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New Ratings Agency Rules From the SEC
As part of the implementation of the Dodd-Frank financial industry overhaul, the U.S. Securities and Exchange Commission (SEC) yesterday proposed new rules for credit ratings agencies. These are not the agencies that rate consumer credit. No, these are the folks who rate the various financial products sold by the big investment bankers. Things like mortgage backed securities, for example. During the Real Estate Bubble ratings agencies had rampant conflicts of interest. Investment banks selling investments paid the ratings agencies to rate...
read moreManufacturers Approaching Capacity is Employment Good News
News today from several major sources, The Wall Street Journal and Bloomberg Business Week, are both reporting that manufacturers in the United States and abroad are approaching capacity. Importantly, the news is not simply reporting the content of a press release from a governmental statistical agency. Instead, the news is coming from reporters that are paying attention to corporations. These businesses are announcing their need to build new productive capacity to meet growing demand for goods and services worldwide as gross domestic...
read moreIntuitive Assessment of Investment Climate
One of the primary lessons of The Intuitive Investor is how to use your intuition to assess the investment landscape. On occasion I have provided intuitive assessments of major events, especially when facts have been obscure, or worse, very scarce. For example, just this year I have provided an intuitive assessment of Egypt, an intuitive assessment of the Middle East, and an intuitive assessment of Japan. I am proud to say that investors using these assessments would have invested in moments where investors, in general, were selling. ...
read moreSilver Market’s Rise Due to Chinese Speculation
Yesterday morning the Financial Times ran a story about Chinese retail investors being the source of the rocketing prices for silver worldwide. I have been saying nationally that commodities are in a bubble. Want proof of the froth? On the Shanghai Gold Exchange, where precious metals futures are traded, turnover in silver contracts (i.e. the number of contracts bought and sold) has risen 2,837% (!!!!!) since the beginning of the year. Oh, my God! Let’s put that in comparison in terms of a bubble. Those silver contracts that the...
read moreEconomic Recovery in the Eurozone Takes Hold
Today gross domestic product (GDP) figures for the Eurozone’s first quarter were announced. Data show that compared with the same period last year the Eurozone economy grew 2.5%, and compared to the fourth quarter 2010, grew 0.8%. These results compare to consensus expectations by economists of 2.2% and 0.6%. Analysis: European economic growth has lagged the growth of the United States for many, many years. In fact, even in periods of global economic expansion the European economy sometimes barely grows at all. So that the European...
read moreCommodities Sell Off = Stock Market Sell Off?
Yesterday the Dow Jones Industrial Average fell the most it has in two months. Ostensibly the sell off was because of the dramatic fall in commodities prices, including oil, gold and silver. To me this is evidence of strange trading forces at work, rather than fundamental problems with the U.S. economy. Let’s think about it. If the cost of fuel falls isn’t that good for almost the entire U.S. economy? After all, the only businesses who cheer high oil prices are the oil companies themselves. Every other business and every...
read moreMicrosoft’s Purchase of Skype Won’t Change Company
Late Sunday it was announced that Microsoft purchased Internet phone service provider, Skype, for $8.5 billion. In my opinion, the ultimate effect for Microsoft will be neutral. Let me explain. 1. Skype is a wonderful service, and their founder and CEO is one of my favorite executives across business. I saw him present at an industry conference over ten years ago and was blown away by his business model, persistence, acumen, vision and intelligence. My whole family uses Skype quite readily and happily. But let’s look at why we use...
read moreGermany’s Exports Hit All-Time High
This morning Germany announced that its exports – the overwhelming driver of its economy – hit an all-time high in the month of March. Specifically, the EU’s most powerful nation recorded $142 billion in exports. This achievement was a full 7.3% than in February (!) and indicates a surging interest in German goods. By contrast, German imports of goods, while also up, only increased by 3.1%. Clearly the balance of trade is very favorable for Germany. Why am I reporting German export figures, practically a first for the...
read moreU.S. Job Creation Soars
Department of Labor calculations estimate that the United States’ job creation soared in the month of April. Specifically it added a massive 244,000 jobs. A broad swath of economists had expected only 185,000 jobs would be created. Private Sector job creation was the strongest, adding 268,000 jobs. Last month’s jobs created figure was revised upward by a modest 5,000 jobs. Lastly, the unemployment rate rose to 9.0% vs. expectations that it remain flat at 8.8%. Analysis: That the economy has added a quarter of a million jobs...
read moreSpeculators Are Why Commodities Are So High
New York’s COMEX exchange has upped by 84% the amount of money that must be on deposit by speculators in order for them to borrow money to buy silver futures. This is just the latest rise in margin costs (i.e. borrowing costs) implemented by the COMEX since April 25th. The result? Catastrophic losses on silver investments. I have been saying for many months now that commodities, especially gold and silver, are over valued and that the huge rise in value has not been tied to fundamentals, but to speculative froth. In fact, I am on...
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