Archive for the ‘U.S.A.’ Category
2012 – The Year Where It Happens
What happens? Actually, there are cross roads in 2012 for a lot of the economies. Back in 2011, it was said it will be a year of 2 halves. Now in 2012, that is being brought up again. I do think volatility will be lesser in 2012 as compared to 2H 2011.
U.S.
The economy has probably picked up speed in the last few months and will grow moderately in 2012, staving off the need for additional stimulus from the Federal Reserve, a Reuters poll in December. Payrolls rose 200,000 in December, double the gain in November. A weekly measure of consumer confidence ended 2011 at a five-month high. And manufacturers reported their business in December grew at the fastest pace in six months. Companies added 1.64 million employees in 2011, the best year for the American worker since 2006, after a 940,000 increase in 2010. Even with the gains, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009. GDP grew 1.8 percent last year, according to the median forecast of economists surveyed by Bloomberg News.
Even though the jobless rate dropped to 8.5 percent, it is still very high. And the massive US$15.17 trillion debt is slowing rolling into the world’s concern. In 2012 GDP is estimated to expand by as much as 2.5 percent.
China
A fast growing economy always have numerous threats that surfaces. For China, the threat of inflation retreated somewhat with authorities considering lowering interest rates for the first time since 2008. China’s home prices fell for a fourth month in December, something the government hoped for in addressing a possible property bubble. Hard landing probability lowered with small manufacturing growth from China. However, there appears larger and not so visible signs of trouble. Local government debt through investment and financing platforms have attracted borrowings of conservatively estimated 10 trillion Yuan. The funds are used for infastructural and property projects and the key concern now is repayment.
To meet their commitments local governments need to generate income from land sales, which is fuelling unrest in the world’s second largest economy as residents increasingly complain that land is being unlawfully seized. A recent downturn in China’s housing market will also weigh on the finances of cities and provinces that had planned to pay off debt by selling land at high prices. Corruption allegations against local governments’ methods to raise money and pay debts have culminated in protests, another source of roadblock for economic growth.
The Toxic Asset Is Back
Commercial Mortgage Backed Securities “CMBS”, which was plummeted as a toxic financial asset, is taking a small step back into the market and this time with some relevancy and support. Borrowers with smaller properties and in areas outside the biggest cities are benefitting from the increase in demand for the securities increases from investors seeking higher yields.
The rebound in commercial-mortgage backed securities is making refinancing easier for property owners that have been passed over by institutions that usually hold real estate debt on their books, aiding a recovery in commercial property values. Randy Waesche, an investor in several New Orleans-area hotels, was running out of time to retire debt he took on to build a Marriott hotel in downtown New Orleans when Citigroup offered him a workable solution.
Institutions that keep mortgages on their balance sheets, including insurance companies and non-U.S. banks, focus on top-tier buildings in large metropolitan areas. CMBS issuers fare better in secondary and tertiary markets because they can get the higher rates they need to cover the costs of packaging and selling loans.
Primary markets include metropolitan areas such as New York and San Francisco that are mostly located on the U.S. coasts, while secondary and tertiary markets are comprised of smaller cities and towns. Some of these markets didn’t experience as much of a downturn because they didn’t experience as much of an upturn during the boom years. What people are really looking for is stability. You can find good, stable properties in secondary and tertiary markets.
How To Predict The Markets
Traders and investors have been dreaming of predicting the markets since the beginning of formation of trading markets. How nice will it be to know exactly how the market is going to move tomorrow, next week, next month. In fact, the whole concept of Technical Analysis is to analyze the chart representing human behaviour and predict the future movements.
Now it maybe more possible than ever, as reported in New York Times. Being able to crunch what is called big data gives someone a huge advantage. Wall Street, quant traders and hedge fund have been exploring this for years. Data includes news, commentaries, blog posts, social networking sites and tweets (on Twitter). Analysis includes which market or counter is commented upon, adjectives used, words representing sentiments, even emoticons!
Mainstream Users
There are no lack of mainstream users of this form of market analysis. Alpha Equity Management, a $185 million equities fund in Hartford, uses Thomson Reuters software to measure sentiment over weeks and pumps that information directly into his fund’s trading systems. Bloomberg monitors news articles and Twitter feeds and alerts its customers if a lot of people are suddenly sending Twitter messages about, say, I.B.M.
Predicting 11% Gain in S&P 500
“The benchmark gauge for American equities will rise 11 percent to 1,379 in 2011, bringing the increase since 2008 to 53 percent, the best return since 1997 to 2000, according to the average of 11 strategists in a Bloomberg News survey. Goldman Sachs Group Inc.’s David Kostin, the most accurate U.S. strategist this year, said sales growth will spur a 17 percent rally in the S&P 500 through the end of 2011. ”
I was quite suprised by this Bloomberg in a report.
I had mentioned about the term “New Normal” coined by Pacific Investment Management Co. (PIMCO) where the world economy grows at a slower rate than the decades that preceded this crisis years.
A rise of 11 percent in Standard & Poor’s 500 Index will bring the increase since 2008 to 53 percent, though not as impressive as Emerging Markets growth of approximate 80 percent till date. However, an 11 percent rise is a very attractive draw to finally enter the US market at a time Emerging Markets is showing signs that explosive growth has gone to a sustainable pace.
Who’s Managing Your Money?
I liked this diagram by Tommy Sikes, an advisor in North Carolina at TS Financial. It illustrates the madness that sometimes goes on in the industry.
Financial Advisor Magazine has the results of a study by Cerulli Associates which tells us that in the US, advice business has hit a wall and is not replenishing the ranks with young talent.
Market Updates October 2010
I have decided to put forth my thought on portfolio strategy first
For clients with substantial portfolio, will look into entering the US market as a diversification. I believe US market is in a better place now, but returns of US market will likely be lower than growth markets. (note: a market need not be in a good place, lesser risk more upside to rally, as can be seen previously). US equity has been in the overbought region. As shown below, the S&P 500 index has been trading within the red zone (between 1 and 2 standard deviations above the 50-day) for some time now. It seldom goes above 2 standard deviations and everytime over the last 10 years it reach, it pulls back.
I still favour Asia and emerging markets, especially some of the less mentioned regions like Indonesia, Brazil, South Korea and South East Asia. I favour markets with good domestic consumption and commodities driven mix. It does seem like the markets are very correlated nowadays.
For fixed income I favour Asian emerging market bonds and high yield bond market. Lower risk fixed income will go to SGD, AUD money markets, countries more developed but stable.
Commodities have run up quite a lot and I believe it is a long term story. Pretty hard to reach a convincing conclusion about outperforming equity markets now.
Where will S&P 500 go from here?
An investment consultancy group, Bespoke Investment Group did a recent commentary on direction of the S&P 500 recently. As shown in the chart below, after a sharp decline in late April and early May, the S&P 500 has essentially been range bound for the last three months. The question now is, what’s next?
Read More…
Fresh Graduate And Staying At The Sail?
Will you wish there was a housing crash in Singapore if you can get a 3-bedroom luxury apartment at The Sail over looking Marina Bay Sands for just $3,000 a month? The equivalent was what happened in Miami.
Brandon Klein, a 26-year-old tax accountant, stays at 50 Biscayne Boulevard, one of the luxury holiday condos built during the 2004 to 2008 boom to attract second-home buyers. Housing market has plummeted in end 2008, and with 7,000 unsold condos, almost a third of the 22,079 units in 75 buildings in Miami’s core, it has transformed Miami. With US$2,700 shared among 3 friends, Brandon is living in an apartment with 24 hour concierge, a ‘sick’ view of Downtown and a life he can never imagined. Some areas, previously only middle aged wealthy appear have transformed into dorm like residences. Interestingly, this has infused life into the vacation beach environment.
Chinese Yuan Off The Peg To US Dollar
China’s shift toward a stronger exchange rate may alter the shape of the world economy’s expansion more than its speed, economists said. The currency move is likely to affect the composition of global gross domestic product rather than the growth rate
Chinese consumers might buy more as the rising yuan boosts their purchasing power, while their counterparts in the U.S. cut back on their spending as the cost of goods imported into America rises. The shift will add 0.1 percentage point to global growth this year and next, leaving the rate at about 4 percent, according to the median of 17 forecasts in a Bloomberg News survey of economists.
China’s central bank said June 19 it will increase flexibility in the yuan, marking an end to the crisis policy of pegging to the dollar.
The Culprit In BP Oil Spill
We have met the culprit and he is us. It is us that cause the oil spill.
We — both parties — created an awful set of incentives that encouraged our best students to go to Wall Street to create crazy financial instruments instead of to Silicon Valley to create new products that improve people’s lives. We — both parties — created massive tax incentives and cheap money to make home mortgages available to people who really didn’t have the means to sustain them. And we — both parties — sent BP out in the gulf to get us as much oil as possible at the cheapest price. (Of course, we expected them to take care, but when you’re drilling for oil beneath 5,000 feet of water, stuff happens.)
