Archive for October, 2009

BOO! – Not As Scary This Year

Friday, October 30th, 2009
BOO! – Not As Scary This Year

Last October, stock markets had plummeted, bond markets were in disarray, banks were teetering and the news was terrible. It was truly a scary time. We are removed from that period, but still have fresh memories. So, now is a good time to discuss RISK and how we should view it today. »

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Be Different – Love US Stock Mutual Funds

Thursday, October 29th, 2009
Be Different – Love US Stock Mutual Funds

Any savvy shopper knows that the best time to buy swimsuits is when everyone else is buying parkas. The same applies to investing. To “buy low, sell high” successfully, we must go against the crowd at times. When many are focused on one thing, it is a time to be wary – chances are,... »

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GDP Report Could Alter Fed’s Monetary Policy

Wednesday, October 28th, 2009
GDP Report Could Alter Fed’s Monetary Policy

Although a single economic indicator usually carries little value, tomorrow’s announcement of Gross Domestic Product (GDP) growth could be the exception. The third quarter GDP growth is expected to be around 3.2% (annualized). If the growth is at that level, next week’s Fed meeting might produce the first indication of an interest rate rise. »

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Percentage Arithmetic – When Numbers Don’t Add Up

Tuesday, October 27th, 2009
Percentage Arithmetic – When Numbers Don’t Add Up

We are in a period in which percentages fill the media reports because they are so big. At the same time, many of those numbers and the way they are used can be misleading. Now is a good time to refresh ourselves on percentage arithmetic so that we draw the right conclusions. »

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US Treasury Signals Interest Rate Rise?

Monday, October 26th, 2009
US Treasury Signals Interest Rate Rise?

Most of the US Government’s $1.9 trillion in borrowing to pay for emergency programs has been through short-term securities issuance. This morning, Bloomberg reports that is about to change in a big way. The US Treasury is going to issue many more long-term bonds to move the average maturity on all US Government debt... »

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Cocoa Prices and Currency Measurement

Friday, October 23rd, 2009
Cocoa Prices and Currency Measurement

The Wall Street Journal today reported “Cocoa Hits A 30-Year High,” and gains “… soar 70% in a year.” That’s true, if one looks at prices in US dollars. But, cocoa is a global commodity, so in other places that buy cocoa, the relevant price is in their currency. For example, the European chocolate... »

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Do Credit Risk Spreads Indicate Problems or Opportunities?

Thursday, October 22nd, 2009
Do Credit Risk Spreads Indicate Problems or Opportunities?

Yesterday we used an interest rate spread to evaluate the Federal Reserve Boards activities and to get an understanding of where fixed-income investments might be headed. Today, let’s look at spreads to evaluate credit risk – the risk of bonds not issued by the US governement. These spreads can provide an insight into expected... »

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Interest Rates Without the Fed – What’s “Normal”?

Wednesday, October 21st, 2009
Interest Rates Without the Fed – What’s “Normal”?

In the Barron’s article I mentioned yesterday (“C’mon, Ben!” October 19, page 20), the effect on savers is discussed: “…consider the plight of the country’s savers, who now are getting less than 1% yields on money market funds and who are being forced to take substantial interest-rate or credit risk if they want higher... »

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The US Dollar – A Game of Chicken?

Tuesday, October 20th, 2009
The US Dollar – A Game of Chicken?

With the economy and financial markets improving, the Federal Reserve Board could be close to allowing short-term interest rates to return to “normal”. This rise could be fairly fast and go quite far. As I described in “US Dollar’s Decline? Think Interest Rates, Not Inflation,” an interest rate increase will produce a worldwide gain... »

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The Energy Battles – Who Will Win?

Monday, October 19th, 2009
The Energy Battles – Who Will Win?

In The New York Times today is a front-page article, “Energy Firms Find No Unity on Climate Bill.” The Senate is about to take on global warming, causing the energy sector to fragment, as described in the article… »

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A Measurement Lesson from Social Security

Friday, October 16th, 2009
A Measurement Lesson from Social Security

Social Security recipients will get no cost-of-living adjustment (COLA) next year because the trailing one-year Consumer Price Index change was negative. This fact brought to mind the commonly used twelve-month changes to measure economic and financial results. In normal times, such analysis is appropriate. A twelve-month comparison removes the monthly and quarterly noise and... »

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Media Reports: An Indicator Worth Watching

Thursday, October 15th, 2009
Media Reports: An Indicator Worth Watching

The challenge of successful investing is that most of what we read is too late. When the media catch hold of something, it’s usually already in the market prices. However, there is a benefit from reading the press reports: they can help us form a winning contrarian strategy – one that uses the current,... »

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US Dollar’s Decline? Think Interest Rates, Not Inflation

Wednesday, October 14th, 2009
US Dollar’s Decline? Think Interest Rates, Not Inflation

Many articles are linking the US dollar, gold and oil price moves into a forecast of high inflation to come. Starting with the premise that big government deficits lead to high inflation, those three measures are used as proof that the movement is afoot. There are problems with that analysis… »

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Forecasts of Slow Growth May Be Incorrect

Tuesday, October 13th, 2009
Forecasts of Slow Growth May Be Incorrect

In The Wall Street Journal today, White House economic adviser Lawrence Summers is quoted: “… lack of demand will be the major constraint on output and employment in the American economy for the foreseeable future.” The implication is that the economy faces a long slog to regain its footing. This popular belief in the... »

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It’s Time To Watch the Earnings Reports

Monday, October 12th, 2009
It’s Time To Watch the Earnings Reports

The third quarter earnings report season begins in earnest this week, and the numbers are especially important. They will provide a real measure of company and industry health and growth, along with a good indication of the economy’s progress. In addition, investors will use the earnings to test the reasonableness of the stock market’s... »

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