Natural History

Thu, 2009/06/25 - 8:04am | Your editor

      Because I am going with my grandchildren to the Natural History Museum Friday morning, this blog is being put out the night before. Natural History is its theme.

      After being ridiculed by a reader from Thailand for trying to correlate market movements with the weather, I was pleased that the same link drew a comment from Charles Payne, the TV broker. He wrote with a similar conclusion to mine: that irrational factors do impact on market trends:

  Read more »

Mind the Gap

Wed, 2009/06/24 - 8:12pm | Your editor

      Two years ago the Canadian press barons of the Thomson family took over the venerable Reuters press service to create a trans-Atlantic hybrid. The U.S. traded Reuters American Depositary Receipt was retained along with Reuters' original London listing, for the new entity, Thomson-Reuters. The main Thomson stock traded in Canada. Thomson-Retuers is called a dual-listed company.

       In yet another example of how markets do not work efficiently, despite theories, the ADR and the London stock traded at a persistent discount of about 15% from the Thomson-Reuters common stock listed in Toronto. Theories abound as to why this discount persisted. One is that because the Canadian stock the one controlled by the Thomson family members, it is less liquid and harder to short sell. Read more »

This Too Shall Pass

Tue, 2009/06/23 - 3:05am | Your editor

      The current stock market correction is harder for internationalists like us than it is for regular S&P or Dow investors. That is because of the impact of currencies. The dollar is up again which is great if, like me, you are on vacation in a country whose currency has fallen, in this case sterling.

       But it is not so good when the market malaise combines with the rush to the greenback security blanket by world investors. This is happening now for a bunch of reasons. Elections abroad can hurt. Not only is the chaos in Iran leading world investors to seek a safe haven away from the Middle East and its risks; but also pending elections in Argentina have led citizens of that beleagured country to flee into dollars. Nunclear North Korea or Iran is terrifying; the prospect of nuclear Taliban winning Pakistan is more terrifying still. Perceptions of global political risk lead investors to a bolt-hole strategy. And the U.S. is the bolt-hole of choice. Read more »

Tacoma Rain and Gold Price

Mon, 2009/06/22 - 8:23pm | Your editor

     I got a scathingly negative e-mail from Paul Renaud (explanation of who he is below) saying I was trivializing this newsletter by writing about the possible correlation between weather and stock market performance. Actually my comments had a hidden intent.

 

     Any linkup between the weather outside and the performance of stocks clearly is irrational. And I was trying to say that markets actually are irrational.

  Read more »

Pray for Rain

Fri, 2009/06/19 - 8:15am | Your editor

    Today it is gloriously sunny, one of those perfect spring days London occasionally surprises you with. And, therefore, the British stock market is set to fall, according to the latest reader-provided correlation theory which overrides my assumption that sunny weather is good for Wall Street. It is still early in London, but by the time you read this you will know whether the sun hurt the FTSE index today.

     This insight into the important of rain is based on a table worked up by reader (and newsletter writer) Tom McClellan for our weather debate. 

NY-rainfall[1].PNG

    So for really good bullish stock market performance we should all be praying for rain! Downpours! Cats and Dogs! Floods! Inundations! Monsoons! Dam-busters! (Your editor is very proud of having been able to post this table while the webmaster was probably sound asleep.) Read more »

En voyage!

Wed, 2009/06/17 - 1:12pm | Your editor

There will be no way to test my theory that we need some sunny days in New York City for the NSYE to get back up. I am about to fly to South Africa via London and will not be able to continue to correlate the Wall St. to the weather.

As I set off into the sunrise tonight, I'm not sure if we are in a bull market correction or the start of a reversal. My instincts are that we have more upward momentum than down in the present market. Yet the day to day action is:

 99 bottles of beer on the wall, 99 bottles of beer, if one of those bottles should happen to fall,

98 bottles of beer on the wall, 98 bottles of beer, if one of those bottles should happen to fall,

97 bottles of beer on the wall etc.

Note that narrowly fluctuating markets are usually poised for a switch in direction. Since the most recent action has been downward, that may mean a boost in stock prices. There are a couple of other reasons, not based on chart patterns, that also sustain my optimism. Read more »

Developed, Emerging, and Frontier Markets

Tue, 2009/06/16 - 3:25pm | Your editor

Frontier, emerging and developed markets are the three classes into which bourses are slotted by index outfits. And index outfits are the base on which Exchange-Traded Funds stand. ETFs are supposed to provide an objective way of buying into a slice of the investment instruments proliferating in our world, and the way to define a slice is with an index.

So it is really important that Israel will be defined by Morgan Stanley Capital International as a developed country as of May 31, 2010. On the one hand it will cease being a dominant investment target among emerging markets, which it clearly no longer belongs to. But its ranking among the EAFE index countries (Europe, Australasia, Far East) will be only 14th based on current capitalization. This will force some holders tracking the indexes of MSCI to buy Israeli stocks while others sell them.

Still to be determined is the ranking of South Korea. It is currently viewed as an emerging market by MSCI too, with just as little justification in my opinion. I was last in South Korea two decades ago and it clearly was a developed country already then. Read more »

Meet Mr. Bond

Mon, 2009/06/15 - 3:42pm | Your editor

  This message is being composed in a new mechanism developed by our ever inventive webmaster to try to combine the benefits of MS Word (like accents) without picking up html codes which drive the newsletter writing site crazy. You will see how good the results are if it works. For the record I do not see any way to insert accents in this system. And again the font size seems to change without warning. So I suspect it will need work.

  We are having lots of deep and annoying discussions as I prepare for my long summer safari.

  Here is another dialog with the webmaster who wrote: What is the real value of knowing what the bonds you own are really worth if you do not want to sell them? What is the rationale of not looking at the broker's or market's real ask/bid prices if you want to sell them? Read more »

Beating S&P yields

Fri, 2009/06/12 - 3:34pm | Your editor

 

 Here’s a new theory I’m embarrassed about. Living and working about three miles southeast of Wall Street, I am depressed by the rotten wet foggy muggy sunless days we’ve had all week. Can that be why the stock market rise has stalled?

 Today I produce for all readers, including pre-subscribers, a report on a high-yield instrument that you can add, in moderation, to your portfolios. As is always the case with interest-bearing securities, a high pay-out is related to risk. (The editor of Dick Davis Income Digest, Denise Saari, asked me for an article they will publish and I am sharing it with all.)

 Her readers want to earn more return than the 4.22% currently being paid by the S&P 500. You may want to note that the payout ratio on U.S. common shares index is now below what it was last summer before the Lehman bankruptcy spooked the market. Read more »

Carping about Un-TARPing

Wed, 2009/06/10 - 3:42pm | Your editor

       They are now carping over the terms of un-TARPing.  I've been wrestling with Bloomberg and tallies by Nouriel Roubini to try to find out whether Uncle Sam will make any money on the repaid TARP funds. It is unclear. The Fed lent money which cost it nothing and got $1.8 bn in interest from TARP recipients. That, against U.S. budget deficits, is bupkas (Yiddish: nothing much).

          The real money is how much the banks pay to buy back the preferred shares they were brow-beaten by Hank Paulson into selling last year. The valuation based on that sales price will be modest indeed.

          But if the U.S. Treasury can justify auctioning off the preferred shares rather than cancelling them, there can be a bit of profit in it. Credit Suisse has figured that the value of the preferreds from the ten exiting banks and investment banks is $5.7 bn. Read more »