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The Chinese Yuan’s Anticipated Rise – Investment Implications (Part 1)

Tuesday, March 9, 2010
The Chinese Yuan’s Anticipated Rise – Investment Implications (Part 1)

Expected Chinese yuan improvement could provide us with an investment opportunity. However, before going there, I thought a review of challenging exchange rate math would help ensure full understanding.

To start, if I said I just bought gasoline for $3.00 a gallon, you’d know exactly what I meant. And if you saw that gas had risen from $3.00 to $3.30, you’d know that there had been a 10% increase. These pricing and percentage change conventions are ingrained into our everyday thinking. Now let’s enter the currency exchange world…

A recent Bloomberg article described the possible move in the Chinese yuan’s exchange rate. The report said that the markets expected the yuan, now at 6.8269, would rise about 3% in a year – to 6.6285. “WHAT?” you might reasonably exclaim. A quick check on the calculator shows that a move from 6.8269 to 6.6285 is a 2.9% decline. Did Bloomberg blow the calculation? Unfortunately, no.

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Long Ignored, “Upside Risk” Returns – Is “Buyers’ Panic” Next?

Friday, March 5, 2010
By John Tobey
Long Ignored, “Upside Risk” Returns – Is “Buyers’ Panic” Next?

Early Release of Monday, March 8, Write-up
This week’s news reports have been filled with better-than-expected news about the economy, industries and companies. Importantly, this good news has made its way beyond the “leading” indicators to the “coincident” ones, confirming the economy’s recuperation is on track.

The risks we are used to hearing about – e.g., depression and deflation – are about to fade away. This change exposes two very powerful drivers: upside risk and panic buying. These forces can create an atypical bull market. Rather than the usual pattern of three steps forward and one step back, the picture is like a rocket launch: vertical.

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The US Stock Market – From China Perspective, It’s A Desirable Value Play

Friday, March 5, 2010
By John Tobey
The US Stock Market – From China Perspective, It’s A Desirable Value Play

Last week, once again, US investors placed most of their equity mutual fund purchases into international stocks. They love the growth going on elsewhere, especially in emerging markets.

But wait! The news out of China is that it is investing in US stocks and real estate (“China’s investments in U.S. up sharply – The strategy seeks higher earnings by acquiring assets while prices are depressed,” Los Angeles Times, March 4).

They’re savvy money managers, so what do they see? In a word: Value.

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The Three Sides of Financial Regulation: Rules, Guidelines and Saving Face

Thursday, March 4, 2010
By John Tobey
The Three Sides of Financial Regulation: Rules, Guidelines and Saving Face

When a product or service goes bad, there are three natural reactions: To punish those responsible, to help those harmed and to ensure it doesn’t happen again. I want to address the third item, which typically involves congress and government agencies ramping up protection for users.

During such periods, we need to keep our expectations realistic and our reactions separate from our investment decisions.

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The Future – Starting To Warm Up Today’s Stock Market

Wednesday, March 3, 2010
By John Tobey
The Future – Starting To Warm Up Today’s Stock Market

Avatar and Up nominated for Best Picture Academy Award? A science fiction movie and a cartoon? Just shows you that Hollywood is… well, what?

Answering that “what?” actually gives us a window into the future stock market winners – and that future, delayed a bit by the economy’s recent turmoil, now is closing in on us.

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