by Associated Press, extracted from Forbes.com
China calls for new global currency , China is calling for a new global currency to replace the dominant dollar, showing a growing assertiveness on revamping the world economy ahead of next week's London summit on the financial crisis.
The surprise proposal by Beijing's central bank governor reflects unease about its vast holdings of U.S. government bonds and adds to Chinese pressure to overhaul a global financial system dominated by the dollar and Western governments. Both the United States and the European Union brushed off the idea. The world economic crisis shows the "inherent vulnerabilities and systemic risks in the existing international monetary system," Gov. Zhou Xiaochuan said in an essay released Monday by the bank. He recommended creating a currency made up a basket of global currencies and controlled by the International Monetary Fund and said it would help "to achieve the objective of safeguarding global economic and financial stability."
Zhou did not mention the dollar by name. But in an unusual step, the essay was published in both Chinese and English, making clear it was meant for a foreign audience.
China has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves. Premier Wen Jiabao publicly appealed to Washington this month to avoid any response to the crisis that might weaken the dollar and the value of Beijing's estimated $1 trillion in Treasuries and other U.S. government debt.
For decades, the dollar has been the world's most widely used currency. Many governments hold a large portion of their reserves in dollars. Crude oil and many commodities are priced in dollars. Business deals around the world are done in dollars.
But the financial crisis has highlighted how America's economic problems - and by extension the dollar - can wreak havoc on nations around the world. China is in a bind. To keep the value of its currency steady - some say undervalued - the Chinese government has to recycle its huge trade surpluses, and the biggest, most liquid option for investing them is U.S. government debt.
Visit http://www.forbes.com/feeds/ap/2009/03/24/ap6208192.html for the full story.
Tuesday, March 24, 2009
Sunday, March 15, 2009
Did the market find a bottom?
NEW YORK, March 15 (Reuters) - Investors are dubious that Wall Street's best week since November means the stock market has found a bottom.
Even though the Dow industrials ended last week with a 9 percent gain and the S&P 500 shot up over 10 percent from the close on March 6, investors still fear the same problems. For details, see [ID:N13455273].
After the credit crisis shredded the financial system and markets worldwide, many still question the health of banks and believe the economy will stay weak through 2009.
"Obviously, for a massive widespread rally, you are going to need more people comfortable and I don't think that happens until a plan is produced to address the banking issues," said Peter Jankovskis, director of research at OakBrook Investments LLC in Lisle, Illinois.
"I really don't think you're going to see a true floor in this market until we get a comprehensive plan on the finance sector."
Since January, it has largely been a case of one step forward, two steps back for markets, with rallies promptly being reversed as markets push lower. Stocks racked up their best week since November on Friday with a four-day winning streak. And while investors note that this is a positive sign, it does not necessarily mean the worst is over.
Banks led the advances last week as executives from Citigroup (C.N), Bank of America (BAC.N) and JPMorgan Chase (JPM.N) said their banks had been profitable for the first two months of the year and attempted to soothe worries about the possibility of government nationalization of the sector.
Financials will continue to set the market's direction as investors await the results of government "stress tests" to determine banks' health, as well as additional details on the Treasury Department's plan to shore up the sector.
"I find it encouraging that people were willing to step into the market on the fundamental news that came out from Citigroup and Bank of America. It's a sign that at least a few people out there are comfortable enough that the problems will be resolved," Jankovskis said.
FED DECISION AND CPI AHEAD
This week, investors will watch for any new methods the Federal Open Market Committee may use to bolster the anemic economy.
With the target for the fed funds rate already near zero, analysts are expecting the Fed will hold rates steady at the end of the two-day meeting on Wednesday.
Investors and analysts will be looking for signs of any other measures the Fed might take to loosen credit markets, such as buying up long-term U.S. Treasuries.
A new round of data on inflation, manufacturing, housing and the labor market is expected to show a gloomy picture of the economy. On Monday, the Federal Reserve will release February readings on industrial output and capacity utilization. On Tuesday, the U.S. Producer Price Index and housing starts, both for February, are due.
On Wednesday, the U.S. Consumer Price Index for February will be released. Economists polled by Reuters expect that overall CPI rose 0.3 percent in February, matching January's gain. Core CPI, excluding volatile food and energy prices, is forecast to have edged up only 0.1 percent in February, compared with a 0.2 percent gain in January.
TOO FAR TOO FAST?
For the past week, the benchmark S&P 500 shot up 10.7 percent, making it the index's third-best week since World War Two. The Dow jumped 9.01 percent, and the Nasdaq added 10.6 percent.
Market watchers worry that the ramp-up could turn out to be too much, too fast as stocks' ability to accumulate gains over time to build a solid base is considered a key characteristic of a meaningful rally.
Even with the week's substantial gains, all three major U.S. stock indexes are off sharply for the year so far: The Dow Jones industrial average .DJI is down 18 percent, while the Nasdaq composite index .IXIC is down 9 percent and the Standard & Poor's 500 .SPX is off about 16 percent.
From its all-time high in October 2007, the S&P 500 has lost about 52 percent.
"A lot of investors understand that if they catch the bottom, the upside can be enormous. Rallies at this point may start to be really, really sharp. But people are nervous, so there is ample opportunity for sellers," said Charles Lieberman, chief investment officer of Advisors Capital Management LLC, in Paramus, New Jersey.
Pundits are also wary of calling a low for the bear market in the midst of a situation that remains overwhelmingly negative: dismal economic data, accelerating job losses, tight credit markets and uncertainty over what steps U.S. officials can take to rescue the economy.
RULE CHANGES MAY SPUR A RALLY
Investors will also be looking for more comments this week from regulators and others on mark-to-market accounting and the uptick rule.
Some on Wall Street have called for the accounting rule, which requires assets to be valued at current market prices, to be suspended or modified as it would destroy banks' balance sheets by forcing them to write their assets down to fire-sale prices.
The top U.S. accounting rulemaker, the U.S. Financial Accounting Standards Board, will discuss mark-to-market guidance at its board meeting on Monday, according to its website.
A modification of the mark-to-market accounting rule could drive a rally in banks' stocks, which have been hammered by worries over the deteriorating prices of their assets.
The possibility of reinstating the uptick rule, designed to slow the pace of short selling, will also be on the radar after Rep. Barney Frank said last week that he was hopeful the Securities and Exchange Commission would bring back the rule within a month.
The uptick rule, which allowed a stock to be sold short only when the last sale price was higher than the previous one, was repealed by the SEC in 2007 because the agency found that changes in trading strategies made it ineffective. Frank's comments on Tuesday helped extend the market's rally. (Additional reporting by Ellis Mnyandu and Deepa Seetharaman; Editing by Jan Paschal) (Wall St Week Ahead runs every Sunday. Questions or comments on this one can be e-mailed to: leah.schnurr(at)thomsonreuters.com)
Friday, March 13, 2009
What if China calls in US debts?
China expresses worry over its U.S. assets
Extracted from http://www.reuters.com/article/topNews/idUSTRE52C0JF20090313
Fri Mar 13, 2009
BEIJING (Reuters) - Premier Wen Jiabao held out the prospect of extra stimulus spending if needed to hit China's 8 percent growth goal this year and called on Washington to ease worries Beijing has about the safety of its vast U.S. assets.
In his annual news conference ending the nine-day session of China's ceremonial parliament, Wen on Friday reaffirmed China's commitment to keeping the yuan broadly steady and noted that the currency, far from having depreciated, had been rising in value.
Wen, who fielded questions for well over two hours, said the 8 percent growth target was a measure of his government's confidence and a reflection of its commitment to keep raising living standards. But he said the task was not easy.
"I believe that there is indeed some difficulty in reaching this goal. But with effort it is possible," Wen said.
"Only when we have confidence can we have courage and strength, and only when we have courage and strength can we overcome difficulties," the avuncular Wen, 67, said.
The premier said Beijing expected to see results from President Barack Obama's economic recovery plan but expressed concern that massive U.S. deficit spending and near-zero interest rates would erode the value of China's huge U.S. bond holdings.
China is the biggest holder of U.S. government debt and has invested an estimated 70 percent of its $2 trillion stockpile of foreign exchange reserves, the world's largest, in dollar assets.
"We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets. To speak truthfully, I do indeed have some worries.
"I would like, through you, to once again request America to maintain their creditworthiness, keep their promise and guarantee the safety of Chinese assets," Wen said.
U.S. Secretary of State Hillary Clinton voiced her appreciation during a visit to Beijing last month of China's continuing "well-grounded confidence" in U.S. Treasuries.
Any big switch by Beijing out of U.S. Treasury bonds would drive prices lower, inflicting the very losses Wen fears. Still, his remarks, along with the lure of surging share prices, helped depress U.S. Treasuries in Asia.
China's central bank weighed in later with criticism of America's "inappropriate" economic policies, including low savings and high consumption, and said the global crisis had its roots in what it called an unchecked issuance of dollars.
KEEPING SOME POWDER DRY
Wen was speaking at the end of a week in which China has reported a record decline in exports in February and record-low industrial production growth in the first two months of the year.
The weakness was partly offset by a surge in bank lending and strength in fixed-asset investment in response to the 4 trillion yuan ($585 billion) stimulus package that the government unveiled on November 9 in a bid to secure 8 percent growth this year Wen disappointed investors a week ago, in his annual report to parliament, by failing to announce an increase in the size of the package, which aims to boost domestic demand and so take up the slack left by a free-fall in exports.
But he said markets had failed to grasp that the government was already providing relief over and above the stimulus: taxes would be cut by at least 500 billion yuan this year, pensions were going up and teachers' salaries would rise.
What's more, the government had kept some powder dry in case the global economic crisis, already the deepest since the 1930s, got even worse.
"We have prepared enough ammunition and we can launch new economic stimulus policies at any time," he said.
A tightly managed budget and years of rising tax revenues powered by strong economic growth meant the government could now afford to borrow to support the economy.
"We now have more leeway to run a larger fiscal deficit and take on more debt," Wen said. "The most direct, powerful and effective way to deal with the current financial crisis is to increase fiscal spending -- the quicker the better."
STEADY AS SHE GOES
Some officials and economists believe China should also try to quicken its economic recovery by pushing down the yuan, also known as the renminbi, to make the country's exports more competitive on global markets.
Switzerland's central bank on Thursday fanned speculation that a global round of competitive devaluations could be at hand by intervening to weaken the Swiss franc to help fight deflation.
Asked whether China would let its currency depreciate, Wen said this did not accord with the facts: because European and Asian currencies had fallen hard in the past year, the yuan had been gaining in value, putting pressure on China's exports.
Wen restated China's long-standing determination to keep the yuan basically steady and said Beijing alone would set the course of the currency. "No other country can put pressure on our country to depreciate or appreciate the renminbi."
Attaining 8 percent growth is the absolute priority of China's ruling Communist Party, which has staked its claim to legitimacy on ensuring ever-rising living standards and fears social unrest if growth slips below that threshold.
Twenty million migrant workers have already lost their jobs due to a collapse in exports and a slump in construction.
"The problem of unemployment is a very serious one," Wen said. The country was still stable, but he added: "Our government will take this a hundred times more seriously and never become complacent."
(Writing by Alan Wheatley and Emma Graham-Harrison; Editing by Ken Wills)
Extracted from http://www.reuters.com/article/topNews/idUSTRE52C0JF20090313
Fri Mar 13, 2009
BEIJING (Reuters) - Premier Wen Jiabao held out the prospect of extra stimulus spending if needed to hit China's 8 percent growth goal this year and called on Washington to ease worries Beijing has about the safety of its vast U.S. assets.
In his annual news conference ending the nine-day session of China's ceremonial parliament, Wen on Friday reaffirmed China's commitment to keeping the yuan broadly steady and noted that the currency, far from having depreciated, had been rising in value.
Wen, who fielded questions for well over two hours, said the 8 percent growth target was a measure of his government's confidence and a reflection of its commitment to keep raising living standards. But he said the task was not easy.
"I believe that there is indeed some difficulty in reaching this goal. But with effort it is possible," Wen said.
"Only when we have confidence can we have courage and strength, and only when we have courage and strength can we overcome difficulties," the avuncular Wen, 67, said.
The premier said Beijing expected to see results from President Barack Obama's economic recovery plan but expressed concern that massive U.S. deficit spending and near-zero interest rates would erode the value of China's huge U.S. bond holdings.
China is the biggest holder of U.S. government debt and has invested an estimated 70 percent of its $2 trillion stockpile of foreign exchange reserves, the world's largest, in dollar assets.
"We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets. To speak truthfully, I do indeed have some worries.
"I would like, through you, to once again request America to maintain their creditworthiness, keep their promise and guarantee the safety of Chinese assets," Wen said.
U.S. Secretary of State Hillary Clinton voiced her appreciation during a visit to Beijing last month of China's continuing "well-grounded confidence" in U.S. Treasuries.
Any big switch by Beijing out of U.S. Treasury bonds would drive prices lower, inflicting the very losses Wen fears. Still, his remarks, along with the lure of surging share prices, helped depress U.S. Treasuries in Asia.
China's central bank weighed in later with criticism of America's "inappropriate" economic policies, including low savings and high consumption, and said the global crisis had its roots in what it called an unchecked issuance of dollars.
KEEPING SOME POWDER DRY
Wen was speaking at the end of a week in which China has reported a record decline in exports in February and record-low industrial production growth in the first two months of the year.
The weakness was partly offset by a surge in bank lending and strength in fixed-asset investment in response to the 4 trillion yuan ($585 billion) stimulus package that the government unveiled on November 9 in a bid to secure 8 percent growth this year Wen disappointed investors a week ago, in his annual report to parliament, by failing to announce an increase in the size of the package, which aims to boost domestic demand and so take up the slack left by a free-fall in exports.
But he said markets had failed to grasp that the government was already providing relief over and above the stimulus: taxes would be cut by at least 500 billion yuan this year, pensions were going up and teachers' salaries would rise.
What's more, the government had kept some powder dry in case the global economic crisis, already the deepest since the 1930s, got even worse.
"We have prepared enough ammunition and we can launch new economic stimulus policies at any time," he said.
A tightly managed budget and years of rising tax revenues powered by strong economic growth meant the government could now afford to borrow to support the economy.
"We now have more leeway to run a larger fiscal deficit and take on more debt," Wen said. "The most direct, powerful and effective way to deal with the current financial crisis is to increase fiscal spending -- the quicker the better."
STEADY AS SHE GOES
Some officials and economists believe China should also try to quicken its economic recovery by pushing down the yuan, also known as the renminbi, to make the country's exports more competitive on global markets.
Switzerland's central bank on Thursday fanned speculation that a global round of competitive devaluations could be at hand by intervening to weaken the Swiss franc to help fight deflation.
Asked whether China would let its currency depreciate, Wen said this did not accord with the facts: because European and Asian currencies had fallen hard in the past year, the yuan had been gaining in value, putting pressure on China's exports.
Wen restated China's long-standing determination to keep the yuan basically steady and said Beijing alone would set the course of the currency. "No other country can put pressure on our country to depreciate or appreciate the renminbi."
Attaining 8 percent growth is the absolute priority of China's ruling Communist Party, which has staked its claim to legitimacy on ensuring ever-rising living standards and fears social unrest if growth slips below that threshold.
Twenty million migrant workers have already lost their jobs due to a collapse in exports and a slump in construction.
"The problem of unemployment is a very serious one," Wen said. The country was still stable, but he added: "Our government will take this a hundred times more seriously and never become complacent."
(Writing by Alan Wheatley and Emma Graham-Harrison; Editing by Ken Wills)
Friday, March 6, 2009
When will Markets Bottom?
Here are some latest insights that are encouraging.
PART 1
When the bottom comes, it could be stealthy
Extract was ourced from an article by DAVID BERMAN at ReportonBusiness.com
March 6, 2009
In the more innocent days of the stock market - like 2008 - many observers and investors were eagerly anticipating a stock market blow-off as a sign of capitulation, the moment of maximum pessimism that would be followed by a rebirth. Maybe they've been awaiting the wrong signal. Maybe the market is forming a stealth bottom.
There certainly has been no shortage of pessimism, but the rebirth has proved elusive. On Nov. 20, the S&P 500 finished the day 6.7 per cent lower after posting a 6.1-per-cent decline the day before. At the same time, the VIX volatility index surged to a record high above 80, suggesting that investors were in a full-blown panic. But since then, the S&P 500 has slumped another 8.5 per cent. So much for capitulation.
"The more I hear about the need for some sort of dramatic capitulation to affirm that a bottom has been made, the less likely I think it is going to happen," said Bill Luby, who writes the VIX and More blog. "Instead, my thinking is that the longer and steeper the bear market, the more likely that any sort of capitulation will happen in stages."
He believes that the 2002 bottom for the Nasdaq may be a good template to use today for the broader market. Back then, the bear market that followed the implosion of the dot-com bubble coincided with five spikes in the VIX volatility index - each of them decreasing in magnitude, along with unremarkable stock trading volume, until the bottom was reached.
PART 2
U.S. Housing Market May Bottom in 2009, Zandi Says - Bloomerg News
Extract sourced from an artcile by Brian Louis
Feb. 9 (Bloomberg) -- U.S. home prices will reach bottom by the end of the year, concluding a slide that will have cut values 36 percent, Moody’s Economy.com said today.
“Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight,” chief economist Mark Zandi said in a statement today. “Presuming we see strong action by policymakers to help support the economy and the housing market, prices will begin to recover by the end of this year.”
Demand for new and existing homes began to fall in 2005, marking the end of a five-year U.S. housing boom fueled in part by easy credit for subprime borrowers. Existing home prices tumbled from an average high of $230,200 in July 2006 to $175,400 in December, according to data from the Chicago-based National Association of Realtors.
U.S. home prices will fall another 11 percent on average before stabilizing, according to Moody’s Economy.com. The Case- Shiller home price index will fall 36 percent from its 2006 peak to the bottom this year, Zandi’s study said.
About 62 percent of U.S. metropolitan areas surveyed will record double-digit declines in home prices by the end of the slump, according to today’s report. Prices will fall more than 50 percent in former boom areas such as southeast Florida and parts of California, including Riverside.
Florida Real Estate Falls
The biggest home-price decline is forecast for the Naples, Florida, area, where the report estimates prices will tumble 70.1 percent from the top before hitting bottom in the fourth quarter of 2010. Naples is followed by the California areas of Merced and Salinas. Merced prices are forecast to fall 69.6 percent from the peak and Salinas 67.9 percent.
Zandi said at a Credit Suisse homebuilder conference in September 2007 that the housing slump would last through 2008. In an interview on Bloomberg Television on March 3, 2008, he said home prices had fallen about 10 percent nationwide from the peak and he expected prices to fall another 10 percent through early 2009.
In a separate forecast today, housing starts are estimated to plunge 47 percent to 483,000 in 2009, according to Metrostudy, a Houston-based housing market research and consulting company. An estimated 904,300 housing units were started in 2008, according to the U.S. Census Bureau.
“Builders are still trying to sell off the inventory they have,” Brad Hunter, chief economist at Metrostudy, said in an interview. “Consumers are scared to purchase a refrigerator much less the house to put it in.”
The Obama administration and Congress are trying to stem the housing slide at the root of the U.S. recession. President Barack Obama is trying to get a $780 billion economic stimulus bill passed that may help ease lending and bolster home buying.
The U.S. Senate is working to boost house purchases among six-figure-income households by replacing a $7,500 tax credit for first-time homebuyers earning less than $150,000 with a $15,000 break for all income groups. Adding that to the economic stimulus package, senators effectively are encouraging purchases by higher-income households with a reduced risk of default.
"In short, it was a stealth bottom," Mr. Luby said. "I would not at all be surprised to see the current bear market end in a similar stealth bottom. Sometimes a desensitized investment community is more likely to form a bottom than a panicky one."
Yesterday, with the S&P 500 plumbing new 12-year lows at 682.55, the VIX index was above 50 and at the top end of a recent trading range.
However, the VIX was in the process of forming its sixth peak since that Nov. 20 surge, and each peak has been shorter than the previous one - which certainly looks stealth-like.
PART 3
Use This Tool to Identify Stock Market Bottom
Sourced from an article on Nasdaq.com by S. Wade Hansen, analyst at LearningMarkets.com
Investing during a bear market can be a lot like taking a road trip with young children. Just as the children seem to continually yell "Are we there yet?" from the back seat during a road trip, investors seem to continually ask "Have we reached the bottom yet?" during a bear market.
Trying to identify the bottom of a market downturn seems to be a favorite activity among investors and analysts---especially in this day and age when we have 24-hour news channels constantly telling us how bad things are. Unfortunately, the truth is there is no sure-fire way to guarantee an accurate prediction of when the bottom is going to arrive until after it has arrived.
However, there are a few tools you can use to help you put the odds in your favor in your analysis. The S&P 500 Bullish Percent Index is one of those tools.
The S&P 500 Bullish Percent Index is a point-and-figure chart that derives its value from the point-and-figure charts of the 500 stocks that comprise the S&P 500. Here's how it works:
- If an increasing number of those 500 stocks are showing buy signals on their point-and-figure charts, the S&P 500 Bullish Percent Index will be moving higher.
- If an increasing number of those 500 stocks are showing sell signals on their point-and-figure charts, the S&P 500 Bullish Percent Index will be moving lower.
Source: StockCharts.com
Now, you don't need to understand exactly what a point-and-figure chart is or how it works to understand how to use the S&P 500 Bullish Percent Index. So if you aren't familiar with point-and-figure charts right now, don't worry about it.
Here's what you look for on the S&P 500 Bullish Percent Index chart:
- If the farthest column to the right is a column of Xs and is moving higher, the stock market should be moving higher.
- If the farthest column to the right is a column of Os and is moving lower, the stock market should be moving lower.
- If the farthest column to the right is a column of Xs and is moving above 70, the stock market is approaching a level where it could be considered overextended, and it may turn around and start moving lower in the near future.
- If the farthest column to the right is a column of Os and is moving below 30, the stock market is approaching a level where it could be considered overextended, and it may turn around and start moving higher in the near future.
This last condition is the one we are most interested in now. As you can see in the chart above, the most recent column of Os has dropped down below 30. This means the market is getting to a point where it may be overextended to the downside, and it has a chance of finding a bottom and turning around.
Of course, this is not guarantee, and it may take a while for the bottom to actually form and the turnaround to actually happen, but we at least have some advanced warning of what may lie ahead.
Wait until you see a column of Xs form to the right of this column of Os. Once it does, it's probably time to start getting back into some more stocks.
PART 4
Middle Market Executives Expect Financial Crisis to Reach Bottom in 2009
Article sourced from Pr.com
5 March 2009
Reflecting cautious optimism, four out of five middle market executives anticipate that the financial crisis will bottom out in 2009, according to an exclusive study released today by CIT Group Inc. (NYSE: CIT), a leading provider of financing and advisory services to the middle market. The research report, "U.S. Middle Market Outlook 2009: Navigating the Credit Crunch," shows, among other things, that a majority of middle market executives expect stable or growing revenues as they actively focus on operating efficiencies, managing their cash flow and spending more effectively. This study is the first in a series of four middle market studies to be released this year in association with Forbes Insights. "In the face of one of the most challenging financial crises in generations, middle market executives remain cautiously optimistic about the market's recovery as well as their own prospects over the next 12 months," said Jim Hudak, Co-Head of Corporate Finance at CIT. "These findings are in line with what we are seeing ourselves. Despite the current economic crisis, our middle market clients continue to demonstrate their resiliency and ability to adapt as they look for the market to improve." The study, based on the responses of 150 senior-level financial decision makers at U.S. middle market companies (those with annual revenues between $25 million and $1 billion), highlights how these executives are managing the current economic crisis and also reveals their outlook for 2009. The results are in stark contrast to a similar examination of the middle market sponsored by CIT in mid-2007. During that period of positive economic strength, executives had greater expectations for revenue growth and were taking more aggressive steps to invest in the talent and infrastructure necessary to support future expansion. Peter Connolly, Co-Head of Corporate Finance at CIT, said, "Middle market companies have clearly braced themselves to get through these tough times. They are instituting operational efficiencies, watching their cash flow and buttoning up their spending and as they wait for the market to turn around. When recovery does occur, this should help them return to growth." Middle market companies, a key component of the U.S. economy, account for more than $6 trillion in sales and employ almost 32 million Americans (2002 U.S. Census). Key findings of the study include: - Cautious Optimism. Four out of five respondents indicated that the financial crisis will bottom out this year with 28% predicting it will happen within 6 months and 52% saying it will happen in 6 to 12 months. - Resiliency in the Face of Adversity. - Revenue Growth. A majority of middle market executives expect stable (23%) or growing (41%) revenues. Of those who expect their revenues to grow, 73% said they would achieve/support this growth by improving their operating efficiencies as they manage their cash flow and spending more effectively. Thirty-six percent said their revenues would decline. In 2007, approximately two-thirds of executives believed that their revenues would grow over the next 12 months. - Keeping Cash Close. Executives indicated that they remained focused on maintaining day-to-day operations as they delay longer-term plans. Respondents indicated that cash-flow financing was the number one form of financing that they will use in the next 12 months, and 31% said working capital needs was the number one item for which they might use any financing, while traditionally longer-term investments, such as plant and equipment (21%) and new technology (16%), seem to be put on hold. By comparison, in 2007, new technology topped the list, being picked by more than a third of respondents, and working capital was fifth. - Managing Expenses. In an effort to contain costs and work through the current economic crisis, more than two-thirds of executives surveyed indicated that they would cut their capital expenditures (36%) or keep them at the same level as last year (36%), while just 28% planned to spend more. Regarding cost-cutting initiatives, more than half anticipate reducing staff levels, 49% will invest less in new plants and equipment, and 38% intend to cut back on R&D. In contrast, in 2007, a little more than half of those surveyed indicated they would increase their capital expenditures as they focused on growing staff levels (47%) and investing in new technology (36%). - Not Immune to Current Economic Crisis. When asked how the current crisis has affected their business, nearly two-thirds said it has had a significant or moderate impact, while one-third said it had a slight impact or no impact at all. - Market Conditions Portend Financing Challenges. Should economic conditions worsen, executives expressed concern that their access to financing will become more difficult. Forty percent indicated that changes in the availability of credit/financing would have a negative impact on their business; more than a quarter (27%) said their ability to secure financing will worsen in the next year. NOTE TO EDITORS: Complimentary copies of "U.S. Middle Market Outlook 2009: Navigating the Credit Crunch," as well as podcasts related to the study featuring Peter Connolly and Jim Hudak, Co-Heads of Corporate Finance at CIT, can be downloaded at middlemarket.cit.com.
PART 1
When the bottom comes, it could be stealthy
Extract was ourced from an article by DAVID BERMAN at ReportonBusiness.com
March 6, 2009
In the more innocent days of the stock market - like 2008 - many observers and investors were eagerly anticipating a stock market blow-off as a sign of capitulation, the moment of maximum pessimism that would be followed by a rebirth. Maybe they've been awaiting the wrong signal. Maybe the market is forming a stealth bottom.
There certainly has been no shortage of pessimism, but the rebirth has proved elusive. On Nov. 20, the S&P 500 finished the day 6.7 per cent lower after posting a 6.1-per-cent decline the day before. At the same time, the VIX volatility index surged to a record high above 80, suggesting that investors were in a full-blown panic. But since then, the S&P 500 has slumped another 8.5 per cent. So much for capitulation.
"The more I hear about the need for some sort of dramatic capitulation to affirm that a bottom has been made, the less likely I think it is going to happen," said Bill Luby, who writes the VIX and More blog. "Instead, my thinking is that the longer and steeper the bear market, the more likely that any sort of capitulation will happen in stages."
He believes that the 2002 bottom for the Nasdaq may be a good template to use today for the broader market. Back then, the bear market that followed the implosion of the dot-com bubble coincided with five spikes in the VIX volatility index - each of them decreasing in magnitude, along with unremarkable stock trading volume, until the bottom was reached.
PART 2
U.S. Housing Market May Bottom in 2009, Zandi Says - Bloomerg News
Extract sourced from an artcile by Brian Louis
Feb. 9 (Bloomberg) -- U.S. home prices will reach bottom by the end of the year, concluding a slide that will have cut values 36 percent, Moody’s Economy.com said today.
“Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight,” chief economist Mark Zandi said in a statement today. “Presuming we see strong action by policymakers to help support the economy and the housing market, prices will begin to recover by the end of this year.”
Demand for new and existing homes began to fall in 2005, marking the end of a five-year U.S. housing boom fueled in part by easy credit for subprime borrowers. Existing home prices tumbled from an average high of $230,200 in July 2006 to $175,400 in December, according to data from the Chicago-based National Association of Realtors.
U.S. home prices will fall another 11 percent on average before stabilizing, according to Moody’s Economy.com. The Case- Shiller home price index will fall 36 percent from its 2006 peak to the bottom this year, Zandi’s study said.
About 62 percent of U.S. metropolitan areas surveyed will record double-digit declines in home prices by the end of the slump, according to today’s report. Prices will fall more than 50 percent in former boom areas such as southeast Florida and parts of California, including Riverside.
Florida Real Estate Falls
The biggest home-price decline is forecast for the Naples, Florida, area, where the report estimates prices will tumble 70.1 percent from the top before hitting bottom in the fourth quarter of 2010. Naples is followed by the California areas of Merced and Salinas. Merced prices are forecast to fall 69.6 percent from the peak and Salinas 67.9 percent.
Zandi said at a Credit Suisse homebuilder conference in September 2007 that the housing slump would last through 2008. In an interview on Bloomberg Television on March 3, 2008, he said home prices had fallen about 10 percent nationwide from the peak and he expected prices to fall another 10 percent through early 2009.
In a separate forecast today, housing starts are estimated to plunge 47 percent to 483,000 in 2009, according to Metrostudy, a Houston-based housing market research and consulting company. An estimated 904,300 housing units were started in 2008, according to the U.S. Census Bureau.
“Builders are still trying to sell off the inventory they have,” Brad Hunter, chief economist at Metrostudy, said in an interview. “Consumers are scared to purchase a refrigerator much less the house to put it in.”
The Obama administration and Congress are trying to stem the housing slide at the root of the U.S. recession. President Barack Obama is trying to get a $780 billion economic stimulus bill passed that may help ease lending and bolster home buying.
The U.S. Senate is working to boost house purchases among six-figure-income households by replacing a $7,500 tax credit for first-time homebuyers earning less than $150,000 with a $15,000 break for all income groups. Adding that to the economic stimulus package, senators effectively are encouraging purchases by higher-income households with a reduced risk of default.
"In short, it was a stealth bottom," Mr. Luby said. "I would not at all be surprised to see the current bear market end in a similar stealth bottom. Sometimes a desensitized investment community is more likely to form a bottom than a panicky one."
Yesterday, with the S&P 500 plumbing new 12-year lows at 682.55, the VIX index was above 50 and at the top end of a recent trading range.
However, the VIX was in the process of forming its sixth peak since that Nov. 20 surge, and each peak has been shorter than the previous one - which certainly looks stealth-like.
PART 3
Use This Tool to Identify Stock Market Bottom
Sourced from an article on Nasdaq.com by S. Wade Hansen, analyst at LearningMarkets.com
Investing during a bear market can be a lot like taking a road trip with young children. Just as the children seem to continually yell "Are we there yet?" from the back seat during a road trip, investors seem to continually ask "Have we reached the bottom yet?" during a bear market.
Trying to identify the bottom of a market downturn seems to be a favorite activity among investors and analysts---especially in this day and age when we have 24-hour news channels constantly telling us how bad things are. Unfortunately, the truth is there is no sure-fire way to guarantee an accurate prediction of when the bottom is going to arrive until after it has arrived.
However, there are a few tools you can use to help you put the odds in your favor in your analysis. The S&P 500 Bullish Percent Index is one of those tools.
The S&P 500 Bullish Percent Index is a point-and-figure chart that derives its value from the point-and-figure charts of the 500 stocks that comprise the S&P 500. Here's how it works:
- If an increasing number of those 500 stocks are showing buy signals on their point-and-figure charts, the S&P 500 Bullish Percent Index will be moving higher.
- If an increasing number of those 500 stocks are showing sell signals on their point-and-figure charts, the S&P 500 Bullish Percent Index will be moving lower.
Source: StockCharts.com
Now, you don't need to understand exactly what a point-and-figure chart is or how it works to understand how to use the S&P 500 Bullish Percent Index. So if you aren't familiar with point-and-figure charts right now, don't worry about it.
Here's what you look for on the S&P 500 Bullish Percent Index chart:
- If the farthest column to the right is a column of Xs and is moving higher, the stock market should be moving higher.
- If the farthest column to the right is a column of Os and is moving lower, the stock market should be moving lower.
- If the farthest column to the right is a column of Xs and is moving above 70, the stock market is approaching a level where it could be considered overextended, and it may turn around and start moving lower in the near future.
- If the farthest column to the right is a column of Os and is moving below 30, the stock market is approaching a level where it could be considered overextended, and it may turn around and start moving higher in the near future.
This last condition is the one we are most interested in now. As you can see in the chart above, the most recent column of Os has dropped down below 30. This means the market is getting to a point where it may be overextended to the downside, and it has a chance of finding a bottom and turning around.
Of course, this is not guarantee, and it may take a while for the bottom to actually form and the turnaround to actually happen, but we at least have some advanced warning of what may lie ahead.
Wait until you see a column of Xs form to the right of this column of Os. Once it does, it's probably time to start getting back into some more stocks.
PART 4
Middle Market Executives Expect Financial Crisis to Reach Bottom in 2009
Article sourced from Pr.com
5 March 2009
Reflecting cautious optimism, four out of five middle market executives anticipate that the financial crisis will bottom out in 2009, according to an exclusive study released today by CIT Group Inc. (NYSE: CIT), a leading provider of financing and advisory services to the middle market. The research report, "U.S. Middle Market Outlook 2009: Navigating the Credit Crunch," shows, among other things, that a majority of middle market executives expect stable or growing revenues as they actively focus on operating efficiencies, managing their cash flow and spending more effectively. This study is the first in a series of four middle market studies to be released this year in association with Forbes Insights. "In the face of one of the most challenging financial crises in generations, middle market executives remain cautiously optimistic about the market's recovery as well as their own prospects over the next 12 months," said Jim Hudak, Co-Head of Corporate Finance at CIT. "These findings are in line with what we are seeing ourselves. Despite the current economic crisis, our middle market clients continue to demonstrate their resiliency and ability to adapt as they look for the market to improve." The study, based on the responses of 150 senior-level financial decision makers at U.S. middle market companies (those with annual revenues between $25 million and $1 billion), highlights how these executives are managing the current economic crisis and also reveals their outlook for 2009. The results are in stark contrast to a similar examination of the middle market sponsored by CIT in mid-2007. During that period of positive economic strength, executives had greater expectations for revenue growth and were taking more aggressive steps to invest in the talent and infrastructure necessary to support future expansion. Peter Connolly, Co-Head of Corporate Finance at CIT, said, "Middle market companies have clearly braced themselves to get through these tough times. They are instituting operational efficiencies, watching their cash flow and buttoning up their spending and as they wait for the market to turn around. When recovery does occur, this should help them return to growth." Middle market companies, a key component of the U.S. economy, account for more than $6 trillion in sales and employ almost 32 million Americans (2002 U.S. Census). Key findings of the study include: - Cautious Optimism. Four out of five respondents indicated that the financial crisis will bottom out this year with 28% predicting it will happen within 6 months and 52% saying it will happen in 6 to 12 months. - Resiliency in the Face of Adversity. - Revenue Growth. A majority of middle market executives expect stable (23%) or growing (41%) revenues. Of those who expect their revenues to grow, 73% said they would achieve/support this growth by improving their operating efficiencies as they manage their cash flow and spending more effectively. Thirty-six percent said their revenues would decline. In 2007, approximately two-thirds of executives believed that their revenues would grow over the next 12 months. - Keeping Cash Close. Executives indicated that they remained focused on maintaining day-to-day operations as they delay longer-term plans. Respondents indicated that cash-flow financing was the number one form of financing that they will use in the next 12 months, and 31% said working capital needs was the number one item for which they might use any financing, while traditionally longer-term investments, such as plant and equipment (21%) and new technology (16%), seem to be put on hold. By comparison, in 2007, new technology topped the list, being picked by more than a third of respondents, and working capital was fifth. - Managing Expenses. In an effort to contain costs and work through the current economic crisis, more than two-thirds of executives surveyed indicated that they would cut their capital expenditures (36%) or keep them at the same level as last year (36%), while just 28% planned to spend more. Regarding cost-cutting initiatives, more than half anticipate reducing staff levels, 49% will invest less in new plants and equipment, and 38% intend to cut back on R&D. In contrast, in 2007, a little more than half of those surveyed indicated they would increase their capital expenditures as they focused on growing staff levels (47%) and investing in new technology (36%). - Not Immune to Current Economic Crisis. When asked how the current crisis has affected their business, nearly two-thirds said it has had a significant or moderate impact, while one-third said it had a slight impact or no impact at all. - Market Conditions Portend Financing Challenges. Should economic conditions worsen, executives expressed concern that their access to financing will become more difficult. Forty percent indicated that changes in the availability of credit/financing would have a negative impact on their business; more than a quarter (27%) said their ability to secure financing will worsen in the next year. NOTE TO EDITORS: Complimentary copies of "U.S. Middle Market Outlook 2009: Navigating the Credit Crunch," as well as podcasts related to the study featuring Peter Connolly and Jim Hudak, Co-Heads of Corporate Finance at CIT, can be downloaded at middlemarket.cit.com.
Wednesday, March 4, 2009
What is SIX SIGMA ?
An introduction to Six Sigma and how to get LEAN - a guide to Total Quality Management
Sunday, March 1, 2009
Global crisis-time to sell Shares and buy a Property?
I have been asked an interesting question as to what is the state of the economic crisis vesrus the past and if one should dump stocks and buy a property.
It does make sense to have a property in an investment portfolio just as well as having other asset classes (Plotted on log scale so that percentage gains are apparent (rather than nominal gains with 2002 as we are back to 02 valuations). Yet the the timing of selling may not be a good one:
In short, a dollar invested in stocks has produced gains that BEATS all other asset classes. On average, equities have returned 7% per year for the last two centuries. Cash has become worthless, while gold, interestingly, has proven itself a near perfect store of value. One dollar of gold purchased in 1800 has returned nearly exactly that – one dollar nineteen cents. (This may be the most compelling argument for those who maintain that gold is the ultimate hedge against inflation.) So, whilst the stocks are down massively now, is the glass half full or half empty?
Here is a 100 year picture:
We know one thing for sure-they will keep going zig-zag for another 100 years. Here is another look at his equity return line for the last 40 years.
What can be seen here are the dips and jabs above and below the regression line that mark the overbought and oversold moments in market history since 1970. Deeply oversold markets in 1974 (40.7% below trend) and 1981 (40% below trend) were only worsted by the grand-daddy bear market of 1932, which brought equities 42% below trend (not shown).
See the resemlence between 1973-74 and 2008-09. Every time the markets dip to such level, a new RUN commenses.Wharton Business School Finance Professor Siegel conducted a statistical analysis that shows that the 2008 bear market has brought stocks 43.1% below trend, pointing to a bear market relatively worse than anything we have seen for the last 200 years!
Does that mean stocks will not fall further?
Absolutely not-we had worse economic and solcial climates, wars, etc. Things can fall apart (as nearly everything eventually must). And we have certainly entered a new era where the results of unprecedented central bank meddling will reap consequences unknown, unintended and likely dire. But, at the same time, investors must also be aware that two hundred years of history has a momentum of its own – and must also be reckoned with. In fact, my personal view is that the banking fall-out was driven by Ultra-Rich who indirectly control governments, driving the banking sector under complete government control.
Here is Jim Roger's view
Therefore, should we regress to the mean that Professor Siegel’s work points us toward, we could be witnessing the index back where it was. Conversely, Siegel’s work indicates that there’s no historical precedent for indexes to fall significantly from these levels. Figure out what history means to you, and take that for what it’s worth.
Banking Crisis....just another one. According to an IMF database, there have been 124 “systemic” banking crises since 1970—episodes in which bad debts soared across the economy and much of the banking sector was insolvent. Most of those crashes were in the developing world. But the list also includes half a dozen rich-country crashes, from Japan’s slump after its property bubble burst in the late 1980s, to the Nordic bank crises in the early 1990s. All involved deep recessions, required massive government intervention to clean up bust banks, and led to big increases in public debt as economies shrank while government spending soared. But the speed of recovery differed dramatically; Japan endured a decade of economic stagnation, whereas South Korea returned to growth within two years of its 1997 banking disaster.
Whether or not any of these trends will continue into the future is a point of debate for another time. What is most interesting for us at this juncture is the absolutely straight regression line that marks the return in equities over the period in question. It is to this straight line that we now turn our attention.
During 1973, short term rates increased right up until the end of August when they temporarily peaked at 8.67%. They had been steadily increasing since February 1972 (When they were just 3.2%). Does this sound familiar? In response to a slowing economy and a looming recession they then spent the next 12 months to August 1974 in a tight range between 8.67% and 7.12%. During this time Gold rallied strongly from US$105 an ounce to US$152.50, an increase of 45% (It got as high as US$172.25). It remained strong until the stock market consolidated again towards the second half of 1974 after a lengthy fall. From August 1974 to December 1976 interest rates eased from 8.96% back down to 4.35%, during which time the stock market embarked on another post recession rally (Similar to the one following the first recession in 1970). Gold's rally continued until December 1974 when it peaked at US$193 before embarking on a severe correction that took it as low as US$104.38 during August 1976, a fall of close to 46% or all of its preceding gains. My guess is with short term rates being reduced to ease the recessionary conditions, the inflation problem was played down by the Fed and the investment public flocked back into the stock market at the expense of Gold. History later proved that this easing of interest rates only exacerbated the inflationary pressures to the point where they could no longer be swept under the carpet. The Gold price towards the end of 1976 commenced what to this day has been the most spectacular and longest rally in Gold market history. A record that I strongly believe will be broken in the years to come. Looking at resource sector is still worthwhile, otherwise just stick to aussie INDEX funds as the resources are a large chunk of it.
Now look at the Dow Index in the US from 1970-1990 above. The charts tell a very interesting story. it shows America (as well as the global economy) survived without huge gains from the stock market. Millions of Americans purchased homes from 1970-1990. Today, many of those same homeowners are losing their homes. Whilst we have not seen many Australians loosing homes, US experiences numerous foreclosures assisted by severe job-losses, factory closures and banks wanting to get out by selling at losses for whatever they can get.
Here is a long list of houses for sale in detroit after GM shut it's car plant:
http://www.realtor.com/realestateandhomes-search/Detroit_MI?sby=1
They take Amex over the phone and some prices arfe $1 per house - would you like 1000 homes for $1,000???
Some feel this is a joke or a crazy notion of a complete housing meltdown, yet wait......we had worse situations in the past 100 years, didn't we? People will still need to live somewhere? Life always goes on. For those non-believers we point out that Automotive industry is cyclical, as well as peoperty is also cyclical. US companies announced in 2008 the closing of 1,223 993 jobs, a figure surpassing by 57 percent the total number of layoffs in 2007 and the highest figure over the past five years, according to Challenger, Gray Christmas consulting firm.
Household names such as Caterpillar, (CAT) Home Depot (HD) and Sprint Nextel (S) said Monday that they are laying off a combined 35,000 workers in moves that stressed the severity of the worldwide recession and kicked off what is likely to be a week of gloomy earnings announcements, further job cuts and dismal data. Corning said it is cutting 3,500 jobs, or 13% of its payroll, etc.
The news ratchets up the pressure on the Obama administration and Congress as lawmakers debate an $825 billion stimulus package intended to save or create millions of jobs. Far more job cuts are likely as consumer and business spending tumbles amid what many economists say is the worst recession the USA has seen since the Great Depression. With the economic stimuls [packages in nmost countries mirrowing the US (eg $42b Rudd's package here in Oz), thhe cycle will re-emerge eventually. If the workers get jobs again, can they afford more than $1 for the house to live in? You bet!
Are such property panics rare? No.
Let's look at Japan. Japanese real estate is literally selling at 1980s prices. Rents in Tokyo are up 30% in the past two years. There's a huge incentive to borrow and buy real estate, as "cap rates" (essentially the rent minus the costs of upkeep) are 4%-6%, while the cost of borrowing money is only 1.5%. There is no supply... vacancy rates in Tokyo real estate are tight at 2.6% and there isn't much new building taking place.
Japan's house prices tumbled throughout the 90's and only in recent times have they began slowly to move in a positive direction. This chart shows the land prices for Japans Urban areas from 1964 to 2007. Land prices are the most common way of measuring Japan's house prices.
This crisis, like most others in rich countries, emerged from a property bubble and a credit boom. The scale of the bubble—a doubling of house prices in five years—was about as big in America’s ten largest cities as it was in Japan’s metropolises. But nationwide, house prices rose further in America and Britain than they did in Japan (see first chart). So did commercial-property prices. In absolute terms, the credit boom on top of the housing bubble was unparalleled. In America private-sector house debt soared from $22 trillion in 2000 (or the equivalent of 222% of GDP) to $41 trillion (294% of GDP) in 2007 (see second chart).
Judged by standard measures of banking distress, such as the amount of non-performing loans, America’s troubles are probably worse than those in any developed-country crash bar Japan’s. According to the IMF, non-performing loans in Sweden reached 13% of GDP at the peak of the crisis. In Japan they hit 35% of GDP. A recent estimate by Goldman Sachs suggests that American banks held some $5.7 trillion-worth of loans in “troubled” categories, such as subprime mortgages and commercial property. That is equivalent to almost 40% of GDP.
As the world’s biggest debtor, America headed into this bust in a very different position from Japan, a creditor nation rich in domestic savings. Nonetheless the macroeconomic trends in America look more like those that existed in Japan than other crisis-hit countries. Most big banking failures, from Sweden’s to South Korea’s, were created or worsened by a currency crash. Tumbling exchange rates raised the real burden of foreign-currency loans, forced policymakers to keep interest rates high and pushed up the fiscal costs of bank rescues. (Because of the rupiah’s collapse, for instance, the clean up of Indonesia’s failed banks in 1998 cost more than 50% of GDP.) But, by boosting exports, a weaker currency also offered a route to recovery and eventually things normalised.
Look at art an asset class-do you believe museums will shut down and Van Gogh and Michelangelo will sell for $1? Doubt it!
It does make sense to have a property in an investment portfolio just as well as having other asset classes (Plotted on log scale so that percentage gains are apparent (rather than nominal gains with 2002 as we are back to 02 valuations). Yet the the timing of selling may not be a good one:
In short, a dollar invested in stocks has produced gains that BEATS all other asset classes. On average, equities have returned 7% per year for the last two centuries. Cash has become worthless, while gold, interestingly, has proven itself a near perfect store of value. One dollar of gold purchased in 1800 has returned nearly exactly that – one dollar nineteen cents. (This may be the most compelling argument for those who maintain that gold is the ultimate hedge against inflation.) So, whilst the stocks are down massively now, is the glass half full or half empty?
Here is a 100 year picture:
We know one thing for sure-they will keep going zig-zag for another 100 years. Here is another look at his equity return line for the last 40 years.
What can be seen here are the dips and jabs above and below the regression line that mark the overbought and oversold moments in market history since 1970. Deeply oversold markets in 1974 (40.7% below trend) and 1981 (40% below trend) were only worsted by the grand-daddy bear market of 1932, which brought equities 42% below trend (not shown).
See the resemlence between 1973-74 and 2008-09. Every time the markets dip to such level, a new RUN commenses.Wharton Business School Finance Professor Siegel conducted a statistical analysis that shows that the 2008 bear market has brought stocks 43.1% below trend, pointing to a bear market relatively worse than anything we have seen for the last 200 years!
Does that mean stocks will not fall further?
Absolutely not-we had worse economic and solcial climates, wars, etc. Things can fall apart (as nearly everything eventually must). And we have certainly entered a new era where the results of unprecedented central bank meddling will reap consequences unknown, unintended and likely dire. But, at the same time, investors must also be aware that two hundred years of history has a momentum of its own – and must also be reckoned with. In fact, my personal view is that the banking fall-out was driven by Ultra-Rich who indirectly control governments, driving the banking sector under complete government control.
Here is Jim Roger's view
Therefore, should we regress to the mean that Professor Siegel’s work points us toward, we could be witnessing the index back where it was. Conversely, Siegel’s work indicates that there’s no historical precedent for indexes to fall significantly from these levels. Figure out what history means to you, and take that for what it’s worth.
Banking Crisis....just another one. According to an IMF database, there have been 124 “systemic” banking crises since 1970—episodes in which bad debts soared across the economy and much of the banking sector was insolvent. Most of those crashes were in the developing world. But the list also includes half a dozen rich-country crashes, from Japan’s slump after its property bubble burst in the late 1980s, to the Nordic bank crises in the early 1990s. All involved deep recessions, required massive government intervention to clean up bust banks, and led to big increases in public debt as economies shrank while government spending soared. But the speed of recovery differed dramatically; Japan endured a decade of economic stagnation, whereas South Korea returned to growth within two years of its 1997 banking disaster.
Whether or not any of these trends will continue into the future is a point of debate for another time. What is most interesting for us at this juncture is the absolutely straight regression line that marks the return in equities over the period in question. It is to this straight line that we now turn our attention.
During 1973, short term rates increased right up until the end of August when they temporarily peaked at 8.67%. They had been steadily increasing since February 1972 (When they were just 3.2%). Does this sound familiar? In response to a slowing economy and a looming recession they then spent the next 12 months to August 1974 in a tight range between 8.67% and 7.12%. During this time Gold rallied strongly from US$105 an ounce to US$152.50, an increase of 45% (It got as high as US$172.25). It remained strong until the stock market consolidated again towards the second half of 1974 after a lengthy fall. From August 1974 to December 1976 interest rates eased from 8.96% back down to 4.35%, during which time the stock market embarked on another post recession rally (Similar to the one following the first recession in 1970). Gold's rally continued until December 1974 when it peaked at US$193 before embarking on a severe correction that took it as low as US$104.38 during August 1976, a fall of close to 46% or all of its preceding gains. My guess is with short term rates being reduced to ease the recessionary conditions, the inflation problem was played down by the Fed and the investment public flocked back into the stock market at the expense of Gold. History later proved that this easing of interest rates only exacerbated the inflationary pressures to the point where they could no longer be swept under the carpet. The Gold price towards the end of 1976 commenced what to this day has been the most spectacular and longest rally in Gold market history. A record that I strongly believe will be broken in the years to come. Looking at resource sector is still worthwhile, otherwise just stick to aussie INDEX funds as the resources are a large chunk of it.
Now look at the Dow Index in the US from 1970-1990 above. The charts tell a very interesting story. it shows America (as well as the global economy) survived without huge gains from the stock market. Millions of Americans purchased homes from 1970-1990. Today, many of those same homeowners are losing their homes. Whilst we have not seen many Australians loosing homes, US experiences numerous foreclosures assisted by severe job-losses, factory closures and banks wanting to get out by selling at losses for whatever they can get.
Here is a long list of houses for sale in detroit after GM shut it's car plant:
http://www.realtor.com/realestateandhomes-search/Detroit_MI?sby=1
They take Amex over the phone and some prices arfe $1 per house - would you like 1000 homes for $1,000???
Some feel this is a joke or a crazy notion of a complete housing meltdown, yet wait......we had worse situations in the past 100 years, didn't we? People will still need to live somewhere? Life always goes on. For those non-believers we point out that Automotive industry is cyclical, as well as peoperty is also cyclical. US companies announced in 2008 the closing of 1,223 993 jobs, a figure surpassing by 57 percent the total number of layoffs in 2007 and the highest figure over the past five years, according to Challenger, Gray Christmas consulting firm.
Household names such as Caterpillar, (CAT) Home Depot (HD) and Sprint Nextel (S) said Monday that they are laying off a combined 35,000 workers in moves that stressed the severity of the worldwide recession and kicked off what is likely to be a week of gloomy earnings announcements, further job cuts and dismal data. Corning said it is cutting 3,500 jobs, or 13% of its payroll, etc.
The news ratchets up the pressure on the Obama administration and Congress as lawmakers debate an $825 billion stimulus package intended to save or create millions of jobs. Far more job cuts are likely as consumer and business spending tumbles amid what many economists say is the worst recession the USA has seen since the Great Depression. With the economic stimuls [packages in nmost countries mirrowing the US (eg $42b Rudd's package here in Oz), thhe cycle will re-emerge eventually. If the workers get jobs again, can they afford more than $1 for the house to live in? You bet!
Are such property panics rare? No.
Let's look at Japan. Japanese real estate is literally selling at 1980s prices. Rents in Tokyo are up 30% in the past two years. There's a huge incentive to borrow and buy real estate, as "cap rates" (essentially the rent minus the costs of upkeep) are 4%-6%, while the cost of borrowing money is only 1.5%. There is no supply... vacancy rates in Tokyo real estate are tight at 2.6% and there isn't much new building taking place.
Japan's house prices tumbled throughout the 90's and only in recent times have they began slowly to move in a positive direction. This chart shows the land prices for Japans Urban areas from 1964 to 2007. Land prices are the most common way of measuring Japan's house prices.
This crisis, like most others in rich countries, emerged from a property bubble and a credit boom. The scale of the bubble—a doubling of house prices in five years—was about as big in America’s ten largest cities as it was in Japan’s metropolises. But nationwide, house prices rose further in America and Britain than they did in Japan (see first chart). So did commercial-property prices. In absolute terms, the credit boom on top of the housing bubble was unparalleled. In America private-sector house debt soared from $22 trillion in 2000 (or the equivalent of 222% of GDP) to $41 trillion (294% of GDP) in 2007 (see second chart).
Judged by standard measures of banking distress, such as the amount of non-performing loans, America’s troubles are probably worse than those in any developed-country crash bar Japan’s. According to the IMF, non-performing loans in Sweden reached 13% of GDP at the peak of the crisis. In Japan they hit 35% of GDP. A recent estimate by Goldman Sachs suggests that American banks held some $5.7 trillion-worth of loans in “troubled” categories, such as subprime mortgages and commercial property. That is equivalent to almost 40% of GDP.
As the world’s biggest debtor, America headed into this bust in a very different position from Japan, a creditor nation rich in domestic savings. Nonetheless the macroeconomic trends in America look more like those that existed in Japan than other crisis-hit countries. Most big banking failures, from Sweden’s to South Korea’s, were created or worsened by a currency crash. Tumbling exchange rates raised the real burden of foreign-currency loans, forced policymakers to keep interest rates high and pushed up the fiscal costs of bank rescues. (Because of the rupiah’s collapse, for instance, the clean up of Indonesia’s failed banks in 1998 cost more than 50% of GDP.) But, by boosting exports, a weaker currency also offered a route to recovery and eventually things normalised.
Look at art an asset class-do you believe museums will shut down and Van Gogh and Michelangelo will sell for $1? Doubt it!
Thursday, February 19, 2009
Estate Planning: Wills - Bloomberg: Your Money
So, how important is it to have a will? It's very important, assuming you want to maintain control of your assets and avoid the court system. But, before you grab a sheet of paper, you need to understand what should be done to make sure your will is effective and valid.
SMSF Self Managed Super Funds holding Trust assets
Self Managed Super Funds holding trust assets
by Brett Davies at LawCentral
Question: I am having an ongoing debate with my accountant.
My wife and I are currently the trustees of our SMSF. We are very conscious of the rules and requirements relating to investment and ensuring that our SMSF is compliant. We are aware that investment in a "related trust" is restricted (since 11 August 1999). This means that there are "non-arm's length income provisions in the Income Tax Assessment Act 1997 (ITAA). This all leads us to the conclusion that our SMSF cannot hold an interest in a trust.
Our accountant begs to differ. She says that there are many circumstances that a SMSF can hold an interest in a trust. Can you please clarify this for us?
by Brett Davies at LawCentral
Question: I am having an ongoing debate with my accountant.
My wife and I are currently the trustees of our SMSF. We are very conscious of the rules and requirements relating to investment and ensuring that our SMSF is compliant. We are aware that investment in a "related trust" is restricted (since 11 August 1999). This means that there are "non-arm's length income provisions in the Income Tax Assessment Act 1997 (ITAA). This all leads us to the conclusion that our SMSF cannot hold an interest in a trust.
Our accountant begs to differ. She says that there are many circumstances that a SMSF can hold an interest in a trust. Can you please clarify this for us?
Hybrid Trusts - Where are we now? Where are we going now?
Hybrid Trusts - by Brett Davies at LawCentral.
Last year I discussed the advantages of negative gearing within a Hybrid Trust and the 'new' approach of the ATO when dealing with this.
Hybrid Trusts, as the name suggests, are a combination of a Discretionary Trust and a Unit Trust. Unit holders are entitled to fixed income and/ or capital. However there is still a lot of flexibility for the Trustee to deal with the income and capital of the Trust.
Last year I discussed the advantages of negative gearing within a Hybrid Trust and the 'new' approach of the ATO when dealing with this.
Hybrid Trusts, as the name suggests, are a combination of a Discretionary Trust and a Unit Trust. Unit holders are entitled to fixed income and/ or capital. However there is still a lot of flexibility for the Trustee to deal with the income and capital of the Trust.
Avoiding GST on Family Trust transfers
Avoiding GST on Family Trust transfers - by Brett Davies at Lawcentral
QUESTION: Your articles on transferring commercial property out of family trusts (and into, for example, Self Managed Super Funds) are helpful. However, I still don't understand the GST issues.
What if my client's family trust is not registered for GST?
ANSWER: Your client has a family trust which is not registered for GST.
One of the trust assets is a commercial property. The family trust wants to distribute the commercial property to one of its beneficiaries. This is called an in specie distribution. In these circumstances an in specie distribution is usually not a taxable supply by the family trust. Therefore, there is no GST payable. This is supported by Private Rulings 60695 (2006), 60418 (2006) and Interpretative Decision 2001/503.
As I stated in my previous articles on this topic, if the client's family trust was registered for GST (or was legally required to register for GST) then it is a taxable supply. GST would payable by the family trust. This is the case whether mum and dad as the beneficiaries were registered for GST or not. See Private Ruling 16483 (2002).
When you distribute assets from a family trust and then try and get them into your Self Managed Super Fund many tax issues can arise such as stamp duty, Capital Gains Tax, Fringe Benefit Tax and as you mention GST.
Want to know more:
Self Managed Superannuation Fund Deed - http://LawCentral.com.au
QUESTION: Your articles on transferring commercial property out of family trusts (and into, for example, Self Managed Super Funds) are helpful. However, I still don't understand the GST issues.
What if my client's family trust is not registered for GST?
ANSWER: Your client has a family trust which is not registered for GST.
One of the trust assets is a commercial property. The family trust wants to distribute the commercial property to one of its beneficiaries. This is called an in specie distribution. In these circumstances an in specie distribution is usually not a taxable supply by the family trust. Therefore, there is no GST payable. This is supported by Private Rulings 60695 (2006), 60418 (2006) and Interpretative Decision 2001/503.
As I stated in my previous articles on this topic, if the client's family trust was registered for GST (or was legally required to register for GST) then it is a taxable supply. GST would payable by the family trust. This is the case whether mum and dad as the beneficiaries were registered for GST or not. See Private Ruling 16483 (2002).
When you distribute assets from a family trust and then try and get them into your Self Managed Super Fund many tax issues can arise such as stamp duty, Capital Gains Tax, Fringe Benefit Tax and as you mention GST.
Want to know more:
Self Managed Superannuation Fund Deed - http://LawCentral.com.au
Get money out of your Family Trust?
Family Trusts can now pay Superannuation to its directors - By Brett Davies at Lawcentral
Many Family Trusts have a company as a trustee. That company has a human being as a director. The director wants to get paid. Can the Trustee Company pay him out of the trust assets? Can the Trust (rather than the Company) claim a tax deduction? And can the Company claim a tax deduction for the Director's Superannuation contributions? The good news is that the ATO has said yes.
Traditionally, you couldn't get money directly out of your Family Trust into your Superannuation. This new ATO approach now gives you a window to do this.
Many Family Trusts have a company as a trustee. That company has a human being as a director. The director wants to get paid. Can the Trustee Company pay him out of the trust assets? Can the Trust (rather than the Company) claim a tax deduction? And can the Company claim a tax deduction for the Director's Superannuation contributions? The good news is that the ATO has said yes.
Traditionally, you couldn't get money directly out of your Family Trust into your Superannuation. This new ATO approach now gives you a window to do this.
SMSF Superannuation - who gets it when you DIE?
Superannuation all goes to the oldest son- by LawCentral:
Question: My adviser has suggested that I make binding nomination for my superannuation. This is to ensure that my Super goes to my three children equally at death. I have my own self managed superannuation fund. My eldest child is the co-trustee of the SMSF. I have already made a non-binding direction that the funds are distributed between my children. Surely, if there are any problems, my Will (which also leaves everything in equal shares) deals with this?
Question: My adviser has suggested that I make binding nomination for my superannuation. This is to ensure that my Super goes to my three children equally at death. I have my own self managed superannuation fund. My eldest child is the co-trustee of the SMSF. I have already made a non-binding direction that the funds are distributed between my children. Surely, if there are any problems, my Will (which also leaves everything in equal shares) deals with this?
Superannuation tricks for a 66-year old
Superannuation tricks for a 66-year old by Lawcentral:
QUESTION: In a few years I will be turning 66 years old.
1. Does your Self Managed Superannuation Deed http://www.lawcentral.com.au/CreateDo... allow me contribute to my Super?
2. Can I contribute the full $450k and then start a pension with the smallest minimum withdrawal rate?
3. My wife has died; can the left over Superannuation when I die go to my adult child tax free?
ANSWER: While the age of 65 is important, under our Self Managed Superannuation Deed http://www.lawcentral.com.au/CreateDo... you can contribute to Super until you turn 75 years of age. This is provided after 65 you satisfy the work test. It is an easy test. All you need to do is work for a total of 40 hours in "gainful" employment within any 30-days of a financial year.
Two doors then open up.
Firstly, you can instruct your boss (or yourself if you are self-employed) to stick in up to $100k into your Super. This is a "concessional tax contribution". This means that you put untaxed earnings directly into your Super and don't personally pay any tax on the income. However, your SMSF will peel off 15% of that contribution and give it to the tax man. Still 15% is better than the highest marginal tax rate of 46.5%.
Your boss also gets a full tax deduction for paying your Super.
If you are going to shovel in more than 9% of your income or your bonuses into Super then you need to document this before you derive the income. This is a common fault with most Employment Contracts. If you use our Employment Contracts http://www.lawcentral.com.au/CreateDo... then you will comply. If you are using someone else's Employment Contract then ask them if their Employment Contract complies.
Secondly, on top of that you can also put in another $150,000 per financial year of "non-concessional contributions". (This is the new term for "after tax-contributions".) This is where the money has already had the tax paid on it. It could, for example, be a nest egg sitting in your bank account or some of the proceeds from the sale of your family home -- assuming your family home is capital gains tax free.
Now, as you were under 65 you could contribute $450k into your Super. You are bringing forward the contribution. Therefore, this stops further "non-concessional contributions" for the next 2 financial years.
Our Self Managed Superannuation Fund Deed http://www.lawcentral.com.au/CreateDo... allows you to immediately start a pension (an account-based pension, to be exact) in which you are only forced to pay 4% of the income to yourself each year. There is now no tax on the income that pensions generate. But while in accumulation mode (before you convert to a pension) your fund is taxed on income. Your deed http://www.lawcentral.com.au/CreateDo... must allow for 2 components: taxable and tax-free component.
Your final question is a tough one. The government has seen fit to tax your adult children at 16.5% on your Super when you die. In fact, apart from your spouse, children under 18 and people you maintain -- all your other family members can get stung with this death duty. There are a number of strategies to reduce this penalty to your "non-dependants" in our deeds. Your adviser and accountant will give you advice on this. You can also consider seeing Brett Davies Lawyers www.taxlawyers.com.au to set up one of our Superannuation Testamentary Trust in your Will.
QUESTION: In a few years I will be turning 66 years old.
1. Does your Self Managed Superannuation Deed http://www.lawcentral.com.au/CreateDo... allow me contribute to my Super?
2. Can I contribute the full $450k and then start a pension with the smallest minimum withdrawal rate?
3. My wife has died; can the left over Superannuation when I die go to my adult child tax free?
ANSWER: While the age of 65 is important, under our Self Managed Superannuation Deed http://www.lawcentral.com.au/CreateDo... you can contribute to Super until you turn 75 years of age. This is provided after 65 you satisfy the work test. It is an easy test. All you need to do is work for a total of 40 hours in "gainful" employment within any 30-days of a financial year.
Two doors then open up.
Firstly, you can instruct your boss (or yourself if you are self-employed) to stick in up to $100k into your Super. This is a "concessional tax contribution". This means that you put untaxed earnings directly into your Super and don't personally pay any tax on the income. However, your SMSF will peel off 15% of that contribution and give it to the tax man. Still 15% is better than the highest marginal tax rate of 46.5%.
Your boss also gets a full tax deduction for paying your Super.
If you are going to shovel in more than 9% of your income or your bonuses into Super then you need to document this before you derive the income. This is a common fault with most Employment Contracts. If you use our Employment Contracts http://www.lawcentral.com.au/CreateDo... then you will comply. If you are using someone else's Employment Contract then ask them if their Employment Contract complies.
Secondly, on top of that you can also put in another $150,000 per financial year of "non-concessional contributions". (This is the new term for "after tax-contributions".) This is where the money has already had the tax paid on it. It could, for example, be a nest egg sitting in your bank account or some of the proceeds from the sale of your family home -- assuming your family home is capital gains tax free.
Now, as you were under 65 you could contribute $450k into your Super. You are bringing forward the contribution. Therefore, this stops further "non-concessional contributions" for the next 2 financial years.
Our Self Managed Superannuation Fund Deed http://www.lawcentral.com.au/CreateDo... allows you to immediately start a pension (an account-based pension, to be exact) in which you are only forced to pay 4% of the income to yourself each year. There is now no tax on the income that pensions generate. But while in accumulation mode (before you convert to a pension) your fund is taxed on income. Your deed http://www.lawcentral.com.au/CreateDo... must allow for 2 components: taxable and tax-free component.
Your final question is a tough one. The government has seen fit to tax your adult children at 16.5% on your Super when you die. In fact, apart from your spouse, children under 18 and people you maintain -- all your other family members can get stung with this death duty. There are a number of strategies to reduce this penalty to your "non-dependants" in our deeds. Your adviser and accountant will give you advice on this. You can also consider seeing Brett Davies Lawyers www.taxlawyers.com.au to set up one of our Superannuation Testamentary Trust in your Will.
Entreprenuership, New Business, Start Up & Business Planning
Business Plan - If you fail to plan then you are planning to fail
The reality of running your own business and offers some advice about writing a business plan, financing a new business, marketing and finding customers, record keeping and taxation.
Writing a business plan, including how to structure the plan, what information to include and other considerations
Drawing up a budget, bank finance and deciding how much financing you will need.
Marketing your new business, finding customers, pricing your product and / or service, and setting yourself apart fom the competition, "...better than your competition and at a profit..."
Taxation, how it works and the importance of keeping records
The reality of running your own business and offers some advice about writing a business plan, financing a new business, marketing and finding customers, record keeping and taxation.
Writing a business plan, including how to structure the plan, what information to include and other considerations
Drawing up a budget, bank finance and deciding how much financing you will need.
Marketing your new business, finding customers, pricing your product and / or service, and setting yourself apart fom the competition, "...better than your competition and at a profit..."
Taxation, how it works and the importance of keeping records
Kevin Rudd's Government spending $42 billion
"...to invest in jobs and economic future....to see Australia through economic crisis..."
USA President Obama Signs $787 Billion Economic Stimulus Bill Into Law
President Barack Obama signed the $787 billion stimulus bill into law Tuesday in Denver. The legislation is the most sweeping economic package in decades. (Feb. 17)
"....most sweeping recovery package....."
"....most sweeping recovery package....."
Is Australian Government guaranteeing all banks?
The Australian government is taking steps to help stabilize the country's economy. Over the weekend Prime Minister Kevin Rudd announced plans for the government to guarantee bank deposits for the next three years.
STORY:
In a bid to combat the global financial turmoil, Australian Prime Minister Kevin Rudd announced that deposits are safe.
[Kevin Rudd, Australian Prime Minister]:
"The Australian government will guarantee all deposits, whatever their size, in all Australian banking institutions for three years. Banks, building societies, credit unions. As Prime Minister of Australia again I am not prepared to stand idly by in dealing with the concerns of Australians as they watch global financial developments unfold."
The Australian government has allocated a 2.6 billion U.S dollar fund to help maintain liquidity in the markets.
Rudd stressed that banks are well regulated, but action is needed.
[Kevin Rudd, Australian Prime Minister]:
"This global financial crisis has entered a new and dangerous phase with real consequences for growth, for jobs and therefore for the future and as a consequence the government of course is examining measures for the future about how best to deploy a surplus that we had set aside for the future."
Ireland and Germany have also said they will guarantee the funds of depositors while in the UK it's reported that Britain's ailing banks are to ask the government for a 35 billion pound cash injection.
The Sunday Times newspaper says HBOS, Royal Bank of Scotland, Lloyds TSB and Barclays, are behind the move.
The announcements come as the world's leading finance ministers meet to discuss the credit crisis.
The leaders have agreed to work together to improve the economic climate by improving regulation and the overall function of the world markets.
STORY:
In a bid to combat the global financial turmoil, Australian Prime Minister Kevin Rudd announced that deposits are safe.
[Kevin Rudd, Australian Prime Minister]:
"The Australian government will guarantee all deposits, whatever their size, in all Australian banking institutions for three years. Banks, building societies, credit unions. As Prime Minister of Australia again I am not prepared to stand idly by in dealing with the concerns of Australians as they watch global financial developments unfold."
The Australian government has allocated a 2.6 billion U.S dollar fund to help maintain liquidity in the markets.
Rudd stressed that banks are well regulated, but action is needed.
[Kevin Rudd, Australian Prime Minister]:
"This global financial crisis has entered a new and dangerous phase with real consequences for growth, for jobs and therefore for the future and as a consequence the government of course is examining measures for the future about how best to deploy a surplus that we had set aside for the future."
Ireland and Germany have also said they will guarantee the funds of depositors while in the UK it's reported that Britain's ailing banks are to ask the government for a 35 billion pound cash injection.
The Sunday Times newspaper says HBOS, Royal Bank of Scotland, Lloyds TSB and Barclays, are behind the move.
The announcements come as the world's leading finance ministers meet to discuss the credit crisis.
The leaders have agreed to work together to improve the economic climate by improving regulation and the overall function of the world markets.
2009 Money with George Soros
George Soros(born August 12, 1930, in Budapest, Hungary, as György Schwartz) is a Hungarian-born Jewish American financial speculator, stock investor, philanthropist, and political activist.
Soros is estimated currently[2009] to be worth around $9 billion in net worth; he is ranked by Forbes as the 101st-richest person in the world.
Soros is chairman of Soros Fund Management and the Open Society Institute and is also a former member of the Board of Directors of the Council on Foreign Relations. He is also one of three initial funders of Center for American Progress, and is represented on the board. His funding and organization of Georgia's Rose Revolution was considered by Russian and Western observers to have been crucial to its success, although Soros said his role has been greatly exaggerated. In the United States, he is known for having donated large sums of money in a failed effort to defeat President George W. Bush's bid for re-election in 2004.
Former Federal Reserve Chairman Paul Volcker wrote in 2003 in the foreword of Soros' book The Alchemy of Finance:
George Soros has made his mark as an enormously successful speculator, wise enough to largely withdraw when still way ahead of the game. The bulk of his enormous winnings is now devoted to encouraging transitional and emerging nations to become 'open societies,' open not only in the sense of freedom of commerce but—more important—tolerant of new ideas and different modes of thinking and behavior.
Move to the United States
In 1956 he moved to New York City, where he worked as an arbitrage trader with F. M. Mayer from 1956 to 1959 and as an analyst with Wertheim and Company from 1959 to 1963. Throughout this time, Soros developed a philosophy of "reflexivity" based on the ideas of Karl Popper. Reflexivity, as used by Soros, is the belief that the action of beholding the valuation of any market by its participants, affects said valuation of the market in a procyclical 'virtuous or vicious' circle.
Soros realized, however, that he would not make any money from the concept of reflexivity until he went into investing on his own. He began to investigate how to deal in investments. From 1963 to 1973 he worked at Arnhold and S. Bleichroeder, where he attained the position of vice-president. Soros finally concluded that he was a better investor than he was a philosopher or an executive. In 1967 he persuaded the company to set up an offshore investment fund, First Eagle, for him to run; in 1969 the company founded a second fund for Soros, the Double Eagle hedge fund.
When investment regulations restricted his ability to run the funds as he wished, he quit his position in 1973 and established a private investment company that eventually evolved into the Quantum Fund. He has stated that his intent was to earn enough money on Wall Street to support himself as an author and philosopher - he calculated that $500,000 after five years would be possible and adequate.
He is also a former member of the Carlyle Group.
Business
Soros is the founder of Soros Fund Management. In 1970 he co-founded the Quantum Fund with Jim Rogers, which created the bulk of the Soros fortune. Rogers retired from the fund in 1980. Other partners have included Victor Niederhoffer and Stanley Druckenmiller.
In late 2006, Soros bought about 2 million shares of Halliburton.
In 2007, the Quantum Fund returned almost 32%, netting Soros $2.9 billion
George Soros' theory of super-bubbles at the World Economic Forum 2009
George Soros on credit crunch and the cycle of boom & bust, the role of market fundamentalism, credit rating agencies, deregulation & globalization. Source: Bloomberg
Soros is estimated currently[2009] to be worth around $9 billion in net worth; he is ranked by Forbes as the 101st-richest person in the world.
Soros is chairman of Soros Fund Management and the Open Society Institute and is also a former member of the Board of Directors of the Council on Foreign Relations. He is also one of three initial funders of Center for American Progress, and is represented on the board. His funding and organization of Georgia's Rose Revolution was considered by Russian and Western observers to have been crucial to its success, although Soros said his role has been greatly exaggerated. In the United States, he is known for having donated large sums of money in a failed effort to defeat President George W. Bush's bid for re-election in 2004.
Former Federal Reserve Chairman Paul Volcker wrote in 2003 in the foreword of Soros' book The Alchemy of Finance:
George Soros has made his mark as an enormously successful speculator, wise enough to largely withdraw when still way ahead of the game. The bulk of his enormous winnings is now devoted to encouraging transitional and emerging nations to become 'open societies,' open not only in the sense of freedom of commerce but—more important—tolerant of new ideas and different modes of thinking and behavior.
Move to the United States
In 1956 he moved to New York City, where he worked as an arbitrage trader with F. M. Mayer from 1956 to 1959 and as an analyst with Wertheim and Company from 1959 to 1963. Throughout this time, Soros developed a philosophy of "reflexivity" based on the ideas of Karl Popper. Reflexivity, as used by Soros, is the belief that the action of beholding the valuation of any market by its participants, affects said valuation of the market in a procyclical 'virtuous or vicious' circle.
Soros realized, however, that he would not make any money from the concept of reflexivity until he went into investing on his own. He began to investigate how to deal in investments. From 1963 to 1973 he worked at Arnhold and S. Bleichroeder, where he attained the position of vice-president. Soros finally concluded that he was a better investor than he was a philosopher or an executive. In 1967 he persuaded the company to set up an offshore investment fund, First Eagle, for him to run; in 1969 the company founded a second fund for Soros, the Double Eagle hedge fund.
When investment regulations restricted his ability to run the funds as he wished, he quit his position in 1973 and established a private investment company that eventually evolved into the Quantum Fund. He has stated that his intent was to earn enough money on Wall Street to support himself as an author and philosopher - he calculated that $500,000 after five years would be possible and adequate.
He is also a former member of the Carlyle Group.
Business
Soros is the founder of Soros Fund Management. In 1970 he co-founded the Quantum Fund with Jim Rogers, which created the bulk of the Soros fortune. Rogers retired from the fund in 1980. Other partners have included Victor Niederhoffer and Stanley Druckenmiller.
In late 2006, Soros bought about 2 million shares of Halliburton.
In 2007, the Quantum Fund returned almost 32%, netting Soros $2.9 billion
George Soros' theory of super-bubbles at the World Economic Forum 2009
George Soros on credit crunch and the cycle of boom & bust, the role of market fundamentalism, credit rating agencies, deregulation & globalization. Source: Bloomberg
2009 Money with Jim Rogers
James Beeland Rogers, Jr. (born October 19, 1942) is an American investor and financial commentator. He is co-founder, along with George Soros, of the Quantum Fund, and is a college professor, author, world traveler, economic commentator, and creator of the Rogers International Commodities Index (RICI).
Rogers was born in Wetumpka, Alabama. Rogers grew up in Demopolis, getting started in business at the age of five, picking up bottles at baseball games. He got his first job on Wall Street, at Dominick & Dominick, after graduating with a bachelor's degree from Yale University in 1964. Rogers then acquired a second BA degree from Balliol College, Oxford University in 1966. After Oxford, Rogers returned to the U.S. and enlisted in the army for a few years.
In 1970, Rogers joined Arnhold & S. Bleichroeder, where he met George Soros. That same year, Rogers and Soros founded the Quantum Fund. During the following 10 years the portfolio gained 4200% while the S&P advanced about 47%. It was one of the first truly international funds.
In 1980, Rogers decided to "retire", and traveled on motorcycle through China. Since then, he has been a guest professor of finance at the Columbia University Graduate School of Business.
In 1989 and 1990, Rogers was the moderator of WCBS' The Dreyfus Roundtable and FNN's The Profit Motive with Jim Rogers. From 1990 to 1992, he traveled through China again, as well as around the world, on motorcycle, over 100,000 miles (160,000 km) across six continents, which was picked up in the Guinness Book of World Records. He tells of his adventures and worldwide investments in Investment Biker.
In 1998, Rogers founded the Rogers International Commodity Index. In 2007, the index and its 3 sub-indices were linked to exchange-traded notes under the banner ELEMENTS. The notes track the total return of the indices as an accessible way to invest in the index.
Between January 1, 1999 and 5 January, 2002, Rogers did another Guinness World Record journey through 116 countries, covering 245,000 kilometers with his wife, Paige Parker, in a custom-made Mercedes. The trip began in Iceland, which was about to celebrate the 1000th anniversary of Leif Eriksson's first trip to America. On January 5, 2002, they were back in New York City and their home on Riverside Drive. His route around the world can be viewed on his website, jimrogers.com. He wrote Adventure Capitalist following this around-the-world adventure. It is currently his best selling book.
On his return in 2002, Rogers became a regular guest on Fox News' Cavuto on Business which airs every Saturday. He has a daughter, Happy, born in 2003. In 2005, Rogers wrote Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market. In this book, Rogers quotes a Financial Analysts Journal academic paper co-authored by Yale School of Management professor, Geert Rouwenhorst, entitled Facts and Fantasies about Commodity Futures. Rogers contends this paper shows that commodities investment is one of the best investments over time, which is a concept somewhat at odds with conventional investment thinking.
In December 2007, Rogers sold his mansion in New York City for about 16 million USD and moved to Singapore. This is due mainly in his belief that this is a ground-breaking time for investment potential in Asian markets. Rogers' first daughter is now being tutored in Mandarin to prepare her for the future, he says. "Moving to Asia now is like moving to New York City in 1907," he said. Also, he is quoted to say: "If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia." In a CNBC interview with Maria Bartiromo broadcast on May 5, 2008, Rogers said that people in Asia are extremely motivated and driven, and he wants to be in that type of environment, so his daughters are motivated and driven. He said during that interview that, this is how America and Europe used to be. He chose not to move to Hong Kong or Shanghai due to the high levels of pollution causing potential health problems for his family. His second daughter was born in 2008.
What is next for UK?
What about USA?
Super Inflation Coming!
Shall we let banks fail?
Future of Russia, Emerging markets
Jim Rogers on Future Banking - Shall you trust Banks???
"It's not the first time in the world that investment banks and commercial banks have gone bankrupt, this has been going on for hundreds of years," Jim Rogers, CEO of Rogers Holdings, told CNBC.
Rogers was born in Wetumpka, Alabama. Rogers grew up in Demopolis, getting started in business at the age of five, picking up bottles at baseball games. He got his first job on Wall Street, at Dominick & Dominick, after graduating with a bachelor's degree from Yale University in 1964. Rogers then acquired a second BA degree from Balliol College, Oxford University in 1966. After Oxford, Rogers returned to the U.S. and enlisted in the army for a few years.
In 1970, Rogers joined Arnhold & S. Bleichroeder, where he met George Soros. That same year, Rogers and Soros founded the Quantum Fund. During the following 10 years the portfolio gained 4200% while the S&P advanced about 47%. It was one of the first truly international funds.
In 1980, Rogers decided to "retire", and traveled on motorcycle through China. Since then, he has been a guest professor of finance at the Columbia University Graduate School of Business.
In 1989 and 1990, Rogers was the moderator of WCBS' The Dreyfus Roundtable and FNN's The Profit Motive with Jim Rogers. From 1990 to 1992, he traveled through China again, as well as around the world, on motorcycle, over 100,000 miles (160,000 km) across six continents, which was picked up in the Guinness Book of World Records. He tells of his adventures and worldwide investments in Investment Biker.
In 1998, Rogers founded the Rogers International Commodity Index. In 2007, the index and its 3 sub-indices were linked to exchange-traded notes under the banner ELEMENTS. The notes track the total return of the indices as an accessible way to invest in the index.
Between January 1, 1999 and 5 January, 2002, Rogers did another Guinness World Record journey through 116 countries, covering 245,000 kilometers with his wife, Paige Parker, in a custom-made Mercedes. The trip began in Iceland, which was about to celebrate the 1000th anniversary of Leif Eriksson's first trip to America. On January 5, 2002, they were back in New York City and their home on Riverside Drive. His route around the world can be viewed on his website, jimrogers.com. He wrote Adventure Capitalist following this around-the-world adventure. It is currently his best selling book.
On his return in 2002, Rogers became a regular guest on Fox News' Cavuto on Business which airs every Saturday. He has a daughter, Happy, born in 2003. In 2005, Rogers wrote Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market. In this book, Rogers quotes a Financial Analysts Journal academic paper co-authored by Yale School of Management professor, Geert Rouwenhorst, entitled Facts and Fantasies about Commodity Futures. Rogers contends this paper shows that commodities investment is one of the best investments over time, which is a concept somewhat at odds with conventional investment thinking.
In December 2007, Rogers sold his mansion in New York City for about 16 million USD and moved to Singapore. This is due mainly in his belief that this is a ground-breaking time for investment potential in Asian markets. Rogers' first daughter is now being tutored in Mandarin to prepare her for the future, he says. "Moving to Asia now is like moving to New York City in 1907," he said. Also, he is quoted to say: "If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia." In a CNBC interview with Maria Bartiromo broadcast on May 5, 2008, Rogers said that people in Asia are extremely motivated and driven, and he wants to be in that type of environment, so his daughters are motivated and driven. He said during that interview that, this is how America and Europe used to be. He chose not to move to Hong Kong or Shanghai due to the high levels of pollution causing potential health problems for his family. His second daughter was born in 2008.
What is next for UK?
What about USA?
Super Inflation Coming!
Shall we let banks fail?
Future of Russia, Emerging markets
Jim Rogers on Future Banking - Shall you trust Banks???
"It's not the first time in the world that investment banks and commercial banks have gone bankrupt, this has been going on for hundreds of years," Jim Rogers, CEO of Rogers Holdings, told CNBC.
Marc Faber's 2009 Financial Markets Outlook - Worst Economic Contraction
Marc Faber's 2009 Financial Markets Outlook
Faber says global economy going into severe recession; Faber says emerging markets are being hit the hardest; Analysis by Marc Faber, LTD Founder
In his report he proposes several strategies for current markets.
Faber says global economy going into severe recession; Faber says emerging markets are being hit the hardest; Analysis by Marc Faber, LTD Founder
In his report he proposes several strategies for current markets.
Calculation of Return on Investment
Courtesy of George Mason University
This is the lecture on calculation of return on investment
This is the lecture on calculation of return on investment
Investment Management made Simple - Yale MBA
Financial Markets (ECON 252)- study at home
David Swensen, Yale's Chief Investment Officer and manager of the University's endowment, discusses the tactics and tools that Yale and other endowments use to create long-term, positive investment returns. He emphasizes the importance of asset allocation and diversification and the limited effects of market timing and security selection. Also, the extraordinary returns of hedge funds, one of the more recent phenomena of portfolio management, should be looked at closely, with an eye for survivorship and back-fill biases.
Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses
David Swensen, Yale's Chief Investment Officer and manager of the University's endowment, discusses the tactics and tools that Yale and other endowments use to create long-term, positive investment returns. He emphasizes the importance of asset allocation and diversification and the limited effects of market timing and security selection. Also, the extraordinary returns of hedge funds, one of the more recent phenomena of portfolio management, should be looked at closely, with an eye for survivorship and back-fill biases.
Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses
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