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Market Update 06-15-10

Ameliorating worries that economic growth had slowed down, the latest reports out of China indicate that the economic giant has kept up its strong momentum. Last week, data showed that international trade surged, with exports in particular blowing away consensus expectations. Industrial production and retail sales also showed improvements as well. This positive data form China has calmed market fears, helping equities in both developed and developing markets rebound.
 
May's numbers for China inflation, however, showed the largest increase in 19 months. Property prices climbed more than 12 percent on a year-on-year basis. While it’s getting clear now that China’s government actions (e.g. raising bank reserve ratio requirements and raising interest rates and certain taxes) haven't stopped the torrid growth in the country as the markets have feared, the future course of action is, of course, unknown. Besides revisiting actions already taken, Beijing could very well finally decide to revalue their currency, especially now that exports have shown robust recovery and domestic prices continue to climb.
 
And on that front, the U.S. continues to pressure China to unpeg the yuan from the dollar.
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The only safe currency today: Market Update 06-07-10

Short-Term Key: Neutral
Long-Term Key: -10 (Neutral)
 
-------------------------------------
Inside this week's update...
 
***** Poor employment figures suggest more QE ahead.
***** Why the Fed could undermine the dollar.
***** 2 investment categories for safety and growth.
***** Our top 4 stocks today.
------------------------------------
 
The economy would have to be weak for us to start speculating on whether the Federal Reserve will start buying corporate bonds to prop things up. But that's where we find ourselves in the wake of last Friday's dismal employment figures.
 
True, hours and wages increased a bit in May. But that means little in light of the fact that the economy only created 41,000 private sector jobs.
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Mid-Week Update 05-05-09

With healthcare reform through Congress and signed by the President, there are sure to be changes in the sector’s landscape. We explore some of what we see as the surest winners in your May issue of The Complete Investor. Today we’ll cover some recent earnings reports from healthcare positions in our Growth Portfolio. Our picks are benefiting from an already well-entrenched trend: the proliferation of generic drugs.Read more...

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Why Goldman? Why now? 04-19-10

Short-Term Key: Negative Long-Term Key: -63 (Neutral)
 
           The big news that hit the markets last Friday was the announcement that the Securities and Exchange Commission (SEC) launched a civil lawsuit against Goldman Sachs. This morning, we read that the British have responded by launching their own probe into Goldman's activities.
 
           While it’s gratifying to know that the SEC actually does take steps to punish financial crimes on occasion, we can't help noting that the timing of this move serves a political agenda.
 
           At the moment, President Obama and the Democratic Party are attempting to push a financial reform bill through Congress aimed at preventing future financial disasters like the one we just went through. Meanwhile, the Republicans have united in fierce opposition to the bill. The biggest headache for the Democrats is that their 59 Senate seats do not give them the power to get bills passed, while the Republicans' 41 seats gives them the power kill legislation. The Democrats desperately need one Republican to side with them on this issue.
 
The Republicans generally oppose government regulation on principle.
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Market Update 04-07-10

Treasury Secretary Tim Geithner announced earlier this week that the department’s report on global currency policies, originally planned for an April 15th release, will be delayed. The report could have concluded that China is a currency manipulator and may have resulted in sanctions against China—given the mounting pressure in Congress to do so. The delay is intended to give China room to let the yuan float more freely without appearing to wilt to American pressure.
 
The belief is that if China reevaluated the yuan, it would reduce the U.S.’ trade imbalance and improve the competitiveness of American products overseas. However, it could have unintended consequences. The appreciation of the yuan would increase the purchasing power of the currency, letting China import more commodities for less. After China first unpegged the yuan to the dollar in 2005, commodity prices climbed more than 100 percent until peaking in 2008. Given China’s even higher commodity demand now, it would not be surprising to see history repeat itself. If commodity prices skyrocket again, it could cripple the already fragile recovery of our economy. In essence, getting China to reevaluate the yuan may not be the clear win that U.S.
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Market Update 03-31-10

Although the EU and the IMF have promised to serve as safety net for Greece, the troubled country has a long road ahead. By the end of May alone, Greece will need to raise nearly 12 billion euros to cover financial obligations. For the year, it will need to borrow 32 billion euros. Earlier sales of Greek sovereign debt this year proved, not surprisingly, that investors demand a hefty return for risking their money in Greek debt.Read more...

Headwinds and Crosswinds: 02-25-10

This week's news developments clearly illustrate the headwinds and crosswinds affecting the financial markets these days. 

On the plus side, Federal Reserve chairman Ben Bernanke told Congress yesterday that the Fed won't start raising short-term interest rates anytime soon, as we've advised you for many months now. 

In addition, corporate profits have been strong. While investors haven't been overly impressed, rising earnings coupled with low interest rates and somewhat lower stock prices create improving investment values. 

The negative side, of course, is that the economic recovery likely will remain sluggish for quite a while, not only in the U.S. but also in the rest of the so-called developed world, as we explain below. 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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Stock Market's Wall of Worry: 01-28-10

A bull market climbs a wall of worry. But the wall of worry has just gotten taller. 

Since peaking at 1150 on Jan. 19, the benchmark Standard & Poor's 500 index has dropped 6 percent in seven trading days. This has occurred despite generally positive corporate earnings. 

With the decline has come a rebound in the Chicago Board Options Exchange's volatility index, or VIX. The Fear Index jumped from a low 17.5 on Jan. 19 to as high as 28 just three days later and has since been in the 23-26 range. Still, this level of volatility is only about average for the last 10 years.

Good news on corporate earnings with a poor stock-market response is a clear sign of trouble, at least in the near term. To be fair, "good" isn't good enough after the stock market has soared some 70 percent in 10 months. And the news hasn't been all good, to say the least. Read more...

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Going Where the Money Is

Awash in cash, banks are looking to spend it on tech and outsourcing

 
One of the brightest spots in recent years has been the banks. Their success has left them with a lot of cash that they are eager to put back into their business. At the same time, increasingly they are looking to use new technology to service customers and to further outsource many of their operations. According to market research firm IDC, the U.S. banking industry spent $46.9 billion on IT last year and this is expected to increase to over $60 billion by 2007. Two companies well-situated to capitalize on these trends are InterCept and S1.
 
InterCept offers a broad range of technologies and services specifically geared toward financial institutions and merchants.
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