Please donate what you can to provide immediate and urgent assistance to the victims of the earthquakes in Haiti.
Some reputable organizations which are already working on the ground, are the following:
American Red Cross:
http://www.redcross.org/
(you can also receive frequent flyer miles on some airlines for your donation; for example:
http://american.redcross.org/americanairlines-pub)
Doctors without Borders:
https://donate.doctorswithoutborders.org/
Oxfam
http://www.oxfam.org/haitidonate
(through Facebook Causes: www.causes.com/haitiquake)
World Food Programme:
https://www.wfp.org/donate/haiti
(through Facebook Causes: www.causes.com/feedhaiti )
Give a loved one a Gift donation:
http://exchange.causes.com/
UN Foundation
http://www.unfoundation.org
Other options:
http://www.google.com/relief/haitiearthquake/
Find a charity with a proven track record of success in providing disaster relief and one that has worked in Haiti; avoid possible scams. Start with the list of charities on this list:
http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1004
Detailed information about the emergency response available at:
http://www.reliefweb.int
Please donate what you can today!
Thursday, January 21, 2010
Tuesday, January 12, 2010
Ten money-making ideas (and comments)
In general, I like Marketwatch's "Ten money-making ideas for 2010", by Jonathan Burton.
A few comments:
1. Some asset classes are clearly entering into a bubble, as highlighted by The Economist in this week's cover story. This would include Chinese, Argentine and Brazilian stock markets, among other emerging markets.
2. I agree that some pharmaceutical stocks are undervalued, including Pfizer.
3. In contrast, some tech stocks are clearly overvalued, including Amazon, Apple and Google. I do like Microsoft, IBM and Oracle, as Mr. Burton does.
4. I always recommend "plain vanilla" index funds, such as those tracking the S&P 500.
5. Although oil prices have been rising in response to the cold front in most of the Northern hemisphere, this is probably not sustainable. Other indicators suggest that - the current freezing temperatures notwithstanding - 2010 should be the hottest year on record.
6. I do have to disagree with the "bullish sentiments" on the U.S. dollar. The sky-high deficits do not bode well for the greenback, and already it has fallen back compared to the euro and the yen.
7. I completely disagree with the advise on emerging market index funds (such as iShares MSCI Emerging Markets, EEM). This encapsulates the bubble in emerging market stocks, and will clearly collapse in the coming months. Currently, EEM is trading near its 52-week high of 43.47, and it should come down to at least 35 within the next 6 months.
The main problem with the note is that it does not factor in a very likely rise in inflation and interest rates (except in the recommendation to avoid long-term government bonds). Alternative investments, as mentioned before on this blog, are gold and other commodity ETFs, as well as TIPS (Treasury Inflation-Protected Securities), and some staple goods ETFs.
Happy New Decade!
A few comments:
1. Some asset classes are clearly entering into a bubble, as highlighted by The Economist in this week's cover story. This would include Chinese, Argentine and Brazilian stock markets, among other emerging markets.
2. I agree that some pharmaceutical stocks are undervalued, including Pfizer.
3. In contrast, some tech stocks are clearly overvalued, including Amazon, Apple and Google. I do like Microsoft, IBM and Oracle, as Mr. Burton does.
4. I always recommend "plain vanilla" index funds, such as those tracking the S&P 500.
5. Although oil prices have been rising in response to the cold front in most of the Northern hemisphere, this is probably not sustainable. Other indicators suggest that - the current freezing temperatures notwithstanding - 2010 should be the hottest year on record.
6. I do have to disagree with the "bullish sentiments" on the U.S. dollar. The sky-high deficits do not bode well for the greenback, and already it has fallen back compared to the euro and the yen.
7. I completely disagree with the advise on emerging market index funds (such as iShares MSCI Emerging Markets, EEM). This encapsulates the bubble in emerging market stocks, and will clearly collapse in the coming months. Currently, EEM is trading near its 52-week high of 43.47, and it should come down to at least 35 within the next 6 months.
The main problem with the note is that it does not factor in a very likely rise in inflation and interest rates (except in the recommendation to avoid long-term government bonds). Alternative investments, as mentioned before on this blog, are gold and other commodity ETFs, as well as TIPS (Treasury Inflation-Protected Securities), and some staple goods ETFs.
Happy New Decade!
Tuesday, December 1, 2009
The Year of Living Dangerously
2009 will enter the history books as the first time that global GDP contracted.
It is possible that there was a world-wide fall in production during the Great Depression, but global statistics were not yet estimated at the time (as the IMF and the World Bank had not yet been created).
Another way to view it is that in 2009 more than 80 % of the countries of the world were in recession, something that had not occurred since the Great Depression.
The IMF’s World Economic Outlook (October 2009) estimates a fall in global GDP of -1.1 %.
The collapse in production would have been even worse, had it not been for the relative stability in China (GDP growth rate estimated at 8.5 %) and India (5.4 %).
The former “world economic engine”, the United States, had already entered in recession in December 2007, and will end 2009 with a -2.7 % contraction.
The contraction will be even more pronounced in Europe and Japan. In the euro zone, production will fall by -4.2 %; in UK by -4.4 %; and in Japan by -5.4 %.
The worst-performing economies worldwide are the Baltic states: -18.5 % in Lithuania, -18.0 % in Latvia, and -14.0 % in Estonia. These countries, together with Iceland, suffered a spectacular bursting of the real estate bubble, together with high levels of euro-indebtedness. Other countries with double digit contractions (depression?) were: Armenia (-15.6 %), Ukraine (-14.0 %), and Botswana (-10.3 %).
The stellar performers, apart from the aforementioned Chindia, were: Afghanistan (15.7 %), Qatar (11.5 %), Bhutan (8.5 %), Ethiopia (7.5 %), Azerbaijan (7.5 %) and Congo D.R. (7.4 %). However, in some of these cases (Afghanistan, Ethiopia, and Congo) this growth corresponds more to a recovery from their war-wracked economies.
Among the 30 OECD countries, only Poland (1.4 %), Australia (0.8 %) and South Korea (0.1 %) showed a (barely) positive growth.
The oil-exporting countries contracted by -2.1 %, whereas the net exporters of other products expanded by 2.6 %.
Latin recession
Latin America and the Caribbean are expected to contract by -2.5 % (after growing by 4.2 % in 2008). Mexico suffered a collapse of -7.3 %, as it was particularly affected by the fall in trade with the U.S.
Some Caribbean countries also suffered a severe recession (Antigua -6.5 %, Granada -4.0 %, Bahamas -3.9 %, Jamaica -3.6 %, Barbados – 3.0 %), due to the fall in tourism and the impact of hurricanes and other natural disasters.
Other Latin American countries with a dismal performance are Paraguay (-4.5 %), Argentina (-2.5 %), and Venezuela (-2.0 %; industrial production has already fallen in Venezuela by -12.4 % until June).
While quarterly GDP estimates are not yet available for the third quarter in Ecuador, GDP had fallen by -1.8 % until the second quarter, and more recently there have been severe energy shortages; thus, the contraction in GDP should reach 2 %. Unemployment in Ecuador has increased from 6.4 % in June 2008 to 9.1 % in September 2009, while investment (gross fixed capital) had fallen by 4.5 % until the second quarter.
Recovery, except for the Bolivarians
The IMF estimates a global growth rate of 3.1 % for 2010.
Among advanced economies, the best performers will be Singapore (4.1 %) and South Korea (3.6 %). China should recover a 9 % growth rate, and India 6.4 %.
The average for Latin America in 2010 will be 2.9 %. The stars in the Region will be Peru (5.8 %), Chile (4 %), Guyana (4 %), Paraguay (3.9 %) and Brazil (3.5 %).
However, the Bolivarians will continue to contract (Venezuela -3.4 %, Antigua -1.5 %) or show paltry growth rates (GDP declines in per capita terms): Nicaragua 1 %, Ecuador 1.5 %.
The four horsemen of the Apocalypse
A lingering effect of the crisis will be the increase in unemployment, together with an increase in poverty, hunger and malnutrition.
For the 30 OECD countries, average unemployment is expected to rise from 5.6 % in 2007 to 9 % in 2010 (8.6 % was already reached in September 2009). The recovery has a lagged effect on employment generation, as the initial effect is an increase in productivity, and reluctance by firms to hire long-term workers.
Latvia has reached a 19.7 % unemployment rate, and Spain is not far behind, with 19.3 %. The United States has breached the two digit barrier, at 10.2 %, the highest rate in 16 years.
The International Labor Organization (ILO) estimates that global unemployment could increase by 50 million workers, reaching a total of 230 million worldwide (a historical record). This is equivalent to 7.2 % of the workforce.
In Latin America and the Caribbean, the ECLAC and ILO estimate an average urban unemployment rate of 8.5 %, an increase of 2.5 million unemployed, for a total of 18.4 million urban unemployed. The highest levels observed were Colombia (12.6 %), Chile 10.2 %, Ecuador (9.1 %) and Argentina (9.1 %).
The increase in unemployment is reverting the significant decline in poverty rates that had been observed in recent years. Based on a daily $1.25 poverty line (adjusted by purchasing power parity, PPP), extreme poverty had declined from 1.8 billion in 1990 to 1 billion in 2008, thanks mainly to reductions in China, Brazil, India and East Asia.
Based on a $2 per day poverty line (PPP-adjusted), poverty should increase to 39 % in 2009, or 2.2 billion people, an increase of 64 million people.
In Latin America, poverty ($2 PPP per day poverty line) is likely to increase by 1.1 %, an absolute increase of 8.3 million people. This also reverts a downward trend: from 240.6 million in 2002 to 181.3 million in 2008.
The World Food Programme (WFP) estimates that hunger will afflict more than 1 billion people world-wide, an increase from 846 million in 2007.
The crisis in developed countries has also led to a reduction in remittances to Latin American and Caribbean countries, estimated by the Multilateral Investment Fund at 11 % in 2009. This is the first time that remittances have fallen since the MIF began to track them in 1999.
Stimulating policies
The OECD countries adopted a variety of stimulus packages, including the financial system bailouts; increase in public investment in infrastructure; subsidies to create (or conserve) jobs; extension to unemployment insurance; subsidies for investment in R&D, and in particular “green technologies”.
Six advanced economies (South Korea, the US, Australia, Japan, Turkey and Canada) introduced fiscal stimulus packages for 4 % of GDP or more. China (19 %) and Russia (8 %) went even further.
Part of the stimulus packages were geared towards “green technologies”, aimed at reducing greenhouse gas emissions. Among other countries, this included Australia (AUD 5.7 billion, 0.48 % of GDP); Canada (CAD 2.8 billion, 0.18 % of GDP); Germany (5.7 billion euro, 0.2 % of GDP); and the US (US$ 59 billion, 0.41 % of GDP).
Brazil, Chile and Mexico also extended unemployment insurance or subsidies to generate jobs.
Argentina, Brazil, Chile, Mexico and Peru also launched stimulus packages of fiscal investment in public works, worth a total of US$ 25 billion (or nearly 1 % of GDP).
The IMF indicates in its Regional Economic Outlook that Argentina, Ecuador and Venezuela did not have the capacity to adopt counter-cyclical polices as Brazil, Chile, Mexico and Peru did), because they had observed a pro-cyclical expansion in public expenditures before the crisis struck (Ecuador, for example, dismantled in 2007, under Correa, its “rainy day fund” based on oil income; in stark contrast with Chile’s copper sovereign wealth fund).
Venezuela and Ecuador, in particular, did not have fiscal space to launch a counter-cyclical policy. According to the World Bank, they suffered from an initial fiscal deficit; high dependence on exports of commodities; public expenditure rigidity; restrictions in access to external finance; and high financial costs.
It is possible that there was a world-wide fall in production during the Great Depression, but global statistics were not yet estimated at the time (as the IMF and the World Bank had not yet been created).
Another way to view it is that in 2009 more than 80 % of the countries of the world were in recession, something that had not occurred since the Great Depression.
The IMF’s World Economic Outlook (October 2009) estimates a fall in global GDP of -1.1 %.
The collapse in production would have been even worse, had it not been for the relative stability in China (GDP growth rate estimated at 8.5 %) and India (5.4 %).
The former “world economic engine”, the United States, had already entered in recession in December 2007, and will end 2009 with a -2.7 % contraction.
The contraction will be even more pronounced in Europe and Japan. In the euro zone, production will fall by -4.2 %; in UK by -4.4 %; and in Japan by -5.4 %.
The worst-performing economies worldwide are the Baltic states: -18.5 % in Lithuania, -18.0 % in Latvia, and -14.0 % in Estonia. These countries, together with Iceland, suffered a spectacular bursting of the real estate bubble, together with high levels of euro-indebtedness. Other countries with double digit contractions (depression?) were: Armenia (-15.6 %), Ukraine (-14.0 %), and Botswana (-10.3 %).
The stellar performers, apart from the aforementioned Chindia, were: Afghanistan (15.7 %), Qatar (11.5 %), Bhutan (8.5 %), Ethiopia (7.5 %), Azerbaijan (7.5 %) and Congo D.R. (7.4 %). However, in some of these cases (Afghanistan, Ethiopia, and Congo) this growth corresponds more to a recovery from their war-wracked economies.
Among the 30 OECD countries, only Poland (1.4 %), Australia (0.8 %) and South Korea (0.1 %) showed a (barely) positive growth.
The oil-exporting countries contracted by -2.1 %, whereas the net exporters of other products expanded by 2.6 %.
Latin recession
Latin America and the Caribbean are expected to contract by -2.5 % (after growing by 4.2 % in 2008). Mexico suffered a collapse of -7.3 %, as it was particularly affected by the fall in trade with the U.S.
Some Caribbean countries also suffered a severe recession (Antigua -6.5 %, Granada -4.0 %, Bahamas -3.9 %, Jamaica -3.6 %, Barbados – 3.0 %), due to the fall in tourism and the impact of hurricanes and other natural disasters.
Other Latin American countries with a dismal performance are Paraguay (-4.5 %), Argentina (-2.5 %), and Venezuela (-2.0 %; industrial production has already fallen in Venezuela by -12.4 % until June).
While quarterly GDP estimates are not yet available for the third quarter in Ecuador, GDP had fallen by -1.8 % until the second quarter, and more recently there have been severe energy shortages; thus, the contraction in GDP should reach 2 %. Unemployment in Ecuador has increased from 6.4 % in June 2008 to 9.1 % in September 2009, while investment (gross fixed capital) had fallen by 4.5 % until the second quarter.
Recovery, except for the Bolivarians
The IMF estimates a global growth rate of 3.1 % for 2010.
Among advanced economies, the best performers will be Singapore (4.1 %) and South Korea (3.6 %). China should recover a 9 % growth rate, and India 6.4 %.
The average for Latin America in 2010 will be 2.9 %. The stars in the Region will be Peru (5.8 %), Chile (4 %), Guyana (4 %), Paraguay (3.9 %) and Brazil (3.5 %).
However, the Bolivarians will continue to contract (Venezuela -3.4 %, Antigua -1.5 %) or show paltry growth rates (GDP declines in per capita terms): Nicaragua 1 %, Ecuador 1.5 %.
The four horsemen of the Apocalypse
A lingering effect of the crisis will be the increase in unemployment, together with an increase in poverty, hunger and malnutrition.
For the 30 OECD countries, average unemployment is expected to rise from 5.6 % in 2007 to 9 % in 2010 (8.6 % was already reached in September 2009). The recovery has a lagged effect on employment generation, as the initial effect is an increase in productivity, and reluctance by firms to hire long-term workers.
Latvia has reached a 19.7 % unemployment rate, and Spain is not far behind, with 19.3 %. The United States has breached the two digit barrier, at 10.2 %, the highest rate in 16 years.
The International Labor Organization (ILO) estimates that global unemployment could increase by 50 million workers, reaching a total of 230 million worldwide (a historical record). This is equivalent to 7.2 % of the workforce.
In Latin America and the Caribbean, the ECLAC and ILO estimate an average urban unemployment rate of 8.5 %, an increase of 2.5 million unemployed, for a total of 18.4 million urban unemployed. The highest levels observed were Colombia (12.6 %), Chile 10.2 %, Ecuador (9.1 %) and Argentina (9.1 %).
The increase in unemployment is reverting the significant decline in poverty rates that had been observed in recent years. Based on a daily $1.25 poverty line (adjusted by purchasing power parity, PPP), extreme poverty had declined from 1.8 billion in 1990 to 1 billion in 2008, thanks mainly to reductions in China, Brazil, India and East Asia.
Based on a $2 per day poverty line (PPP-adjusted), poverty should increase to 39 % in 2009, or 2.2 billion people, an increase of 64 million people.
In Latin America, poverty ($2 PPP per day poverty line) is likely to increase by 1.1 %, an absolute increase of 8.3 million people. This also reverts a downward trend: from 240.6 million in 2002 to 181.3 million in 2008.
The World Food Programme (WFP) estimates that hunger will afflict more than 1 billion people world-wide, an increase from 846 million in 2007.
The crisis in developed countries has also led to a reduction in remittances to Latin American and Caribbean countries, estimated by the Multilateral Investment Fund at 11 % in 2009. This is the first time that remittances have fallen since the MIF began to track them in 1999.
Stimulating policies
The OECD countries adopted a variety of stimulus packages, including the financial system bailouts; increase in public investment in infrastructure; subsidies to create (or conserve) jobs; extension to unemployment insurance; subsidies for investment in R&D, and in particular “green technologies”.
Six advanced economies (South Korea, the US, Australia, Japan, Turkey and Canada) introduced fiscal stimulus packages for 4 % of GDP or more. China (19 %) and Russia (8 %) went even further.
Part of the stimulus packages were geared towards “green technologies”, aimed at reducing greenhouse gas emissions. Among other countries, this included Australia (AUD 5.7 billion, 0.48 % of GDP); Canada (CAD 2.8 billion, 0.18 % of GDP); Germany (5.7 billion euro, 0.2 % of GDP); and the US (US$ 59 billion, 0.41 % of GDP).
Brazil, Chile and Mexico also extended unemployment insurance or subsidies to generate jobs.
Argentina, Brazil, Chile, Mexico and Peru also launched stimulus packages of fiscal investment in public works, worth a total of US$ 25 billion (or nearly 1 % of GDP).
The IMF indicates in its Regional Economic Outlook that Argentina, Ecuador and Venezuela did not have the capacity to adopt counter-cyclical polices as Brazil, Chile, Mexico and Peru did), because they had observed a pro-cyclical expansion in public expenditures before the crisis struck (Ecuador, for example, dismantled in 2007, under Correa, its “rainy day fund” based on oil income; in stark contrast with Chile’s copper sovereign wealth fund).
Venezuela and Ecuador, in particular, did not have fiscal space to launch a counter-cyclical policy. According to the World Bank, they suffered from an initial fiscal deficit; high dependence on exports of commodities; public expenditure rigidity; restrictions in access to external finance; and high financial costs.
Thursday, November 19, 2009
Investment competitions in France
I have entered two investment competitions sponsored by the magazine "Capital", capital.fr, in France.
One is to invest a fake 5 million euro portfolio in different currencies. In order to do so, you create a "demo" account in RTFX, through the magazine competition page, and buy or short seven different currency combinations (only major currencies, unfortunately - otherwise, I would be buying Australian and Canadian dollars :-)
The accounts with the top 20 performances win a total of 27,000 euro each month, which is then placed in a real account.
At the end of the competition, 100,000 euro is divided amongst the best 15 performers.
It is fun, and after a couple of hours of competition, I have won about 3,000 (fake, alas) euro - betting against USD, GBP and JPY, and in favor of EUR and CHF - no great science, there.
The same magazine has another competition, in which you invest 1,000 real euro in French stocks and bonds. The top 20 investors each month share 40,000 euro in prizes. To participate in this competition, you have to fill out a long questionnaire, and send a check (or transfer) for 1,000 real euro.
This is a fun way to practice your investment skills.
By the way, why is the plural of euro "euro"? In other languages, euros is used!
One is to invest a fake 5 million euro portfolio in different currencies. In order to do so, you create a "demo" account in RTFX, through the magazine competition page, and buy or short seven different currency combinations (only major currencies, unfortunately - otherwise, I would be buying Australian and Canadian dollars :-)
The accounts with the top 20 performances win a total of 27,000 euro each month, which is then placed in a real account.
At the end of the competition, 100,000 euro is divided amongst the best 15 performers.
It is fun, and after a couple of hours of competition, I have won about 3,000 (fake, alas) euro - betting against USD, GBP and JPY, and in favor of EUR and CHF - no great science, there.
The same magazine has another competition, in which you invest 1,000 real euro in French stocks and bonds. The top 20 investors each month share 40,000 euro in prizes. To participate in this competition, you have to fill out a long questionnaire, and send a check (or transfer) for 1,000 real euro.
This is a fun way to practice your investment skills.
By the way, why is the plural of euro "euro"? In other languages, euros is used!
Saturday, October 31, 2009
My picks for world's scariest stocks
The Motley Fool (fool.com) has an entertaining contest going on right now, to find the "World's Scariest Stock":
http://www.fool.com/investing/general/2009/10/30/the-worlds-scariest-stocks.aspx
My own vote:
SCARY: Crocs, Fannie Mae/Freddie Mac, Palm, Research in Motion and Sirius XM Radio (Palm and RIM basically because, in the long run, they will not be able to compete with Apple and Google).
SCARY AWESOME: Baidu, First Solar, Goldman Sachs and Pfizer.
It is interesting to note that of last year's top 10 scariest stocks, only Citigroup and First Solar underperformed the market. Starbucks actually returned 80 %, whilst Dendreon (a biotech company) returned nearly 500 %!
Happy Halloween!
http://www.fool.com/investing/general/2009/10/30/the-worlds-scariest-stocks.aspx
My own vote:
SCARY: Crocs, Fannie Mae/Freddie Mac, Palm, Research in Motion and Sirius XM Radio (Palm and RIM basically because, in the long run, they will not be able to compete with Apple and Google).
SCARY AWESOME: Baidu, First Solar, Goldman Sachs and Pfizer.
It is interesting to note that of last year's top 10 scariest stocks, only Citigroup and First Solar underperformed the market. Starbucks actually returned 80 %, whilst Dendreon (a biotech company) returned nearly 500 %!
Happy Halloween!
Thursday, October 1, 2009
Mexico, Argentina and Venezuela in severe recession; Peru and Uruguay still growing
The IMF has published its World Economic Outlook (October 2009).
http://www.imf.org/external/pubs/ft/weo/2009/02/pdf/text.pdf
It is forecasting a contraction of -2.5 % for Latin America (on average), and a recovery of 2.9 % in 2010.
The only two countries forecast to show growth in 2009 are Peru (+1.5 %) and Uruguay (0.6 %).
On the other hand, Mexico will fall by -7.3 % (and that might be an underestimation.
Argentina will contract by -2.5 %, and Venezuela by -2.0 %. Although these, again, could be underestimates.
"Especially significant export revenue losses were experienced by the energy-intensive economies of Bolivia, Ecuador, and Trinidad and Tobago".
http://www.imf.org/external/pubs/ft/weo/2009/02/pdf/text.pdf
It is forecasting a contraction of -2.5 % for Latin America (on average), and a recovery of 2.9 % in 2010.
The only two countries forecast to show growth in 2009 are Peru (+1.5 %) and Uruguay (0.6 %).
On the other hand, Mexico will fall by -7.3 % (and that might be an underestimation.
Argentina will contract by -2.5 %, and Venezuela by -2.0 %. Although these, again, could be underestimates.
"Especially significant export revenue losses were experienced by the energy-intensive economies of Bolivia, Ecuador, and Trinidad and Tobago".
Wednesday, September 16, 2009
Crank theories and Austrians
The Financial Times has an interesting article about the "unconventional schools of thought" on investing, also known as "crank theories".
These would be "fund managers, brokers and advisers who distrust the whole structure of the economy and markets and believe that returns can only be made by exploiting the inherent flaws".
One of these, Peter Schiff, is advising his clients
This seems to be too extreme. While a heavy degree of diversification is always in order, completely divesting from dollar-denominated assets, as well as U.S. equities and bonds, is absurd.
I have recommended, of course, investing a (small) portion of your portfolio in commodities and precious metals, although at $1015+ a troy ounce, gold may be in a mini-bubble.
These would be "fund managers, brokers and advisers who distrust the whole structure of the economy and markets and believe that returns can only be made by exploiting the inherent flaws".
One of these, Peter Schiff, is advising his clients
"to avoid any dollar-denominated assets and to invest in overseas stocks and bonds, particularly in Asia and especially in companies that do not have significant exposure to the US. Commodities and precious metals are also recommended".
This seems to be too extreme. While a heavy degree of diversification is always in order, completely divesting from dollar-denominated assets, as well as U.S. equities and bonds, is absurd.
I have recommended, of course, investing a (small) portion of your portfolio in commodities and precious metals, although at $1015+ a troy ounce, gold may be in a mini-bubble.
Thursday, August 27, 2009
Too many people?
There is an interesting debate in "The Economist" on whether there are too many people on planet Earth.
My perspective: All of the current crises (financial, economic, energy, climate change, food, water) are, in essence, expressions of the excessive population of the world, which will only grow worse as the 9.2 billion population figure is reached.
In some cases (food, energy, climate change) the connection is rather obvious. Prices are rising as demand outstrips supply. Greenhouse gas emissions are increasing as the population produces and consumes more and more. Other asset bubbles (housing, financial assets) are also related to the growing pull of demand.
It was appropriate that one of President Obama's first actions was to overturn Bush's ban on funding and promoting population control activities. But, as others have noted (for example, an article in Newsweek last week), perhaps it is too late to revert global warming.
My perspective: All of the current crises (financial, economic, energy, climate change, food, water) are, in essence, expressions of the excessive population of the world, which will only grow worse as the 9.2 billion population figure is reached.
In some cases (food, energy, climate change) the connection is rather obvious. Prices are rising as demand outstrips supply. Greenhouse gas emissions are increasing as the population produces and consumes more and more. Other asset bubbles (housing, financial assets) are also related to the growing pull of demand.
It was appropriate that one of President Obama's first actions was to overturn Bush's ban on funding and promoting population control activities. But, as others have noted (for example, an article in Newsweek last week), perhaps it is too late to revert global warming.
A bottom to house prices?
Paul Krugman blogs that the end is in sight for the bursting of the house price bubble.
He quotes an entry in the "Calculated Risk" blog, which states that:
Krugman himself thinks that:
"The Economist" also sees signs of continuing trouble:
"The Economist" concludes that: "
Personally, I think prices will continue to fall, especially in metropolitan areas where they had more than doubled in the 2000-2006 period (Miami, Los Angeles, Washington D.C., San Diego, Las Vegas, etc.).
He quotes an entry in the "Calculated Risk" blog, which states that:
"especially [in] the mid-to-high priced bubble areas, there will be further price declines... It seems there are many more foreclosures coming. Some of this depends on the success of the modification programs, but the Q2 MBA delinquency report shows a growing number of homeowners in the problem pipeline".
Krugman himself thinks that:
"In 2005-6 it was a slam-dunk prediction that housing prices were headed for a huge fall; that was obvious to everyone except the likes of Alan Greenspan and everyone else who mattered (and a few who didn’t, like Larry Kudlow.) At this point, squinting hard at various measures suggests that housing prices are still a bit high, but we’re within debating range. Home prices could stabilize not too far from here".
"The Economist" also sees signs of continuing trouble:
"the recovery’s foundations look shaky. Rising joblessness will continue to weigh on demand for homes. The unemployment rate, currently 9.4%, is expected to peak at more than 10% some time next year... Consumer confidence remains fragile... For those seeking a mortgage, credit is still hard to come by... With 1.8m homes already in foreclosure, a “similar amount” may be heading that way... the rise in negative equity — when a borrower’s mortgage debt exceeds the value of his home— is also fuelling foreclosures, not least because many would rather walk away than keep making payments on a home that is worth much less than the sum owed on it. Zillow.com, a property-information service, estimates that 23% of homes with mortgages are underwater. Others put it higher. A staggering 60% are submerged in Las Vegas. Deutsche Bank’s securitisation team expects negative equity to peak at 48% of total homes by 2011. That may be too pessimistic, but all agree that the number will rise further".
"The Economist" concludes that: "
Most economists expect them to fall by a further 5-10 percentage points, to their long-term trend line at roughly 40% below their peak, and not to reach bottom until some time in 2010. The pessimists predict they will go crashing through the trend-line to as little as half their 2006 high.
Personally, I think prices will continue to fall, especially in metropolitan areas where they had more than doubled in the 2000-2006 period (Miami, Los Angeles, Washington D.C., San Diego, Las Vegas, etc.).
Monday, August 24, 2009
Top sectors by Return on Equity
Cigarrettes and alcohol I can understand, but why would "Information & Delivery Services" have the top Return on Equity (ROE) by sectors?
http://biz.yahoo.com/ic/827.html
Top companies by market capitalization in this sector are Dun and Bradstreet (DNB), FactSet Research Systems Inc. (FDS), DST Systems Inc. (DST), and Interactive Data Corporation (IDC). I guess something about providing financial information generates efficiency!
Number 2 on the ROE ranking is cigarettes; third is "Aerospace/Defense - Major Diversified"; and in the seventh slot we find "Beverages - Wineries & Distillers"
http://biz.yahoo.com/ic/l/roe.html
I guess the sin investments (alcohol, tobacco, gaming, defense) are worth another look - although the FocusShares ISE SINdex Fund (PUF) is closing. There is a mutual fund in this sector, VICEX.
http://biz.yahoo.com/ic/827.html
Top companies by market capitalization in this sector are Dun and Bradstreet (DNB), FactSet Research Systems Inc. (FDS), DST Systems Inc. (DST), and Interactive Data Corporation (IDC). I guess something about providing financial information generates efficiency!
Number 2 on the ROE ranking is cigarettes; third is "Aerospace/Defense - Major Diversified"; and in the seventh slot we find "Beverages - Wineries & Distillers"
http://biz.yahoo.com/ic/l/roe.html
I guess the sin investments (alcohol, tobacco, gaming, defense) are worth another look - although the FocusShares ISE SINdex Fund (PUF) is closing. There is a mutual fund in this sector, VICEX.
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