by Ronald Griess on Wed, 8 Sep 2010
The following chart compares Moody’s Aaa bond yields with the dividend yield of the S&P Composite. Notice that stock yields remained above bond yields from 1929 until the mid 1950’s.
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by Monty Guild on Wed, 8 Sep 2010
The rise of smaller emerging nations as trading powers
Recent research by UBS economist Jon Anderson illustrates how trade is being reshaped in the developing world. It will probably not surprise you to learn that between 1998 and 2008 six developing nations recorded an increase in exports (as measured by manufacturing & GDP) of more than 25 percent. What will surprise you are the names of these countries.
The emerging market countries that grew their exports by the largest percentage were not the big countries one might expect, such as China, Brazil or India. Instead, they were smaller countries, with less celebrated economies. They were Cambodia, Thailand and Vietnam in South East Asia and the Czech Republic, the Slovak Republic and Hungary in Eastern Europe.
Why did these countries record the highest increase in exports?
By Michael Ashton
As expected, the passage of the long holiday weekend served to sober up financial markets after the exuberant finish to last week. In the sobering-up process, they were helped by a Wall Street Journal article entitled "Europe's Bank Stress Tests Minimized Debt Risk." This article read, in part,
"An examination of the banks' disclosures indicates that some banks didn't provide as comprehensive a picture of their government-debt holdings as regulators claimed. Some banks excluded certain bonds, and many reduced the sums to account for "short" positions they held—facts that neither regulators nor most banks disclosed when the test results were published in late July."
Whoooops!
By Ron Paul
Last week, in the wake of another uptick in the official unemployment rate, the administration continued to claim that their economic policies were working, just not fast enough. This administration inherited an unemployment rate of 7.7% and promised a peak of no higher than 8% if their policies were followed. Not only does the administration have a funny way of ending a war, but now they claim their economic policies are successful. For whom, I wonder?
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By The Mogambo Guru
Bloomberg.com had the headline "Bank of Korea 'Under Pressure' to Boost Gold Holdings, Shinhan's Oh Says," which was perfectly understandable, although I have no idea what "Shinhan's Oh Says" means.
I suspect that Shinhan is some guy who just found out that purposely not buying gold is a really stupid idea, and who, upon realization of his rookie-like mistake, said, "Oh!"
Curious, I read further only to discover the brouhaha is that "The Bank of Korea, which has shunned adding gold to foreign-exchange reserves," is now doing so, which fulfills my original hypothesis of some guy named Shinhan making a stupid investing mistake!
By Axel Merk
In what the Wall Street Journal hails as "one of his most dramatic gestures to business," President Obama is proposing companies be allowed to write off 100% of their new investment in plant and equipment through 2011. Democrats are lukewarm to the idea as it doesn't "stimulate demand"; Republicans are shooting down the idea, too. Few seem to realize is that allowing businesses to expense their investments may be the single most effective policy tool available to promote sustainable economic growth.
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Last February, the originaly Dr. Doom himself, Marc Faber, advised the investment community to buy gold and farmland. From the UK Times:
Dr Faber, who advised his audience to pull out of American stocks one week before the 1987 crash and was among a handful who predicted the more recent financial crisis, vies with the Nouriel Roubini, the economist, as a rival claimant for the nickname Dr Doom.
Speaking today, Dr Faber said that investors, who control billions of dollars of assets, should start considering the effects of more disruptive events than mere market volatility.
“The next war will be a dirty war,” he told fund managers: "What are you going to do when your mobile phone gets shut down or the internet stops working or the city water supplies get poisoned?”
[[wysiwyg_imageupload:78:]]www.GoldForecaster.com
The present situation
The’ better-than-expected’ poor employment figures of last week were generally taken as a sign that the recovery is there, but L-shaped with a slightly rising bias. The new stimuli from government will be positive and hitting where they should. Tax breaks on new equipment and infrastructural development tastes the same as digging holes and filling them in did in the 1930’s. We have to wait and see if the economy will respond. We sincerely hope it will. But do investors even in the U.S. believe that a recovery will see a fall in the gold price? We think not!
[[wysiwyg_imageupload:73:]]You know things are bad when the New York Times entertains the idea that maybe the best thing for the housing market is to let it crash. As in, let the free market correct itself. (Paging Alan Greenspan.)
The Obama administration has two options: do a lot more or do nothing. Either prop up the housing market through herculean stimulus or let housing prices fall to their natural equilibrium.
To sustain housing prices where they are, the administration would have to bring the rest of the market up to the inflated price levels of the boom. It's hard to image how they could do this without destroying the dollar.
However, this is not the administration's main concern. Politics precedes reason. The problem is how to sell the only viable option to existing home owners and avoid the impression that the government is impotent when it comes to economic crises.
Political theater of the absurd
[[wysiwyg_imageupload:81:]]The Fed has been holding court with the barons of Wall Street and other fiefdoms of corporate America to hammer out the details of the Dodd-Frank financial reform legislation. Let's put this in perspective.
Within just months of gutting Ron Paul's audit of the Fed (HR 1207), Dodd and the Dukes of DC reversed its intent and transformed the auditee into the auditor. And all this, amusingly, in the interest of transparency. The only thing transparent is the difficulty of challenging entrenched power.
