In a bow to the power of the weak U.S. dollar, AP reports that Toyota Motor Corp. (NYSE: TM) is raising prices on some of its lower-priced cars. A weak dollar relative to the Yen puts downward pressure on earnings for Toyota since sales in dollars get translated into fewer Yen -- the currency in which Toyota reports earnings.
So, Toyota is trying to raise prices on its more popular, higher gas mileage models in the U.S. figuring it will lose less market share because of the strong demand as consumers -- sickened by paying so much of their income for gasoline as it powers through $4 a gallon -- scramble for Toyota's more fuel-efficient vehicles.
AP reports that Toyota's price increases, which will start in the middle of May, include a hike of $200 on the 2008 Yaris sedan, which will cost $12,425. The 2009 Camry will go up $200 to $18,920. The hybrid Camry, introduced as a 2007 model in late 2006, will cost $300 more, at $25,650. For example, the price of the Lexus IS 350 entry sports sedan will rise $300 to $36,305. However, the pricing of the 2008 Lexus IS F high-performance sports sedan won't change.
With the Japanese yen continuing to fall against the US dollar as well as higher yielding currencies such as the South African rand and the British pound, the question is whether the "carry-trade" is back on? If so, stocks may continue to rise.
What's the "carry trade"? It's an investment strategy with currencies, where investors borrow money in a currency with low borrowing costs (such as the yen) and then invest in higher yielding currencies (such as the rand or Australian dollar), earning the spread. If this trade is "back-on," then it shows that investors are more willing to take on some risk, boding well for a continued stock rally as well.
In a report on Bloomberg: "The currency weakened the most against the South African rand and the British pound, two favorites of so-called carry trades, as the cost of protecting bonds from default declined."
The report then spoke with a currency manager: "With stocks rising this much, it doesn't augur well for the yen," said Mitsuru Sahara, senior currency sales manager at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's second- biggest lender. "Calm is returning to financial markets, and that allows currency traders to focus on rate differentials. The Fed may not have to cut rates much further.''
Keep your eyes on the carry trade to see where the markets may be heading.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 5/2/08
Now that it is clear that Wal-Mart's (NYSE:WMT) international operations are growing much faster than its US division, the company is searching for new frontiers. Revenue overseas is growing at a rate better than 20%
Wal-Mart has had trouble in some countries. Its operation in Japan continues to loss money and it has pulled out of Korea and Germany.
Now, the world's largest retailer is looking to Russia and eastern Europe for more growth. According to the FT, Wal-Mart "firmly signaled its intention to expand into Russia and eastern Europe, announcing that it had recruited Stephan Fanderl, a German retail executive, to explore opportunities in the region."
It will be at least a couple of years before the market can gauge whether Wal-Mart can have success in the region. It has to compete with other companies like big European retail chain Tesco. The Wal-Mart model clearly does not work in all cultures.
A break-down of Wal-Mat's track record overseas is telling. It problems in Germany, Japan, and Korea have been more than off-set by successes in China and Mexico. To some extent that may mean that countries with lower median incomes are better markets for the company. Russia and Eastern Europe are a mixed bag. Parts of Russia have done very well financially. Eastern Europe is still in a stage of economic development.
Wal-Mart may be expanding outside the US, but its success is hardly assured.
Douglas A. McIntyre is an editor at 247wallst.com.
Yahoo! (NASDAQ: YHOO) may have a better foothold in Asia than any other large internet company. This is driven by its holdings in Yahoo! Japan and Chinese e-commerce company Alibaba. According toThe Wall Street Journal, "Depending on how their value is calculated, the stakes account for $9 billion to $14 billion of Yahoo's value."
The valuations are old news. What is not so old is that it is dawning on Microsoft (NASDAQ: MSFT) that having Asian allies may help the company fight off Google (NASDAQ: GOOG) in the fast-growing markets of the Far East. It is something that the world's largest software company does not have now.
The Yahoo! board has a unique opportunity to talk up the strategic value of these holdings with shareholders in public and with Microsoft in private. The prevailing wisdom is that Yahoo! has no alternative other than to sell to Redmond, and that the price is the issue. Yahoo! management should be saying that the Microsoft bid does not take into account the value of having powerful partners in Japan and China and that these are worth several more dollars a share.
It is an argument that has the benefit of being true.
Japan lowered its economic assessment for the first time in a year, saying growth is softening as slowing U.S. consumption is cooling demand for Japanese factory-produced goods, The Wall Street Journal reported Friday (Subscription required).
Japan's government also warned that chances of a further slowdown in Japan's export-driven economy are increasing. "The economy is recovering at a moderate pace recently," the monthly economic report from the Cabinet Office released Friday said, The Journal reported (Subscription required).
Economist David H. Wang told BloggingStocks Friday Japan's revised assessment suggests that the U.S. economic slowdown is already being felt in Japan.
"Japan's comments are usually low-key and generalized, so what one can read into the their revision is that they are experiencing lower demand from the U.S. for Japanese exports, and that they expect more of the same for this year," Wang said. The United States is the largest buyer of Japanese exports.
The Nikkei index rose more than it has at any time in the last five years. It moved up 4.3% to 13,626. Sony (NYSE: SNE) rose 4% to 4820. Toppan Printing rose 10.1% to 1111. Toshiba rose 7.1% to 782.
It is hard for Wal-Mart (NYSE: WMT) to leave Japan, even though its sales there look awful. There are only so many large markets, and to keep its international growth moving, it needs to be in almost all of them.
The world's largest retailer did have a tough time in the big Asian market last year. The operation there said "it now expected to post a group net loss of 20.9 billion yen ($196 million) for calendar 2007, instead of its previous forecast for a loss of 10.4 billion yen, " according to Reuters. Same-store sales for the year dropped just over 1%.
The bad thing about Japan is that sales are flat. The good thing is that the government there allows Wal-Mart to operate without significant regulation. The politics of Japan are stable.
Wal-Mart has had success in China and hopes to move into India, but those countries have many more restrictions for doing business. At this point, Wal-Mart cannot even enter India under its own name. In China, Wal-Mart workers are members of unions and the communist party has a wing in the retailer.
Perhaps a market with modest potential and a large population is better than those with big business risks.
Douglas A. McIntyre is an editor at 247wallst.com.
The New York Times reports that Japan's decade-long economic slump following the bursting of its 1980s economic bubble offers important lessons for the U.S. Of these, the most important one seems to be that banks and others exposed to bad loans should write them off fast and move on. It was Japan's unwillingness to bite the bullet that kept it stuck for a decade.
Last month, I compared Japan's negative interest rates to the ones we have now. But what caused the predicament that led Japan to cut its rates so much? In Japan, housing prices in the major metropolitan regions nearly tripled from 1985 to 1991, then proceeded to lose two-thirds of their value over the next 14 years. In the U.S., the price run up was less extreme: house prices rose 82% from November 2001 to their peak in June 2006. Since the peak, house prices have fallen 10% with 10% to 15% further to go.
Japan was slow to write-down its bad loans. That's because its industrial groups, or keiretsu, had tight links with banks, so when a bank got in trouble it was often quietly bailed out temporarily with loans or investments from other members of the corporate group. In the U.S., banks are quicker to take write-downs and so far we've used Sovereign Wealth Funds (SWFs) to recapitalize the banks.
The lesson we should learn from Japan is that the sooner we face reality, the sooner we can solve our problems and move on to the next period of growth. A larger question is whether we can grow without creating another bubble.
Based in London, Nick Vardy is among the leading international stock experts. The editor of The Global Bull Market Alert has created a package of stocks called the "Ultimate Defensive Global Bull Market Alert" Portfolio -- using ETFs to go short on China and the British pound while simultaneously going long on agriculture and the yen.
"UltraShort FTSE/Xinhua China 25 ProShares (ASE: FXP) has been a hero during market weakness. While the market's current focus is on the exposure of Chinese banks to U.S. subprime loans, the real issue in Chinese banks is their own bad loans to state-owned enterprises. China has a long way to fall.
"Short the CurrencyShares British Pound Sterling Trust (NYSE: FXB). With the U.K.'s fundamentals perhaps weaker than the United States, the U.K. currency should continue to weaken over the coming months.
"PowerShares DB Agriculture (NYSE: DBA) invests in some of the most liquid and widely traded agricultural commodities, corn, wheat, soy beans and sugar.
"Buy the Currency Shares Japanese Yen Trust (NYSE: FXY). The yen zigs when the rest of the market zags. A position in the Yen won't knock your socks off in terms of performance. But it will hold up well in times of turmoil and appreciate steadily as the 'carry trade' unwinds.
"A word of warning: This is a 'defensive' global portfolio that will hold up the best during periods of negative market sentiment. But understand that this is also the part of the portfolio that will underperform -- perhaps significantly -- on any 'relief rally' in the markets."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
Despite a troubled U.S. economy, a stronger yen and increased credit costs in the US., it looks like Japanese automakers are still benefiting from a booming car demand. After Honda Motor Ltd. (NYSE: HMC) announced early this week its profit rose 38.1% in the third-quarter, now it is Nissan Motor Co. (NASDAQ: NSANY)'s turn to prove its efficiency.
Japan's second-biggest automaker reported this morning its third-quarter profit rose 26.6% to 132.22 billion yen ($1.24 billion), helped by higher sales in Asia. The company had posted a profit of 104.46 billion yen during the same period of last year. The company's results also show a respectable 18.2% jump in revenue to 2.770 trillion yen ($26.03 billion), following strong sales of the Rogue crossover vehicle in the U.S.
Although Nissan's earnings numbers matched analysts' predictions, the company is still showing some concerns over its further gains. The automaker stated that its bottom line could be affected by lower American consumer spending. A weaker dollar also could dampen Nissan's earnings by reducing the value of its foreign revenue.
With Ben Bernanke's latest 50 basis point rate reduction it's official -- the U.S. is paying borrowers to take money off its hands. This is just what the Japanese government did during its long economic nuclear winter that began in 1989 when its combined real estate and stock market bubble burst.
Now it's our turn. How so? The real interest rate is equal to the Nominal rate minus the Inflation rate. After today's 50 basis point rate cut, the Nominal rate is 3%. And today's GDP report noted that the inflation rate -- as measured by Bernanke's favorite measure -- the change in Personal Consumption Expenditures (PCE) -- was 3.9% in 2007. The result is that the Fed is giving away money at the rate of -0.9%.
What does this mean? The Fed is so desperate to get us out of the economic slowdown that it is willing to pump up the inflation rate to do so. A bit less than 10 years ago, in November 1998, Japan did the same thing. Nine years after its economic slump began, according to CNNfn, Japanese banks were literally paying for banks to hold money for them thanks to their negative real interest rates.
The reason? A lack of trust in the solvency of its financial system. That sounds like just the thing we have here.
"Will the 'Land of the Rising Sun' ever rise again?" asks Mike Burnick in Global Market Investor. "From a valuation perspective, Japan is a real bargain; in fact, half its stocks trade below book value." Here is his review.
"First, let's cover the bad news; Japan's economy is slowing right now, just like the U.S. and Europe. Consumer spending is slumping worse than in the U.S. In other words, the domestic economy looks dismal. But at the same time, Japan's exports are booming, businesses are flush with cash, and industrial production is running strong.
"The reason is that Japan is an economy in transition, for years they counted on exports to the U.S. and Europe, but today China is becoming its most important trading partner. Exports to China jumped nearly 14% in November, as overall exports expanded 10%. That's why a slowdown in the U.S. and Europe may not hurt Japan as much as some people think.
"What was already one of the world's cheapest markets just went into deep-discount territory last year. In fact, half the stocks listed in Tokyo now trade below book value. In other words, the share price is less than the stock's per share net worth – that's unheard of in developed markets.
In a bow to the power of the weak U.S. dollar, AP reports that Toyota Motor Corp. (NYSE: TM) is raising prices on some of its lower-priced cars. A weak dollar relative to the Yen puts downward pressure on earnings for Toyota since sales in dollars get translated into fewer Yen -- the currency in which Toyota reports earnings. 
Now that it is clear that 
Yahoo!
It is hard for 
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
Oil hits record $127.43 on supply concerns, raised Goldman forecast
