Somehow I think of Davy Crockett when I think of Warren Buffett this morning, reading the news. In terms of media icons, the original stock picking Fonzie has just been accused of having in his wardrobe some stolen clothes. Chachi is broken hearted. Now two inside boys trading on the sly. And there is a backdrop of dreariness. Radioactive oceans and rain and tap-water in Japan. War is spreading in Africa. It seems likely this fire will spread, but to where, next. Two revelations like this at a company are a turning point. Two bad apples can be coincidence but if there is more then there will be blood. Is someone blackmailing Warren Buffett with still other skeletons? Is the media? Attacks by those shorting a company's stock have been popular these last few years, and what would be the biggest, most unbelievable short? Or are news releases (plural) going yet now to follow with deeper revelations that this is in fact the wikileaks press-release on a major financial institution.
A new question this year now is what effect on the market would wall street's last pillar of integrity have if his integrity were revealed to be a conjuring, not unlike that wizard of Oz.
Tuesday, April 5, 2011
Wednesday, March 16, 2011
Japanese Reactor Meltdown and Tsunami Earthquake
The meltdown of the Japanese reactor after the earthquake and tsunami is being discussed as having the potential to create a global economic slowdown by disrupting corporate profits that rely on Japanese manufacturing directly or indirectly. Japan will have less electricity which will slow its manufacturing along with damaged infrastructure and factories. Many companies have built Japan into their supply chain. But the impact of the loss of capacity, much of it semi-permanently over the middle term, will also involve an increase in demand for everything used in rebuilding. America's Hurricane Katrina actually helped spur US economic output, and the same should happen in Japan. Furthermore, Japan’s spending increase can largely be funded by its citizens, and the bond markets are not yet concerned. IF the nuclear incident can be contained soon, the Japanese crisis will lead to higher spot freight shipping rates as well as increased demand from a number of industries, such as metals, building materials and equipment, and green infrastructure producers.
Friday, March 4, 2011
Midway through the Second US Quantitative Easing
Did German market-sentiment just hit an all time high? The US stock market is rising because QE2 seems to have worked, possibly by forcing money into stock markets, increasing household wealth, and thus increasing consumer spending, and, today, the official jobless rate has just fallen below 9%. QE2, a type of money creation in the US, has also increased inflation in global economies, which is leading other countries to raise interest rates. Europe has some economies still likely unable to meet debt payments, however Europe's central bank has announced it will begin increasing interest rates, following much of the developing world these past six months. Inflation in both Europe and the developing world may soon taper off, but increases in food prices (and perhaps oil) may persist.
Protests across the middle east and north african countries are creating uncertainty. About 40% of the world's energy comes from the Gulf States that are also host to a number of U.S. military bases. Any weakening of the nations on the Arabian Peninsula also strengthens extremist groups. So far terrorists have not made use of the chaos in Egypt, Lybia and elsewhere, but it seems likely they will try to engineer some mass killings. So far American interests and oil supplies have not been affected, but this could also happen.
The immediate worry for America is that house price declines have not yet bottomed and interest on US debt may increase. Especially if the QE2 program does not have a followup US growth will likely slow again. The Democrats lost control of congress in the fall, and while this could be positive for the economy, the divisive politics now, for example, threaten to shut down the federal government over budget arguments.
When considering corporate profits, increases in prices of commodities, including food, cotton and energy is resulting in cost increases for a wide array of corporations. Those with proprietary products or services and those who sell to other businesses can pass these costs on in the form of price increases. However, corporations that sell to consumers will find themselves in a less profitable situation with input costs rising and sale prices being held down by households that cannot afford the price increases with wages rising so modestly, consumer credit still fairly tight, and increased global competition. This means that current earnings forecasts for the second half of 2011 are too high and will have to be revised down.
It is easier to predict profits than to predict the actions of people. But leading up to the ending of QE2 it seems the sentiment of investors will be fragile. And democracy in the middle east may not be a likely outcome as is now assumed.
(Update. Internet investing was profitable, though these stocks are pulling back from their PE's in the 70's. NFLX was the real winner. Akami more than doubled. Now it is down to $38, even as the overall market continues to rise, but remaining at a PE of 40 it is too risky to buy. Not many obvious deals now. One possible opportunity, car maker BYD, HK:1211 dropping to a PE of 15 at $30. But China's car market is slowing.)
Protests across the middle east and north african countries are creating uncertainty. About 40% of the world's energy comes from the Gulf States that are also host to a number of U.S. military bases. Any weakening of the nations on the Arabian Peninsula also strengthens extremist groups. So far terrorists have not made use of the chaos in Egypt, Lybia and elsewhere, but it seems likely they will try to engineer some mass killings. So far American interests and oil supplies have not been affected, but this could also happen.
The immediate worry for America is that house price declines have not yet bottomed and interest on US debt may increase. Especially if the QE2 program does not have a followup US growth will likely slow again. The Democrats lost control of congress in the fall, and while this could be positive for the economy, the divisive politics now, for example, threaten to shut down the federal government over budget arguments.
When considering corporate profits, increases in prices of commodities, including food, cotton and energy is resulting in cost increases for a wide array of corporations. Those with proprietary products or services and those who sell to other businesses can pass these costs on in the form of price increases. However, corporations that sell to consumers will find themselves in a less profitable situation with input costs rising and sale prices being held down by households that cannot afford the price increases with wages rising so modestly, consumer credit still fairly tight, and increased global competition. This means that current earnings forecasts for the second half of 2011 are too high and will have to be revised down.
It is easier to predict profits than to predict the actions of people. But leading up to the ending of QE2 it seems the sentiment of investors will be fragile. And democracy in the middle east may not be a likely outcome as is now assumed.
(Update. Internet investing was profitable, though these stocks are pulling back from their PE's in the 70's. NFLX was the real winner. Akami more than doubled. Now it is down to $38, even as the overall market continues to rise, but remaining at a PE of 40 it is too risky to buy. Not many obvious deals now. One possible opportunity, car maker BYD, HK:1211 dropping to a PE of 15 at $30. But China's car market is slowing.)
Monday, August 31, 2009
Going Into Fall, Rally Falters
The calls for bottoming have come out of rebounds in Singapore, France, Germany and others, while USA continues to deteriorate, though positive headlines seem to balance those bad. The question these last few weeks has been will America come back strongly, with 4% growth, or will growth be below 2%, perhaps tipping into another recession within a year.
What seems clear to me is that Western consumers cannot spend like they did, so unless the few companies with cash begin battling for market share by expanding, we are in for slow growth. Inflation in food prices with deflation in goods and services seems likely.
Guessing what can grow...
the internet is a low cost comfort, which makes Akami at a PE of 20 and a price of $16-19 seem reasonable.
the FSYS, CELG have returned well. investing in DBA has not.
What seems clear to me is that Western consumers cannot spend like they did, so unless the few companies with cash begin battling for market share by expanding, we are in for slow growth. Inflation in food prices with deflation in goods and services seems likely.
Guessing what can grow...
the internet is a low cost comfort, which makes Akami at a PE of 20 and a price of $16-19 seem reasonable.
the FSYS, CELG have returned well. investing in DBA has not.
Wednesday, May 6, 2009
People's Psychology is Midway through the 60's
Looking over an old New York Times in my bathroom, I enjoyed the photo of a sad video maker, under headlines that amateurs are caught in the middle between Youtube and Warner. She looked so wistful and sad. The photo reminded me of a hippy signalling that the 60's were over. Recalling working for a dot com at the turn of the century, and the dreamlike multifloor stadium new-years party, the explosion of websites, all offering new services, something "like" the arrival of pot and lsd on the social scene, in fashion, and movies - definitely mind expanding, and not all positive. But now we may be getting to the point after the party on the world scene, those tulmutuous later years, just before the grim 70's.
What does this mean for people and profits, well, the profits will fall off, and the people will have to settle down, risk adverse for a period under the tarps.
Thursday, April 30, 2009
Second Spring Since the Crisis Beginning
in all economies, there's the push it through mentality, embarassing for Egypt, who read the alarmist news and killed all their pigs. I wonder how many of those were for export? And while the stock markets continue to climb, to a peak, really, it seems, with jutting peaks and crenalations. in the news, all the reporters seem to be rattled, wondering how it is that they didn't see something, and so they're making pig flu into "A" and hundreds into millions; fart - history does repeat itself.
The mentality now with regards to the final stages of the gloabl crisis is blind. I enjoyed how executives last fall spoke of the bad assets passing through the system, like a stomach bug. And now all commentators are talking about pushing it through - enough accounting, and it may be the bottom.
I recall last february asking a friend about his job in three d designing for drug company packaging, and he said the drug industry wasn't touched by anything. Now the drug companies are seeing that I put off getting my teeth cleaned. I don't even get my molar's pulled.
global capacity for auto production is said to be 90 million vehicles - demand is now 60 million.
The mentality now with regards to the final stages of the gloabl crisis is blind. I enjoyed how executives last fall spoke of the bad assets passing through the system, like a stomach bug. And now all commentators are talking about pushing it through - enough accounting, and it may be the bottom.
I recall last february asking a friend about his job in three d designing for drug company packaging, and he said the drug industry wasn't touched by anything. Now the drug companies are seeing that I put off getting my teeth cleaned. I don't even get my molar's pulled.
global capacity for auto production is said to be 90 million vehicles - demand is now 60 million.
Friday, April 24, 2009
2009 q1 bottoming?
Deterioration of trade, US home prices, and loans continue but at slower paces giving much joy. With a brief upsurge in trade and even property, March seems to have been a good month for almost everyone. Through some re-valuing of assets (or in the case of Goldman Sachs, leaving a whole month off their statement) US banks have announced profits recently. However now more than 26 banks have been nationalized throughout the US this year alone. Also in the news is China's 6% GDP growth (however electricity use fell). India's 6% GDP forecast. The Brazilian stock index outpacing the 6 week rally in US stocks. Many pundits see hot money riding a shoring up of consumer sentiment, which inevitably will pull back.
The first glimmers of deflation are seen in Spain. China's prices have lost steam amidst ballooning overcapacity (factories under 50% utilization), and while still there are increases in costs of food and services in Beijing, the Consumer Price Index fell 1.6% and 1.2% in Feb and March. With governments around the world expanding money supply, the cast for inflation fears also seems justified. For the first three months of the year, commodities do seem to have leveled, oil tracking between $40-50 a barrel. But underlying price movement here is also a bit of a question. This is a question that should be answered when trade recovers, and at what level.
This stock market rally through 1Q09 seems well orchestrated with announcements just good enough to justify the day's rally. While America's bottoming may be happening, it is more difficult to believe the good news propagated that China's continued deterioration and open-handed money grab is going to undermine the banks within a few years, maybe not unlike what happened in the west after 2001. Other Chinese economists have begun to notice the incredible overcapacity in housing now in China.
A rare bright spot has been the Chinese Bank Regulatory Commission, which has spoken out on both this lax lending and on the need for derivatives to be guided by three principles: transparency, a lack of leverage, and be created in only ways that serve a need in the economy as a whole.
The first glimmers of deflation are seen in Spain. China's prices have lost steam amidst ballooning overcapacity (factories under 50% utilization), and while still there are increases in costs of food and services in Beijing, the Consumer Price Index fell 1.6% and 1.2% in Feb and March. With governments around the world expanding money supply, the cast for inflation fears also seems justified. For the first three months of the year, commodities do seem to have leveled, oil tracking between $40-50 a barrel. But underlying price movement here is also a bit of a question. This is a question that should be answered when trade recovers, and at what level.
This stock market rally through 1Q09 seems well orchestrated with announcements just good enough to justify the day's rally. While America's bottoming may be happening, it is more difficult to believe the good news propagated that China's continued deterioration and open-handed money grab is going to undermine the banks within a few years, maybe not unlike what happened in the west after 2001. Other Chinese economists have begun to notice the incredible overcapacity in housing now in China.
A rare bright spot has been the Chinese Bank Regulatory Commission, which has spoken out on both this lax lending and on the need for derivatives to be guided by three principles: transparency, a lack of leverage, and be created in only ways that serve a need in the economy as a whole.
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