. … [Read more...]
Existing Home Sales Plummet
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...]
How Many Utilities are in Your Portfolio?
A powerful relative strength rally in utilities stocks is underway. The S&P 500 Utilities Index has outperformed the S&P 500 index by 12.5% since early April. Investors are bidding up high yielding utilities stocks in search of yield. … [Read more...]
This Economy is Booming
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
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...]
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