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The Rising Cost of Commodities on the Consumer
by Team of Bespoke Investment Group,
The price of oil is up sharply today, and is trading above $86. While commodity traders love the rise in oil prices, consumers aren't nearly as enthusiastic, especially ahead of the summer driving season. To them, higher prices mean more pain at the pump, and in their wallets. Indeed, while low food and energy prices continue to serve as a rebate for consumers, that rebate has been dwindling since March 2009, and could soon turn into a tax, as they were from the beginning of 2008 through the summer of that year.
Corporate Cost Of Health Care: Announced Charges as of 3/31
by Team of Bespoke Investment Group,
Since Congress passed the health care reform bill on March 21st, we have seen numerous companies announce that they will take charges to earnings. The charges stem from one aspect of the legislation that eliminates deductions for tax-free subsidies companies receive from the government for providing prescription drug benefits to retirees. Due to the material and quantifiable impact that the bill will have on their business and financial results, the companies are required by law to disclose it. So far at least fourteen companies have announced charges totaling at least $1.6 billion.
Yield Curve Back Near Highs
by Team of Bespoke Investment Group,
With long-term interest rates rising and short-term interest rates contained, the rising yield curve is once again starting to receive attention. The Fed defines the yield curve as the difference in basis points between the yield on 10-year and 3-month U.S. Treasury bonds. High values in the yield curve are positive for the economy, while an inverted yield curve is a harbinger of weakness. The curve is currently at the high end of its historical range, and has made multiple attempts to break through the 380 bps level in the current period.
China's 2010 Growth Forecasts Upgraded by the World Bank
by Team of American Century Investments,
The World Bank raised China's 2010 growth forecasts to 9.5 percent last week from the 8.7 percent projected in November, but also predicted that China's growth will slow somewhat in 2011, to 8.7 percent. It also recommended higher interest rates and a stronger currency for China amidst growing concerns over rising inflation and a property sector bubble. The Chinese government emphasized the need for structural reforms in recent presentations to the National People's Congress.
Barron's' Pension Warning Doesn't Change Our Pension Outlook
by Team of American Century Investments,
A recent Barron's magazine piece about unfunded public pension liabilities painted an otherwise solid bond sector with a broad negative brush. While pension liabilities are a serious problem for state and local governments, they are neither a new problem nor an immediate problem, and they are not the most pressing issue that municipalities face in the post-recession environment, according to American Century Investments credit research director David Moore. Despite unfunded pension liabilities, no state runs a serious risk of default on its general debt obligation.
Latest Unemployment Report Reveals the Growing Problem of the Long-Term Unemployed
by Team of American Century Investments,
Four out of 10 unemployed workers are designated as long-term unemployed, meaning that they have been seeking a job for at least six months. This rate exceeds any other since the 1940s. As we have evolved towards a service- and knowledge-based economy, people with at least an undergraduate degree have fared better both in terms of lower unemployment rates and higher wages. This trend has become even more pronounced during the recession that began in December 2007 relative to the past two periods of peak unemployment in June 1992 and 2003.
Headlines Fail to Derail Munis
Municipal bonds of all maturities enjoyed positive returns in February, outpacing their U.S. Treasury counterparts. Money market rates remain low, however, encouraging investors to move further out on the municipal curve to capture yield. While state and local governments continue to face fiscal challenges and worries over bond defaults, Moody's released an updated default rate study that continues to point to the relative safety of municipals.
What's Next for the High Yield Market
by Team of Pioneer Investments,
The economy can achieve 3 to 4 percent growth in 2010. This growth rate, along with low interest rates, should provide a favorable environment for riskier fixed income asset classes such as high yield. Corporate profit margins, cash flows and productivity are all near record levels relative to prior cycles, and balance sheets are relatively healthy. This puts companies in a good position to capitalize on the recovery. A strategy that balances high yield, equity, convertible and bank loan securities is prudent, given the anticipated investment environment.
Underwater in the Housing Market
by Team of American Century Investments,
The number of negative equity mortgages, situations where the borrower owes more on their mortgage than the current market value of the home they bought, increased substantially since the housing bubble burst in 2007. While these homeowners continue to make payments, there is a weak correlation between how badly their mortgages are underwater and foreclosure rates. This is also a problem because many middle and lower income people use their homes as their most important source of retirement savings. In addition, negative equity may diminish labor mobility at a time of high unemployment.
What Happened to Nanotech?
by Team of Bespoke Investment Group,
Nanotech was one of the next big things during the 2002-2007 bull market, but has faded in recent years. Stocks and ETFs related to nanotech lost investor interest, and the sector has seen a drop in news coverage. Unlike many crazes during the internet bubble, however, nanotech does serve a purpose. If the bull market continues, it will be interesting to see whether nanotech resurges.
Preferreds are Preferred
by Team of Bespoke Investment Group,
The ETF that tracks U.S. preferred stocks has soared to bull market highs in recent days. Preferred stocks fell more than common stocks during the 2007-2009 bear market, but since March 2, 2009, the iShares S&P U.S. Preferred Stock Index ETF is up 153 percent, while the S&P 500 is up 66 percent.
Intrade Odds for Obamacare to Become Law by 6/30/2010
by Team of Bespoke Investment Group,
The odds for Obamacare to become law by June 30, 2010 jumped to 60 percent on Intrade a few days ago after the president pushed for the Senate to use reconciliation to pass reform, a procedure that requires only 51 votes and cannot be filibustered. Before then, odds ranged from 30 to 35 percent.
Recommended Bond Allocation
by Team of Bespoke Investment Group,
Have analysts become more conservative, or will the recommended bond weighting continue to fall as the market goes up? Wall Street strategists currently recommend a 30.5 percent weighting in bonds. Before the run-up in treasury bonds during the financial crisis, the recommended bond weighting ranged between 15 and 20 percent. As bond prices rallied, strategists increased their recommended weighting. Bond prices peaked in December 2008, however, and have been drifting lower since the onset of the current bull market in stocks.
Eurozone's Economic Recovery Loses Steam in Fourth Quarter
by Team of American Century Investments,
Economic growth in the 16-country eurozone stalled in the fourth quarter of 2009, raising concerns about the durability of the region's nascent recovery. Output expanded just 0.4 percent on an annualized basis in the fourth quarter, down from 1.7 percent in the third quarter. Meanwhile, after negative growth in 2009, the world economy is projected to expand by 3.9 percent in 2010 and 4.3 percent in 2011. Asia and emerging markets will lead the charge, while advanced economies such as the eurozone will remain sluggish and dependent on government stimulus measures.
Stock Market Performance and Inflation
by Team of American Century Investments,
The world is awash in liquidity as a result of the recent financial crisis and subsequent risk of deflation. Many investors are concerned that this "cheap money" will result in rising inflation. Historical S&P 500 data suggests, however, that the highest price to earnings ratios occur when inflation is between 1 percent and 6 percent.
Where Do We Go From Here?
by Team of Fred Alger & Company,
Investors are showing signs of uncertainty amidst uneven economic growth. The S&P 500 is down 5.64 percent from its peak on January 19. Alger thinks the market pause could go on until well into the second half of 2010, but predicts a significant rally in U.S. equities and a continuation of the bull market in 2011.
A Speeding Ticket
by Team of Beacon Pointe,
Most indices are down from their January highs. But this pull-back is more of a speeding ticket than a suspended license, and markets will soon be able to travel cautiously toward their destinations. This environment will favor investors with a focus on security selection, a strong research effort and unwavering valuation discipline.
Taxes Paid by the Highest-Paid Americans
by Team of Bespoke Investment Group,
A recent IRS report provides ammunition for both sides in the debate over whether the ultra-rich should pay higher taxes. The 400 top U.S. earners accounted for 2.1 percent of all taxes paid in 2007, up from 1.2 percent in 1997. They paid an average tax rate, however, of 16.6 percent, down from 24.2 percent ten years earlier. Their average income in 2007 was $137.9 million.
Sirius Breaks (Above) the Buck
by Team of Bespoke Investment Group,
Sirius XM Radio's stock broke the $1 mark for the first time since September 2008. Shares rose by 1,900% since trading for as low as five cents last February, and are up 80 percent since their low on December 22. An improving auto sector may be driving up share prices.
Growing Problems in the Residential Real Estate Market (Part 2)
by Team of American Century Investments,
The problem of growing housing delinquencies has spread to states not originally affected in the sub-prime crisis and to higher-quality prime mortgages as the nation?s unemployment rate has reached double-digit levels. This commentary looks at the failure to-date of policy initiatives intended to stem defaults, and at the range of possible future policies.
Historical S&P 500 Sector Weightings
by Team of Bespoke Investment Group,
Bespoke Investment Group reviews historical sector weightings in the S&P 500, and says the Technology currently has its highest allocation since the internet bubble burst in 2000, at 19.2 percent. Financials rank second at 14.4 percent after falling to 8.9 percent in March 2009. Consumer Staples still weigh bigger than the Consumer Discretionary sector as they have since 2007, but Consumer Discretionary could overtake Consumer Staples once again if the bull market continues.
Fixed Income Investment Outlook January 2010
by Team of Osterweis Capital Management,
Osterweis Capital Management says in its fixed income investment outlook that increased investor appetite for risk drove up prices of high-yield bonds, equities and other financial assets in 2009. Investors may want to avoid Treasury bonds and other underweight longer-dated assets in order to avoid the impact of a possible interest rate hike.
Equity Investment Outlook January 2010
by Team of Osterweis Capital Management,
In its equity investment outlook, Osterweis Capital Management says it expects the economy to continue expanding this year, but notes that it might face headwinds from a double dip in the housing market and an unwinding commercial real estate sector. Stocks recovered sharply last year in the face of expected profit recovery, but may but may suffer temporary setbacks if the economy disappoints.
Bespoke's Sports Illustrated Swimsuit Issue Indicator
by Team of Bespoke Investment Group,
Bespoke Investment Group says the appearance of American model Brooklyn Decker on the cover of this year's Sports Illustrated swimsuit issue may be a good sign for investors. The S&P 500 remained positive in 13 out of 16 years an American appeared on the cover since 1978 and posted average returns of 10.6 percent. It stayed positive in 12 out of 16 years an American did not appear on the cover, and posted average returns of 8.2 percent.
Growing Problems in the Residential Housing Market
by Team of American Century Investments,
American Century Investments says in its weekly market update that rapidly rising delinquencies and foreclosures on residential housing could soon eclipse unemployment as an object of focus for economists, policymakers and the public. Delinquencies on loans secured by one- to four-unit properties, including home equity lines of credit, have soared since the end of 2007 to approximately 10 percent of the total value of mortgages.
Tweedy Browne: Cautious in the Short Term, Optimistic in the Long Term
by Team of Tweedy, Browne Company,
Robert Huebscher recaps a recent webinar by investment firm Tweedy Browne. The company's four managing partners explained their focus on downside risk, expressed a preference for high-quality dividend-payer stocks and
noted their emphasis on developed markets rather than emerging markets. The partners said they were optimistic about recovery in the long term, but cautious about the short term.
Sovereign Debt Default Risk
by Team of Bespoke Investment Group,
Since the beginning of the year, sovereign default risk (measured by credit default swap prices) has risen for Portugal, France, Iceland, German and Australia. It's even risen for the US - by a greater percentage than for either Dubai or Greece.
Country Stock Market Performance
by Team of Bespoke Investment Group,
Worries about a few EU countries and the Euro currency have rattled global equity markets. Sovereign debt credit default swaps have been rising sharply for countries such as Greece and Portugal in recent days. Equity markets in Spain, Portugal, and Hungary are down more than 5% today alone. They highlight the year to date performance and performance since the 1/19 peak for the major equity markets of 81 countries around the world.
China's Strong GDP Up 10.7% in the Fourth Quarter, but is Inflation on the Horizon?
by Team of American Century Investments,
American Century looks at the sources of growth in the Chinese economy its future projected growth rate. Easy credit and stimulus measures are potentially leading to a real estate bubble and inflation. Exports from China grew in December, following 13 months of decline, and ??the world may have to continue to rely on China as the biggest engine of economic growth.?
Results 2,701–2,750
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