New month, new quarter
March went out like a lamb for investors after a brief fling of bearishness on Monday. And so far the new month and new quarter are looking good. But my confidence in the global economic revival remains pretty low and as a result, I am selling my big recent U.S. gainer, GE. For what to do with the proceeds, read on.
My main concern about both GE and the recovery is based on fear of the unknowns and unknowables in their balance sheets. Today one of our better-performing Chinese stocks, fully listed and in theory regulated to the hilt by U.S. authorities, reported revisions to its 2005 and 2006 accounts because of a re-audit. Read more »
Iran go bragh
Today the improbably named Iranian, Kevin, came and fixed my computer. There was a memory shortage and now I have enough memory for the rest of my life. Kevin's firm actually built my computer so they know what it needs.
With the market up again today, the time has come to summarize some of the factors pushing the bulls vs the bears. The most bullish things this month have been the squeeze on shorts who had to cover by buying stock. Also, there is a lot of money in money market funds that is beginning to ease into the market. Read more »
What is yield?
I am writing this from the apartment because there seem to be issues with my office computer which will be repaired tomorrow by my friendly male-chauvinist local Iranian-American computer specialists. I do not have a virus but some stupid programs keep trying to load when I start up but they are not on my system. Go figure.
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Deine Zauber bindet wieder
Today I am sharing a musical note with you to compensate for the downtrend in the markets. On Wednesday I was privileged to attend a Carducci String Quartet performance. These players are not Italian, as the name might hint at. They are English and Irish, playing away to create great beauty. And of course they did play Beethoven, the rare Rasumovsky E minor Opus 52 string quartet, rumored to be unplayable. It is a pre-Tchaikowsky Russian extravaganza with Cossaks and whoops written by a German composer in Bonn who had never visited Russia early in the 19th century.
I am hopeful about humanity thanks to the newly-commissioned The Flag Project by Huang Ruo composed for the Carducci quartet. It was played by the Carducci string quarter with four pairs of Tibetan Finger Cymbals which harmonize and clash with the strings. Its composer, a Chinese-American Buddhist, chose as his subject the Tibetan prayer flags which fly over the Himalayan region, but are not part of Chinese Buddhist practice.
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Mr. Big and Prof. Bear
Mr. Big vs. Prof. Bear. Today's macro headlines pit Mr. Big of Hong Kong, Li Ka-Cheng, against NYU economics professor Nouriel Roubini. You can see this a businessman vs. academic; as old man vs younger; as China hand vs. U.S. hand; as regime buddy vs administration critic. Both lived under Communism (in China and Romania respectively) so that doesn't distinguish the pair.
Mr. Li says it is time to buy stocks if you have any money left. Prof. Roubini, the bear, says this is a mere bear market rally and will end in tears. Whom do I believe? For the record, both men have said the same things before, and have been right or wrong at different times. Mr. Li is a kind of perma-bull on China and Prof. Roubini a kind of perma-bear about Wall Street. Both have been big picture right:, Li-Ka Cheng for decades about growth, and Prof. Roubini in calling the collapse of the U.S. housing and banking system. Read more »
Moodys' marco-economist Gus Faucher has decided that the economy is going down some more but that things will soon start looking up. He forecasts more falls in GNP, more unemployment, more capital shortfalls, especially in home mortgages, and more global spead of woe. But he thinks the end of the vicious cycles are visible already.
However, thanks to the Fed's unprecedented response to the crisis, he feels fiscal stimulus around the globe will help recovery. He believes that stock markets have bottomed alreary and that housing starts are also near their low. By Thanksgiving, he expects that there will be something to be thankful for, that major financial failures will come to an end. Read more »
Yesterday's euphoria was followed by a morning after, triggered by Chinese concern at the shrinking dollar in which about 2 trillion of China's reserves are denominated. When someone tells you that the percentage rise in the Dow-Jones over the last two weeks was the highest since 1935, if you are like me you immediately think: oy, then there was 1936, and 1937, and 1938....
*We had bad news and good. First bad news bear was Perdigao which even before its rumored takeover of Sadia seems to have copied something the other Brazilian meatpacker specialized in: bad currency bets. That is the only way I can explain a loss of Reais 20 mn ($8.9 mn) in Q4 despite the firm's revenue rising 59% to Rs 3.06 bn and the EBITDA rising 93% to Rs2.465 mn. The company did something stupid in forex to wipe out those potential gains and push itself into the red.
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Here is a quiz. Who said what follows, and when?
"The income gap between the rich and the rest of the U.S. population has become so wide, and is growing so fast, that it might eventually threaten the stability of democratic capitalism itself."
The surprising answer: Alan Greenspan in 2005. So much for Ayn Rand! I learned this from a fun book I just read, Riches Among the Ruins by Robert P. Smith with Peter Zheutlin, (New York Amacom 2009). Mr. Smith is the near-legendary trader in beaten-down emerging markets debt who made amd lost several fortunes by risking his life in countries wracked by war, revolution, corruption, and confusion. Read it! Read more »
Earmarks and Fed Funds
Demand from a subscriber in Missouri is one reason we are now emailing the newsletter rather than posting it on the website. This doctor was working flat-out preparing a grant application for earmarked funds to do research into melanoma; I think he got it.
Fast forward 18 months (a guess) when the stimulus package has generated enough stimulus and has to be ended to prevent inflation. What do you think Congress will do about melanoma research funding? My guess is that it will be untouchable, unlike the bridges to nowhere, the tattoo removal subsidies, the museum of gambling, and other congressional earmarks causing so much tsktsking today. What you want in a stimulus package is indefensible subsidies, not valid ones for medical research, education, unemployment benefits, alternative energy, and other good causes. Read more »
Working Hard to Make It Easier for You
Working hard for Global Investing our webmaster has created the ability to send by e-mail the paid newsletter to paid subscribers and contributors and other members of the press. There is a risk we are taking: that you will pass this newsletter on to others without paying. When you visited the memberlodge, your arrivals were tracked to make sure that there weren't any mob arrivals; with an e-mail we cannot track who sees this newsletter. Everyone has family and friends. Please do not broadcast this newsletter. If you a member of the press, you can quote us with attribution
For the record the former publisher also apparently engaged in plagiarism along with SEC violations and other evil acts. Read more »