Results 1,801–1,850 of 2,118 found.
Macroeconomics and Presidential Elections
It?s now just 16 months until our next presidential election. Republican candidates have already begun the long process of party debates and fund-raising efforts. President Obama wasted no time as well, launching his re-election campaign effort in March. This upcoming election will likely focus on the economy and involve major debates over taxation, spending, job creation and the fundamental role of the government in our economy. As a result, the election outcome could have significant consequences for the types of policies, incentives and legislation that will be pursued post-November 2012.
A Tough Month for One Party
After the Republican Party took control of the House following the 2010 elections, the Democratic Party staged somewhat of a rebound in the polls. Over the past five months on the prediction market website Intrade.com, the odds for the Democrats to control the House and Senate after the 2012 elections steadily increased. The odds for President Obama to win re-election also trended higher. For whatever reason, however, the GOP has surged back in June. Below are historical charts of the Intrade.com contracts for the GOP to control the House, Senate, and White House following the 2012 elections.
Second Quarter Earnings Growth Expectations
The first chart below shows how expectations for Q2 S&P 500 earnings growth have changed over the past four months. From the end of February through the end of April, growth expectations rose from 10.7% to 14.1%. Since the end of April, however, earnings growth expectations have drifted lower and the consensus estimate currently stands at 13.3%. The peak in the Q2 earnings growth estimate coincides with the peak in the S&P 500 this year. Has the market dropped because of the drop in growth estimates, or have analysts lowered their estimates because of the market drop? We think the latter.
Passing Fad or Enduring Legacy? The Case for Owning Gold in Good Times and Bad
Gold has been one of the few shining stars during a challenging 10+ years for most investors. In May, gold breached $1,500 an ounce, a new record. In fact, since bottoming out at $252 an ounce in 1999, gold has been enjoying a steady long-term bull run. This has prompted some prognosticators to warn that the "gold bubble" is ready to burst. On the other side of the coin, the more bullish "gold bugs" view the rally as confirmation of their long-held belief in the value of owning gold. Today, gold is still viewed by many as a somewhat exotic investment with little value.
Greek Drama and the Eurozone's Future: Wharton's Franklin Allen Weighs In
After a week of political drama within his Socialist Pasok party and a new wave of violent riots in the streets, Greek Prime Minister George Papandreou survived a vote of confidence, helping to pave the way for his plans to unleash further austerity measures to keep the country afloat. It has been just over a year since he shepherded in a multibillion-euro rescue package from the International Monetary Fund and the European Union, which commits Greece to several more years of drastic budget cuts and will save it from defaulting on its staggering debt.
Japan Outlook ? June 2011
Nomura?s forecast for Japan?s CY2012 real GDP growth is 3.2%, up from an expected rate for CY2011 real GDP growth of just 0.1%. Although there has been a temporary deterioration in Japanese economic indicators due to supply side constraints, such as capital stock damage, supply chain disruption, and electricity generating capacity shortfalls, we have already started to witness signs that these constraints are easing. The supply chain will return to normal this autumn, as production bases in the disaster-affected areas are restored or the users quickly switch to substitute components.
We?re Still Patiently Positioned for a Flatter Yield Curve
In this Weekly Market Update, we discuss the steep Treasury yield curve and our yield curve flattener trade. This economic cycle-based, duration-neutral, mean-reversion strategy?and how it fits with our other active positions?helps illustrate the investment process and outlook of the fixed income team. The gap between short- and long-maturity U.S. Treasury yields has been at or near historically wide levels since 2009. It?s an interesting facet of the latest economic cycle. One of our active positions is tied to an eventual narrowing of this spread to a more historically average level.
The World Held Hostage by Credit Default Swaps? Alford on the FOMC: Watch what they say
In this issue of The Institutional Risk Analyst, we feature a comment from Richard Alford on the state of thinking inside the Federal Open Market Committee regarding monetary policy -- at least based on what folks at the Fed say in public. We also comment on the latest financial bailout, in this case the apparent salvation of the European and US banks in the CDS market from taking a hit in the restructuring of Greece.
The ?Great Recalibration?
Investors who have participated in the municipal market over the last several years are keenly aware of the volatility that the market has experienced. Increased market volatility has resulted from the reaction to subprime exposure; downgrades and eventual disappearance of monoline insurers; the exit of hedge funds and arbitragers from the municipal market; fiscal strains on state governments; and changes in demand dynamics with the intro and eventual elimination of Build America Bonds. As each of these issues came to bear, they were often the subject of sensational headlines.
What?s Wrong with Chinese IPOs
Another wave of Chinese IPOs is hitting the US equity market, but this time many US investors are staying dry. The reasons for this growing aversion are several, but paramount among them are evidence of actual fraud at a handful of companies. As a result, Chinese IPOs have been one of the worst performing groups in the US IPO market, which furthers investor avoidance of the sector. If an investor bought every Chinese IPO since 2008, the average return though mid June would have been a -24% loss, compared to a 25% gain on the average non-Chinese IPO.
The more things change, the more they remain the same. That trite expression has been applied to many different things. We are applying it to what may be an early stage tech ?bubble?. Almost every investor is familiar with LinkedIn coming out at $45 per share then jumping to $120 per share in the first day of trading before settling in at $90 per share. Other examples abound. The very popular Facebook is estimated to be worth $76 billion. We have to admit that at least some of the tech companies are actually making money today with viable ideas, but the valuations still seem a bit absurd.
Understanding the Investment Process at Jensen Investment Management - Step One: Return on Equity
We believe that Return on Equity is a very useful criterion for identifying companies that have the potential to provide attractive returns over long periods of time. Our experience and research suggest that our requirement of consistently high Return on Equity results in a universe of high-quality, profitable companies that are able to generate returns above their costs of capital in a variety of circumstances and economic environments. This paper serves to illustrate the reasons why we use Return on Equity the way we do, and why we use it for the first step of our investment process.
The Economy Hits a Soft Patch?But How Soft and How Long?
Most economists concur that the economy recently has hit a ?soft patch.? The revised estimate of first quarter GDP1 growth was only 1.8% on an annualized basis. Nonfarm payrolls grew only 54,000 in May, a substantial downward change from February to April when approximately 200,000 new jobs were added each month. And average housing prices have now declined for six consecutive months. The question investors are asking is whether this slowdown is temporary or a sign of a longer-term slowdown that is coming just as the Fed winds down its latest round of monetary stimulus at the end of June.
Global Overview: June 2011
Slower manufacturing growth triggers fears of another global economic downturn. Even as the global economy appeared to have entered a phase of stable growth, the unexpected slowdown in global manufacturing activity during the month of May has led to fears of another economic downturn. Activity indicators declined the most in developed economies where growth was expected to gain pace this year. However, unless the trend persists, it is more likely that the moderation in manufacturing activity growth is only a readjustment after several months of rapid expansion.
Pacific Basin Market Overview
Europe?s sovereign debt woes and inflation fears have plagued the Asian equity markets recently, sending indices lower during May. The eventual withdrawal of QE2 also became a real concern for the markets. Japan?s post disaster market downturn continued in May, but mainly due to negative international factors this time. Meanwhile, domestic concerns about the ongoing negative impact of supply-chain disruption on manufacturers? earnings and the political disarray caused by a divided parliament and a weakened prime minister have continued to weigh on the market.
Middle East/Africa Economic Review May 2011
The fiscal stability of the Middle East and N.Africa region continues to be threatened by social pressures, yet rising inflation on the back of increasing fuel and energy prices and high levels of unemployment remain the main causes of concern. According to the Regional Economic Outlook report by IMF, the region is expected to grow 3.9 percent in 2011. The oil exporting countries are anticipated to record better growth thanks to high oil prices and production, while oil importing nations such as Egypt, Morocco and Jordan are expected to expand at a much slower pace.
Developed Asia Pacific: Economic Review May 2011
Developed Asia Pacific economies largely managed to boost output by leaning on exports in May. For some of the economies affected by natural disasters earlier this year, exports proved to be a blessing. Australia, which was affected by floods in February this year, not only managed to increase raw material exports but also gained by the investments associated with its export-oriented mining sector. Earthquake-hit New Zealand and Japan, however, faced difficulties in increasing output. New Zealand, which depends on food exports and tourism, suffered because of a strong domestic currency.
Emerging Asia Pacific: Economic Review May 2011
Aggressive interest rate hikes by emerging markets in the past twelve to eighteen months have started showing some results. Although food inflation in many emerging markets remains at elevated levels, the pace of inflation seemed to slow in some countries. Further, inflation expectations are expected to cool, primarily due to anticipation of record harvest of food grains in many countries. The threat from oil prices, which grew at a menacing pace during the first quarter of the year, also subsided a bit in May. Nonetheless, many central banks across Asia were cautious over monetary policy.
Emerging Europe: Economic Review May 2011
According to data from EuroStat, inflation in the Euro-zone touched a 30-month high of 2.8 percent in the month of April as prices of fuel, electricity, and housing continued to soar. In line with the broader trend, the inflation gauge in the 27-member European Union, which also includes Poland, the Czech Republic, and Hungary registered an annual 3.2 percent in April, a touch above the 3.1 percent recorded in March. Among the east European economies, the Czech Republic recorded the lowest rate of inflation during the month.
Developed Europe: Economic Review May 2011
All through May, Developed Europe?s debt woes dominated market sentiment, in not only the region but also other parts of the globe. Several other developments, such as the surge in the bond yields of other indebted nations like Spain, Ireland, and Portugal; S&P?s downgrade of the outlook for Italy?s sovereign bond from stable to negative; electoral setbacks for the ruling parties in Spain and Germany; and the arrest of the IMF chief, a key leader of the discussions on Greece; also added to investors? unease.
Americas: Economic Review May 2011
In North America, the U.S. and Canada saw contrasting economic trends during the first quarter. While first quarter GDP growth in the U.S. slowed when compared to the previous quarter, growth accelerated in Canada. The U.S. housing market remains weak while the housing recovery in Canada started last year, and the labor market has also seen a similar divergence. However, the economic outlook for the two countries is expected to converge more in the coming quarters. As growth accelerates in the U.S., Canada may find it difficult to maintain its first quarter growth pace.
The Next US Policy Shift
We were once told by a client that ?when the US government decides to sell, no price is cheap enough.? Our friend added: ?This is how Onassis made his fortune; buying the surplus cargo boats the US Navy no longer needed following the end of WWII for cents on the dollar.? If this is true, then there must be fortunes to be made in US housing today, not only is housing trading at very attractive levels against incomes and ability to service a mortgage, but the US government, through its GSEs, is proving to be a very willing seller. In 1Q11 the GSEs sold 110,000 foreclosed homes, 10% of sales.
Ratio of Earnings Yield to Long-Term Interest Rates
The "Fed Model" is a valuation model used to gauge the relative valuation between stocks and bonds. While there are several variations, in its basic form the Fed Model compares the earnings yield on the S&P 500 (inverse of P/E ratio) and the yield on long-term interest rates (10-year Treasury yield). When the yield on the 10-year Treasury exceeds the earnings yield of the S&P 500, stocks are considered to be overvalued relative to treasuries, and vice versa when the earnings yield exceeds the yield on the 10-year Treasury. So what is the Fed Model saying now? Equities are undervalued.
Gold at $1,500 an Ounce: Speculation or Fundamental Demand?
We believe gold?s performance in recent years and current price above $1,500 an ounce reflect solid fundamental demand, rather than speculative fervor. A key driver of gold demand in the current environment is buying by central banks around the world. In addition, it appears that investors looking for a hedge against both the falling dollar and broader economic uncertainty have been buying gold for its diversification benefits. Jewelry demand in India and China are other, underappreciated positives.
The Economy: When Will Happy Days Be Here Again?
The latest economic reports show the U.S. recovery has faltered. But someday, surely, there will be a real recovery. What forces will drive that upturn? And will the healthy economy of the future look different from those of the past -- establishing a "new normal?" Two intertwined factors are critical to any rebound, according to many experts: Home prices must stop declining and begin to rise, and consumers must spend more freely.
Strategist Year-End S&P 500 Price Targets
Below we highlight the most recent year-end S&P 500 price targets.Just two strategists currently have year-end targets below the actual level of the S&P 500 at the moment.Morgan Stanley is looking for a year-end S&P 500 level of 1,238, while Credit Suisse is looking for 1,275.On the bullish side, Deutsche Bank remains above any other firm with its price target of 1,550.Also, a chart of the S&P 500 along with the averageyear-end strategist price target as the year has gone on.While the market has reallytaken a downturn in recent weeks,strategists have yet to lower their targets.
Has the hour of the dividend stock arrived?
Surveying the present financial landscape-what are investors? options? Bonds have been enjoying historic popularity. But they are at market highs and come with return and income potential inherently capped by their coupons. Turning to Treasuries, the price-to-yield is particularly unattractive. Then there?s the specter of interest rate risk. The steep rebound of equities off the crisis bottom ended with the arrival of 2010, and double-digit returns for many formerly cheap stocks went with it. Following a period of volatility, we appear to have settled into the slow-growth stage.
Presidential Approval Ratings: How Obama Stacks Up
Following last week's uptick in the unemployment rate, we have heard multiple references to the fact that no US President since WWII has ever been re-elected with the unemployment rate above 7.2%. Not surprisingly, with the jobless rate now at 9.1%, President Obama's approval rating currently stands at a rather tepid 47%.
David Kotok on Central Bank Credibility; Bob Eisenbeis: Did the Fed Print Money with QE?
This week in The Institutional Risk Analyst, we republish a comment by Robert Eisenbeis, Chief Monetary Economist of Cumberland Advisers, "Did the Fed Print Money in QE1 and QE2?" Eisenbeis, who was Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta prior to joining Cumberland, corrects a puzzling comment on the Fed published last week in the Wall Street Journall by George Melloan. We assumed that Melloan and the Wall Street Journal editorial staff were aware of the rules of monetary quantum mechanics, but maybe not.
A consensus of economic analysts expected 1st quarter economic growth to be revised up to 2.2% but instead the final reading was left unchanged at 1.8%. This was a disappointment but the data hints that a good part of the slow growth is attributable to the earthquake/ tsunami / nuclear meltdown in Japan which created very significant supply chain disruptions that led to lower economic activity. These disruptions continued into the 2nd quarter so it is likely we will see disappointing growth continue a little longer.
Can Less Deliver More? The Case for Concentrated Equity Strategies
"Don't put all your eggs in one basket" is such a widely held notion within the financial services industry that it's almost blasphemous to suggest an investment strategy that questions this premise. But what if researching multiple baskets of stocks was too distracting and too much to manage? Could focusing your attention on a single, smaller basket of investment ideas produce better results? Some investment professionals-Warren Buffett among them-believe concentrated equity portfolios offer the opportunity for better risk-adjusted returns.
And That?s The Week That Was?
Congress failed to pass a bill to raise the government?s debt ceiling and help avoid a default in early August. Republicans refused to support any legislation that is not tied to specific deficit reduction, even though there is a potential downgrade on US debt without any progress on a deal. The bickering continued in the aftermath of the unemployment data as both parties blamed the other for the weaker results. Republicans questioned the ?binge of taxing, spending, borrowing and over-regulating,? while Democrats claimed their counterparts are too focused on ?tax breaks for millionaires.?
High Unemployment Remains a Substantial Challenge for the Economy
Continued high unemployment and weak residential housing prices are two hangovers from the Great Recession that continue to act as brakes on the economy and current recovery. Some analysts say the housing problem is a several-year process of allowing prices to fall to where demand recovers. But the housing market is closely related to the labor market and the unemployment problem. However, no one has a definitive analysis of what?s wrong or what is needed to bring unemployment down from 9%. And adopting the same laissez-faire approach as the housing market is clearly not a solution.
As the first of the Baby Boomers begin to turn 65, they are being greeted with some bad news concerning Medicare and Social Security, especially since they hope to enjoy a longer time in retirement. Social Security is now scheduled to be exhausted by 2036, a year earlier than was projected last year. In addition to longer life spans, the 2% reduction in Social Security tax this year was a major factor in this updated information. As bad as things are for Social Security, things are worse for Medicare, which is projected to be bankrupt by 2024, five years sooner than was projected last year.
Still Chugging Along: The Market that Could
The global economic recovery is moving along but there remain some areas of concern. Our managers? discussion included such things as rising commodity prices, real estate problems and perhaps most interesting to readers, how they have investment portfolios positioned. Included in the roundtable were Bert L. Boksen (Small/Mid Cap Growth); James Camp (Fixed Income); Ed Cowart (Equity Income/Value); Todd McCallister (Small/Mid Cap Core); Jack McPherson (Small Cap Core Value); Eric Mintz (Small/Mid Cap Growth); Richard Skeppstrom (Large Cap Core); and Stacey Serafini Thomas (Small/Mid Cap Core)
Is the Slow Economic Data Due to Japan or Something Deeper?
We have been discussing the slowdown in economic data on both an absolute basis and relative to expectations. Within the investment community there is a debate over whether the slowdown is a temporary effect from the massive earthquake in Japan back in March, or part of a broader global economic slowdown. Ultimately only time will settle this debate, but a look at two widely watched economic indicators and how they reacted following the January 1995 Kobe earthquake shows that the recent slowdown is more likely a result of the earthquake in Japan, and therefore temporary in nature.
Next Big Thing: "Rent to Own?" Recreating the Ear of the Markets
We feature a comment by Damien IslamFrenoy and David Cox, of Microsoft Banking and Capital Markets, about the need to restore context to information to better identify and manage risk. But first we make a few observations about the trends in the political economy. The first quarter of 2011 is now the best quarter since 2007 but does this mean that the future is assured? With an ROA<1% and ROE measured in single digits, the results are less than stellar. But the retrenchment of Americans away from housing assets and toward cash savings raises questions about the future of the banking industry.
An Investment in Infrastructure
Neglecting infrastructure can have tragic consequences. Think about the I-35 bridge collapse in Minneapolis, levees breaking in Missouri or the San Bruno gas pipeline explosion. These and many other examples illustrate the type of destruction that can occur if the country?s aging infrastructure is not addressed. At the same time, demand for new infrastructure is growing exponentially in emerging markets. Data highlighting the scale of construction, transport, logistics and communications development are so large they render relevant context difficult to comprehend.
Prediction Market Contracts on the Debt Ceiling and 2012 Elections
Everyone is following the debt ceiling story at the moment, and you can bet on whether and when Congress will approve its increase over at Intrade. While investors recognize the seriousness of the issue, Congressmen are unfortunately treating it as a political game. As we saw when Congress failed to pass TARP I, the market doesn't like political gameplay. At the moment, Intrade traders are putting the odds of a debt ceiling increase by the end of July at just 27%. Odds for an increase by the end of August are at 67%, and odds for an increase by the end of September are at 75%.
Protecting Bond Portfolios From Rising Rates
As the U.S. economy continues to strengthen and the prospect of inflation rises, investors are concerned the U.S. may potentially face a sustained period of rising interest rates. This matters to bond owners because changes in interest rates directly impact the market value of bonds and bond portfolios. With today?s fixed income markets now implying an increase in interest rates and higher volatility in credit spreads, a traditional buy-and-hold bond portfolio or a more traditional fixed income mutual fund strategy may not be as attractive to investors.
Everything from Oil to Silver: Are Speculators Causing Too Much Volatility?
Allegations that traders manipulated oil prices in 2008 are reinforcing the buzz -- at the gas pump and elsewhere -- that speculators are driving up the price of oil, triggering wild price spikes and nail-biting volatility. Fingering speculators is a popular pastime these days, but experts at Wharton and elsewhere say the blame is often misplaced. Although speculation can affect prices, most of the recent price swings in oil and other commodities are happening for fundamental economic reasons.
Global Mergers and Acquisitions Activity Continues to Rise
Mergers and acquisitions activity is on the rise worldwide. In the U.S. this increase has been accompanied by the return of mega-deals ($10 billion+) driven primarily by large multi-national corporations flush with cash. These deals (and the anticipation of more to come) have helped drive markets up in the first quarter of this year. But the question on the minds of many investors is whether acquiring companies are at risk of overpaying for acquisitions that?while deemed ?strategic?-may only end up transferring (not creating) value from shareholders of the acquiring to the acquired companies.
Is Deflation in the US Housing Sector Accelerating?
This week in The Institutional Risk Analyst, we offer our view on the housing sector as we travel to Philadelphia on Tuesday to participate in the 29th Annual Monetary and Trade Conference sponsored by the Global Interdependence Center and Drexel University. John Burns walked the participants through the current situation in the US housing sector and the outlook for a recovery in prices. The bottom line: Even though affordability has returned, new home sales are likely to remain depressed for years due to massive inventories of unsold homes, dwindling finance and weak employment markets.
Best First Day IPO Returns: Current Bull Market
As of now, shares of LinkedIn (LNKD) are up 171% from their offering price, making it the best performing IPO on its first day of trading in the current bull market. The stock is moving around like crazy, but if it manages to close above $117.56, LNKD will maintain its spot on top of the list.
Explaining U.S. debt levels, credit ratings, and recent bond market behavior
This week, we discuss the U.S. debt ceiling and the credit ratings for U.S. sovereign debt, plus explanations for seemingly counterintuitive bond market behavior. To fully comprehend the ceiling, we should first review the U.S. federal debt it?s attempting to cap, and why. The U.S. federal debt reflects what the U.S. government has to borrow to help pay for its multitude of operations, services, and financial commitments. Like some of its citizens, the U.S. government has been living beyond its means in recent years, spending more money than it has in reserve or receives in tax revenues.
Floating rate: Hedging the interest rate risk in your fixed-income portfolio
Following the Great Recession of 2008, many investors aggressively moved to cash and fixed-income securities in a classic flight to safety. In early 2009, we could point to a historic opportunity to capture significant total return. Much of that correction has already occurred and valuations across the fixed-income market have largely recovered. At this juncture in the business cycle, credit risk has declined dramatically, as evidenced by defaults that are running below long-term averages, robust new issuance and demand for bonds, and healthy corporate balance sheets and earnings.
Ally Financial + ING Bank? Richard Alford on Lessons Forgotten at the Greenspan/Bernanke Fed
This week in The Institutional Risk Analyst we feature a comment from Dick Alford on the lessons forgotten by the Fed when it comes to financial regulation. Showing his considerate nature, Dick even uses the official histories of past crises prepared by the FDIC as the timeline to make it easier for some of our former colleagues at the Fed to follow along. But first, let's have some fun with one of the toys developed for The IRA Bank Monitor, namely our pro forma M&A analysis tool.
The Value of Gold Company Stocks and Gold?s Role in a Diversified Portfolio
Two questions we?ve heard a lot lately are ?Why haven?t the stocks kept pace with the metal?? and ?What?s the right amount of gold for my portfolio?? The recent disparity in performance between gold bullion and gold mining stocks is largely down to concern about higher costs to extract and refine the metal. Compare those fears with conditions in 2009 and 2010, when gold mining stocks did very well as the price of gold bullion surged, while changes in production costs were comparatively tame. This meant better top-line revenue and margin figures, making for attractive stock performance.
Pacific Basin Market Overview - April 2011
Equity markets in Asia continued to gain ground in April after a volatile first quarter of 2011. Stock markets ended higher as companies reported strong earnings, while expectations that inflation may have peaked out also helped to support market sentiment. Disruption to manufacturing industry supply-chains and ongoing problems surrounding the Fukushima nuclear power plant have continued to weigh on Japanese stock prices, although the market was able to stabilize from the massive sell-off that followed the Tohoku earthquake.
UK Country Risk: Is Lloyd's of London Too Big to Sue?
Last month an American investor named Richard Tropp filed a writ of certiorari with the US Supreme Court to review a decision by the Second Circuit in New York regarding an epic litigation against the Lloyds of London insurance market. To us, the case of Tropp v. the Corporation of Lloyds is troubling not only because it implies that thousands of investors in the Lloyd's insurance market have no contractual rights enforceable at law in the courts of England and Wales, but also because of what it says more broadly about the state of the law in Britain.
Results 1,801–1,850 of 2,118 found.