This recession is very different from any since the Depression. Normal events just aren't happening, ones like a rebound in housing prices, shorter unemployment periods, interest rates bouncing back. The severity of the economic slowdown continues to grind on, and investors who thought along the lines of a "normal" recovery have been disappointed so far as there's nothing normal happening.
Comfort Zone Investing: Unconventional Thinking Needed
Continue reading Comfort Zone Investing: Unconventional Thinking Needed
ECB President, Trichet, Says Cut Public Spending and Raise Taxes
Ben Bernanke, chairman of the U.S. Federal Reserve, said on Thursday: "In the short term, I would believe that we should maintain a reasonable degree of fiscal support, stimulus for the economy."That was yesterday. Today, Friday, Jean Claude Trichet, president of the European Central Bank, in an editorial for the Financial Times, called for public spending cuts and tax increases immediately across the industrialized world. Prolonging the stimulus would have "very limited" effect on growth, he wrote.
Trichet criticized the oversimplified message of fiscal stimulus -- "stimulate, activate, spend" -- given to all industrialized economies.
In Europe, both manufacturing and services output in the eurozone grew faster than expected. The European Commission also said that consumer confidence was at its highest level in July for more than two years.
When it comes to economic policy, it's difficult to plot the perfect path. Bernanke is an avid student of the 1930s depression and vows not to repeat the mistakes of that era. Trichet, on the other hand, is of the conservative European school of economics. He would prefer to err on the side of fiscal conservatism. Bernake would continue to use public money, if needed. He has already used $11.2 trillion of taxpayer money to prop up U.S. bank. The shift of this vast amount of money from taxpayers to the private banking sector is unprecedented in world history. Whether he should continue this policy is open to debate.
Do you believe that Trichet is right to cut spending and raise taxes?
Oil Falls On Bearish Inventory Report and Bernanke Testimony
Oil prices headed lower on Wednesday after the Department of Energy announced a surprise increase in inventories last week.Analysts had been expecting to see oil reserves decline last week by 1.4 million barrels, but the weekly inventory report showed that inventories actually increased during the week by 400,00 barrels.
Continue reading Oil Falls On Bearish Inventory Report and Bernanke Testimony
Housing Starts Fall in June
The Commerce Department reported that June housing starts were down 5% from May. Total starts for June were 549,000, the lowest level since October, and fewer than the median estimate by Bloomberg News. Economists had predicted a fall to 577,000 annual rate, according to a Bloomberg survey.Building permits rose 2.1% to 586,000, driven by a 20% jump in multifamily applications. Permits for single family housing, the biggest part of the market fell 3.4% to 421,000. This is the lowest level since April 2009.
Investing Strategy: Find the Growth First, Then Invest
With the New York Times' headlines from Prechter's version of the Elliott Wave calling for a Dow 1000 tsunami to Krugman promoting a Third Depression, and with everyone trumpeting safe havens at any price, I continue to like our contrarian stance suggesting that near-term pessimism has peaked, making growth today's best investment.The stage for such growth is obviously located where economic activity and job creation are on the rise (without the aid of stimulus plans). Looking at the IMF's recently released and upgraded 2010 global growth forecast, and as set against our more balanced mix, I'll wager growth makes even sound near-term investment sense... and at today's fretful prices, bargains buffer some of such a venture's risk.
Continue reading Investing Strategy: Find the Growth First, Then Invest
U.S. Home Buying Applications Plunge to a 13-Year Low
If you were a potential home buyer and heard talk of a double dip recession, what would you think? You might think that the next drop will be worse than the first and that you probably shouldn't buy now. You might wait a bit to see what happens. That's exactly what most Americans are doing and that's exactly why demand for home loans is at a 13-year low.This is happening despite record low mortgage rates of 4.69%. The record low rates attracted refinancing, which accounted for 78.7% of all applications last week. But even refinancing fell 2.9%
Continue reading U.S. Home Buying Applications Plunge to a 13-Year Low
Avatar Holdings (AVTR): A Ben Graham-Style Housing Value
"Following a record low reading for new home sales, you might think now is the worst time to bet on a housing recovery," says Lou Basenese.
The editor of the Small Cap and Special Situations Report asserts, "Think again. The aftermath of such disappointing news represents an ideal contrarian opportunity.
And one such opportunity is Avatar Holdings (AVTR), which ranks as a buy even by Ben Graham's strict value criteria.
Continue reading Avatar Holdings (AVTR): A Ben Graham-Style Housing Value
Investors Pour Billions into Money Market Funds
Despite this week's equity rally, investors are nervous about the future. They still fear a double dip. For that reason they are running to pour funds into money markets.
EPFR Global, which tracks the flows of money market funds, reported that money market funds had their greatest inflows in 18 months, some $33.5 billion.
Some of the world's biggest fund managers are now holding up to 40% cash in their portfolios. The main driver behind the flow of funds into money markets is fear, fear of another market slide. Chris Tuffy of Credit Suisse said: "This is about capital preservation."
Continue reading Investors Pour Billions into Money Market Funds
Office Vacancy Rate Still Rising
The fallout from the financial meltdown has taken its toll on office space. As the recession took hold, companies laid off more and more employees. It stands to reason that all that office space isn't needed. Reis Inc. tracks office space. Reis reported that 1.8 million square feet of office space were lost in the recent quarter, with a vacancy rate of 17.4%.Office space is tied to employment. The recent numbers indicate that employers are still not planning to hire additional employees who, in turn, would occupy more space. Some agencies of the federal government have expanded but this has been countered by a cutback from banks and larger corporations.
Tired of Looking for Work? See the World Instead!
With the unemployment rate hovering near 10%, bad news on the TV and job prospects dwindling, it can be tempting to retreat to a nice beach somewhere until the economy turns around. Some people are actually doing it! Rather than sitting around and moping until the economy recovers, you can go see the world and have the trip of a lifetime.
Out of work and taking a vacation? You probably want some of what I am smoking? Well, listen up!
Continue reading Tired of Looking for Work? See the World Instead!
California Communities Cut Police Forces Due to Budget Crunches
Several communities in California are eliminating basic services and are hiring contractors to do the jobs.
San Carlos, the City of Good Living and a Silicon Valley suburb, is closing budget deficits by cutting out basic services and hiring contractors to do the jobs. San Carlos faces a budget deficit of $3.5 million on a budget of $25.8 million. Council members estimate that cutting out the police force will save $2 million. Another $500,000 will be saved by contracting out cutting of grass and cleaning restrooms. The council voted 4 to 1 to pursue the Mateo County Sheriff's Department on taking over the 32-member police force.
Continue reading California Communities Cut Police Forces Due to Budget Crunches
Fed Officials Offer Dim View on the Economy
Atlanta Federal Reserve President, Dennis Lockhart, expressed concern that the recovery is so weak that the big D -- deflation, or a dangerous drop in price levels, is a risk that warrants watching. He added that deflation discussion will likely be on the next Fed agenda. He said: "It's appropriate to think about what we would do under a deflationary scenario." He is more convinced than ever that short term interest rates remain at record lows.
Fed board governor Elizabeth Duke said that full restoration of credit growth is likely to be years away.
Continue reading Fed Officials Offer Dim View on the Economy
Jobless Claims Unexpectedly Rise to 472,000
New applications for unemployment insurance unexpectedly rose 13,000 to 472,000 in the week ending June 28. Analysts polled by Reuters had estimated the number to be 452,000.
The four-week average, which smooths out the numbers, rose 3,250 to 466,500. This is the highest since early March.
Continue reading Jobless Claims Unexpectedly Rise to 472,000
Oil's First Losing Quarter Since 2008
Oil prices have been falling recently, and they continued to fall Wednesday, resulting in oil having its first losing quarter since the end of 2008.Oil prices have dropped by 9.7% since the end of the first quarter on growing concerns over the global economy and due to lackluster summer demand.
On Tuesday, the big news was that China was growing slower than previously expected. On Wednesday, we had two pieces of news affecting oil prices: oil inventories and a weak jobs report.
Janus Flexible (JAFIX): A 'Sterling' Track Record
Janus Flexible Bond (JAFIX) is a so-called multi-sector bond fund whose consistently good year-to-year performance has resulted in a sterling long-term record," says fund expert Mark Salzinger.
The editor of the No-Load Fund Investor explains, "For all of 2008 and 2009, Flexible Bond produced a cumulative total return of 18.9%, vs. only 6.9% for the multi-sector funds tracked by Morningstar. Over the past five years, Flexible Income's annualized return of 6.6% places it among the top 7% of all the fixed-income funds we cover.
"Over the past two years, the fund was the 10th best performer of every fund we track. In 2008, when most funds with significant holdings of corporate bonds produced major losses, Flexible Bond produced a gain of 5.6%.
The editor of the No-Load Fund Investor explains, "For all of 2008 and 2009, Flexible Bond produced a cumulative total return of 18.9%, vs. only 6.9% for the multi-sector funds tracked by Morningstar. Over the past five years, Flexible Income's annualized return of 6.6% places it among the top 7% of all the fixed-income funds we cover.
"Over the past two years, the fund was the 10th best performer of every fund we track. In 2008, when most funds with significant holdings of corporate bonds produced major losses, Flexible Bond produced a gain of 5.6%.
Continue reading Janus Flexible (JAFIX): A 'Sterling' Track Record
Comfort Zone Investing: Unconventional Thinking Needed
BP to Begin Scaling Back Oil Cleanup
Oil's Uncertain Economic Outlook
