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Market Update 08-24-10

BHP Billiton’s (BHP) bid to take over Canadian fertilizer producer Potash Corporation of Saskatchewan (POT) has officially been rejected as being too low. But the buzz created by the takeover attempt isn’t dying. First, there was speculation that one of the Chinese state-owned enterprises would step in and shell out the cash for Potash—if anyone has ample cash for the acquisition, the Chinese do. Today, there’s new speculation that BHP’s Australian rival, Rio Tinto (RTP), may partner with a Chinese company and submit its own bid for Potash. Rumors are also circulating that fellow fertilizer producer Mosaic (MOS) may partner with other agricultural companies to acquire Potash.
 
The high level of interest in Potash highlights the bullish case for fertilizers, essential for growing crops. In the long run, population growth and improving standards of living in developing countries should lead to continual demand for fertilizer to increase food supply. In the nearer term, the rally of crop prices due to adverse weather conditions (for example, Russia’s drought and wild fires) reducing supply should lead to an extra demand jolt for fertilizers as farmers scramble to take advantage of more favorable pricing.
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Weakening Economy vs. Big Deals: 08-19-10

Evidence of slower growth for the U.S. economy continues to mount, putting pressure on stock prices while boosting bonds. Yet the reality is that stocks are down only slightly for this week so far.Read more...

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Market Update 08-17-10

It was only a matter of time, but China has now officially overtaken Japan as the second-largest economy in the world. According to government statistics, China’s GDP totaled $1.33 trillion in the second quarter, slightly ahead of Japan’s $1.28 trillion output. Given China’s growth momentum and Japan’s own sluggish economic recovery, it appears almost certain that for the full year China’s economy will be larger.
 
This is only the latest milestone for China, as it has already surpassed the U.S. as the world’s largest energy consumer and the biggest car market, and Germany as the largest exporter. Although its economy is still only a fraction of the U.S. economy, China could surpass the U.S. as number one as soon as 2030. Despite prodigious growth in the last few decades, large parts of the country still remain woefully underdeveloped and per-capita income is still less than one-tenth of that of the U.S., still leaving plenty of room for urbanization and growth.
 
With its growth, however, China will put an increasingly large strain on the world’s resources. Not blessed with rich natural resources but flush with cash, the Chinese have been on a rampage to secure resource assets around the world via acquisitions through its state-owned companies.
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Market Update 08-10-10

The term “bank stress test” has been floating around in the news quite a bit lately with the Europe testing its banks to rebuild investor confidence. China will now join in the fun and conduct one of its own. Last year, China carried out stress tests with the assumption of home prices dropping by up to 30 percent; this time around, China said it would make the test even more rigorous, testing the ability of its banks to withstand home prices falling as much as 50 to 60 percent in cities where prices have risen the most dramatically. The tough standards of China’s stress test makes Europe’s own stress test look like a farce.

While the move suggests that Chinese policymakers are concerned about the health of the real estate market, it also shows, as usual, the communist government’s pre-emptive and no-nonsense approach in managing its economy. The severity of the adverse scenario (up to 60 percent price decline) to be used in the stress test in the most lucrative real estate markets is more policymakers wanting to make sure its banks can handle the worst case scenario rather than them believing that a 60 percent drop would really happen.Read more...

No easy answers from technology: Market Update 06-14-10

Short-Term Key: Neutral Long-Term Key: -6 (Neutral)
 
I must confess that this past weekend I was a little preoccupied by my son's college graduation. Nonetheless, the sight of all those young people, some of whom may be the future leaders of our nation, getting their diplomas, reminded me how crucial it is to draw attention now to the really big problems they will face – and, as investors, how profitable it will be to focus on real solutions.
 
For example, yesterday the Sunday Times featured a front page article on how little benefit humanity has gained from the decoding of the human genome. Ten years since the world celebrated the first draft of DNA code, we have yet to see the promised plethora of new cures for genetic diseases.
 
If you read my 1999 book, Defying the Market, you may recall that in it I discussed many of the limits to our technological approach to solving the world's problems. In particular, I pointed out that large-scale, computerized enumeration of possibilities – the approach used to map DNA, identify new superconducting molecules, or search for patentable drugs – was not likely to produce the needed solutions to the problems that would unfold in the future.
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As Stocks Tumble, Start to Look for New Opportunities: 05-20-10

Stocks around the world have continued to fall sharply this week. The Standard & Poor's 500 is down about 10 percent from its late April high. The culprits are many.

First are the persistent Euro zone troubles. These range from the sheer size of the government debt challenge to mounting worries over Europe's will to address the situation, in terms of both financial support and necessary spending cuts. National strikes in Greece don't help either. If $1 trillion isn't enough, how much is?

The fate of the euro currency itself increasingly has come into question. The euro has dropped 15 percent against the dollar so far in 2010 and is currently at a four-year low. Inevitably, the world's investors have also been selling euro-denominated assets heavily amid rising economic and political uncertainty.

There's also a growing feeling that Europe's problems will have a bigger negative impact on the U.S. than first thought. For example, U.S. exporters will be hurt by slowing demand in Europe because of the weakness there. And the plunging euro provides a cost advantage to Europe's own exporters. In addition, U.S. banks could be hurt by their close business relationships with their European counterparts. Then there's the potential risk of actual sovereign-debt defaults.Read more...

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Market Update 03-15-10

Market Update
March 15, 2010
 
Short-Term Key: Negative
Long-Term Key: -78.5 (Neutral to Negative)
 
-------------------------------------
Inside this week's update...
 
***** The world of tomorrow is a world of less.
***** Focusing on the important things, and making money from them.
***** 6 compassionate, long-term stocks.
------------------------------------
 
The U.S. economy now shows clear signs of growth. Most likely, U.S. growth will exceed 3% for this quarter and the next one as well.
 
However, the second half of this year doesn't look quite as rosy.
Read more...

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Compassionate money-makers 03-15-10

Market Update
March 15, 2010
 
Short-Term Key: Negative
Long-Term Key: -78.5 (Neutral to Negative)
 
-------------------------------------
Inside this week's update...
 
***** The world of tomorrow is a world of less.
***** Focusing on the important things, and making money from them.
***** 6 compassionate, long-term stocks.
------------------------------------
 
The U.S. economy now shows clear signs of growth. Most likely, U.S. growth will exceed 3% for this quarter and the next one as well.
 
However, the second half of this year doesn't look quite as rosy.
Read more...
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Market Update 03-02-10

The bifurcated economy continues to plod along. The manufacturing segment is doing fairly well thanks in large part to strong export demand, which has risen for seven consecutive months. The service sector, however, continues to struggle.Read more...

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Mid-Week Update 02-24-10

Despite some positive economic news that has come out in recent weeks, one area of the economy that has yet to show real signs of improvement is retail spending. American consumers are still reeling from the near collapse of the U.S. economy, and nearly 10 percent of them don’t have a job (many more if you count partially employed). This raises doubts about the sustainability of the recovery, given that personal consumption accounts for roughly 70 percent of U.S. GDP. Read more...

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