by Market Shadows - October 8th, 2015 11:53 am
Financial Markets and Economy
Zambian Finance Minister Alexander Chikwanda is seeking to restore confidence in the economy to help reverse the world’s worst currency, record borrowing costs and sliding growth. The two things that matter the most to the outlook are the copper price and power supply, which he has little control over.
The World Bank is betting on mass migration driving the global economy (Business Insider)
The impact of mass migration has hit headlines around the world in recent months, but according to the World Bank, the benefits of large-scale immigration could drive forward the global economy in the coming decades.
In a major new report — released to coincide with the start of the World Bank and International Monetary Fund's annual meetings, this year taking place in Lima, Peru — the bank argues that the current mass migration happening throughout the world can be a major driver for the global economy in years to come.
Saudi billionaire Prince Alwaleed Bin Talal has given Twitter a big vote of confidence just months after suggesting CEO Jack Dorsey should step aside.
Alwaleed has increased its stake in Twitter over the last six weeks to 5.17%, making him the second biggest shareholder after former CEO and co-founder Evan Williams.
The boost for palladium prices from a scandal at Volkswagen AG over car pollution tests will probably be sustained as the metal’s biggest monthly jump in two years brings it into line with supply and demand, according to GMK Norilsk Nickel PJSC, the top producer.
The Financial Conduct Authority launched a big review into the British banking sector to make sure
by Market Shadows - October 8th, 2015 12:55 am
Financial Markets and Economy
Volkswagen shares are popping on its disaster-recovery plan (Business Insider)
Volkswagen shares are popping in Frankfurt on Wednesday morning after the troubled carmaker spelled out how it was going to recover from the emissions-rigging scandal that has engulfed the company.
S&P 500 under 1,800? That’s better news than you think (Market Watch)
All’s well when oil’s well, right? That may be the strategy in the early going for this stock market, which is looking cheery, despite the fact the S&P 500 got its winning streak derailed last night.
But soon enough, earnings will be in your face, possibly batting this market around. Tim Knight, blogging for Slope of Hope, is purveying a little doom. He says as investors “head into another earnings season, the bulls better pray to whatever pagan gods they worship that company after company magically defy the downturn that the economy is quite obviously entering.”
The yen rises, crude oil extends its winning run andSABMiller sharesrise on AB InBev Bid.
Samsung had an awesome day in Korea's stock market, after announcing bumper results for Q3.
Here’s my definition of technical analysis (TA), the dubious belief that squiggly lines on a chart will predict price moves. While some signals work sometimes, generally TA is just cartoons for investors who can’t be bothered with fundamental analysis.
Like most cartoons, technical analysis is entertaining but not much help.
“Dow Theory,” a trusty old gauge for technicians, offers a great example right now.
As the investing world rushed last week to sell anything related to Glencore Plc, traders in the credit market turned to
by ilene - October 7th, 2015 6:11 pm
Courtesy of Robert Reich
The Washington Post just ran an attack on Bernie Sanders that distorts not only what he’s saying and seeking but also the basic choices that lie before the nation. Sanders, writes the Post’s David Fahrenthold, “is not just a big-spending liberal. And his agenda is not just about money. It’s also about control.”
Fahrenthold claims Sanders’s plan for paying for college with a tax on Wall Street trades would mean “colleges would run by government rules.”
Apparently Fahrenthold is unaware that three-quarters of college students today attend public universities financed largely by state governments. And even those who attend elite private universities benefit from federal tax subsidies flowing to wealthy donors. (Meg Whitman’s recent $30 million donation to Princeton, for example, is really $20 million from her plus an estimated $10 million she deducted from her taxable income.) Notwithstanding all this government largesse, colleges aren’t “run by government rules.”
The real problem is too many young people still can’t afford a college education. The move toward free public higher education that began in the 1950s with the G.I. Bill and was extended in the 1960s by leading public universities was reversed starting in the 1980s because of shrinking state budgets. Tuition has skyrocketed in recent years as states slashed education spending. It’s time to resurrect that earlier goal.
Besides, the biggest threats to academic freedom these days aren’t coming from government. They’re coming as conditions attached to funding from billionaires and big corporations that’s increasing as public funding drops.
When the Charles Koch Foundation pledged $1.5 million to Florida State University’s economics department, for example, itstipulated that a Koch-appointed advisory committee would select professors and undertake annual evaluations. The Koch brothers now fund 350 programs at over 250 colleges and universities across America. You can bet that funding doesn’t underwrite research on inequality and environmental justice.
Fahrenthold similarly claims Sanders’s plan for a single-payer system would put healthcare under the “control” of government.
But health care is already largely financed through government subsidies – only they’re flowing to private for-profit health insurers that are now busily consolidating into corporate laviathans. Anthem purchase of giant insurer Cigna will make it the largest health insurer in America;
by Market Shadows - October 6th, 2015 9:49 pm
Financial Markets and Economy
Big U.S. companies are holding more than $2.1 trillion in profits overseas and are avoiding paying about $620 billion in U.S. taxes, according to a study released Tuesday.
The study by liberal groups Citizens for Tax Justice and the U.S. PIRG Education Fund found that nearly three-quarters of Fortune 500 companies had at least one tax-haven subsidiary in 2014. Bermuda and the Cayman Islands were the most popular tax-haven destinations.
SunEdison Inc. Chief Executive Officer Ahmad Chatila has some explaining to do, after announcing plans to fire 15 percent of his workforce. It’s his latest move to reverse anindustry-worst 70 percent slump in market value over three months.
On August 20, the S&P 500 snapped its streak of 211 sessions without a 5% pullback. This was the longest such streak since March 31, 2003 to February 11, 2004, when the benchmark index went 219 days without a 5% drop.
The American energy boom is finally showing some cracks from the crash in oil prices.
U.S. oil production decreased by 120,000 barrels per day in September from August, according to a report released by the Energy Information Administration on Tuesday.
Exelon Corp. reached a settlement Tuesday with Washington’s mayor on its $6.8 billion proposal to buy utility Pepco Holdings Inc., bringing it closer to a deal that has been in the works for more than a year.
A pricey valuation is no sign of a dying bull market (Business Insider)
Most investors consider the stock market's valuation before making their decisions to buy or sell.
by ilene - October 6th, 2015 2:30 pm
Courtesy of Joshua M. Brown
Paradoxically, or at least counterintuitively, it turns out that falling oil prices are a net negative for corporate profit margins. This despite the fact that energy is an input cost for making and moving stuff around in the economy. A rational person would guess that a lower energy cost is an overall positive for corporate profit margins, but it actually doesn’t end up working that way.
In stock market terms, the benefits of a lower oil / gas prices do not boost profit margins enough to offset the drag on margins coming from the energy sector, which is something like 8% of the S&P 500’s market cap weighing right now (down from 12%).
Here’s Liz Ann Sonders, Chief Strategist at Charles Schwab, on the right way to think about corporate profit margins – which, net of energy companies, are still sitting at all-time record highs:
Profit margins under pressure
From an all-time high of over 9% reach in 2014, S&P 500 profit margins have dropped by 60 basis points over the past year and now sit at 8.5%. Declines of this magnitude are rare outside of recessions, other than in 1985, which was the only time in the past 40 years margins dropped this much without an attendant recession according to Barclays. It’s an important reference point because profit margins fell in 1985 due to a 60% plunge in oil prices; while profit margins outside of the energy sector remained stable.
Over the two years, energy sector net profit margins have imploded from over 8% and are now on their way toward 2%. On the other hand, the collective revenue-weighted net profit margin of the other nine S&P sectors has continued to trend marginally higher and sits near an all-time high, which means earnings pressure will also be mostly felt within the energy sector.
More from Liz Ann on the possibilities of an earnings recession in her latest commentary below:
Picture via Pixabay.
by ilene - October 6th, 2015 2:10 pm
Courtesy of Wade of Investing Caffeine
This article is an excerpt from a previously released Sidoxia Capital Management complementary newsletter (October 1, 2015). Subscribe on the right side of the page for the complete text.
“Anyone can run a hundred meters, it’s the next forty-two thousand and two hundred that count.”
Investing is a lot like running a marathon…but it’s not a sprint to the retirement finish line. The satisfaction of achieving your long-term goal can be quite rewarding, but attaining ambitious objectives does not happen overnight. Along the hilly and winding course, there can be plenty of bumps and bruises mixed in with the elation of a runner’s high. While stocks have been running at a record pace in recent years, prices have cramped up recently as evidenced by the -2.6% decline of the S&P 500 stock index last month.
But the recent correction should be placed in the proper perspective as you approach and reach retirement. Since the end of the 2008 Financial Crisis the stock market has been racing ahead at a brisk rate, as you can see from the total return performance below (excluding 2015):
This performance is more indicative of a triumph than a catastrophe, but if you turned on the TV, listened to the radio, or surfed the web, you may come to a more frightening conclusion.
What’s behind the recent dip? These are some of the key concerns driving the recent price volatility:
- China: Slowing growth in China and collapse in Chinese stock market. China is suffering from a self-induced slowdown designed to mitigate corruption, prick the real estate bubble, and shift its export-driven economy to a more consumer-driven economy. These steps diminish short-term growth (albeit faster than U.S. growth), but nevertheless the measures should be constructive for longer-term growth.
- Interest Rates: Uncertainty surrounding the timing of a 0.25% target interest rate increase by the Federal Reserve. The move from 0% to 0.25% is like walking from the hardwood floor onto the rug…hardly noticeable. The inevitable move by the Fed has been widely communicated for months, and given where interest rates are today, the move will