How to Prepare for Rising (Really!) Treasury Rates – Bloomberg 06-29-12

Predictions:

Ibbetson Associates said that the next 20 years are not likely to yield a bond bonanza, favors stock investing – the S&P 500 stock index will return an average 7.6 percent, and long-term government bonds 4.1 percent.

Joseph Davis at Vanguard expects future bond returns to be muted, and stock returns formidable. Davis sees parallels with Japan, where interest rates plummeted more than 10 years ago and have yet to budge.

Chun Wang at Leuthold Group says long-term Treasury rates may fall even farther in the short-term, but could rise after a resolution in Europe – the upside from a short-term dip in rates isn’t worth the downside risk when rates rise.

William Bernstein says Treasury rates are not even keeping pace with inflation, and bond investors are looking at an extreme low return/high risk proposition so is staying with short-term (under five years) Treasuries and short-term high-grade corporate bonds.

Read the full article at http://www.bloomberg.com/news/2012-06-29/how-to-prepare-for-rising-really-treasury-rates.html

Greenspan Says Europe Like a ‘Leaking Boat’ With Holes – Bloomberg 06-29-12

Predictions:

Alan Greenspan said Europe is a leaking boat and political consolidation is the only solution to the region’s financial crisis – we are gradually moving in that direction.

Greenspan expects the “fiscal cliff” to be kicked down the road becauuse nobody wants all of those items to hit the economy all od a sudden – at the end of the day, something will be done.

Read the full article at http://www.bloomberg.com/news/2012-06-29/greenspan-says-europe-like-a-leaking-boat-with-holes.html

Consumer Spending in U.S. Stalls as Hiring Weakens: Economy – Bloomberg 06-29-12

Salient to Investors:

Neil Dutta at Renaissance Macro Research said the growth backdrop is weakening, with a propensity for consumers to boost their rate of savings.

Goldman Sachs lowered forecast for growth this quarter to a 1.6 percent annual rate from 1.7 percent, Morgan Stanley cut to 1.7 percent from 1.9 percent.

The Bloomberg Consumer Comfort Index turned negative last week for the first time in three months, while the gauge for all consumers climbed to the highest level in two months.

Ward McCarthy at Jefferies & Co. sees stagnant spending as consumers struggle with a lack of income growth, though the decline in gasoline prices, especially if it continues, will provide some relief going forward.

Sean Incremona at 4Cast sees no near-term significant pick up in manufacturing, but it can maintain a mild pace of growth.

Read the full article at http://www.bloomberg.com/news/2012-06-29/u-s-consumer-spending-unchanged-in-may-weakest-in-six-months.html

Fewer U.S. States Economies Gain in BEES Index in Slowdown – Bloomberg )6-29-12

Salient to Investors:

The Bloomberg Economic Evaluation of States index shows that 31 states gained during Q1 down from 35 during Q4 2011. The results were mixed for key presidential battleground states.  The states involved in manufacturing and energy were among the top gainers.

Joseph Brusuelas at Bloomberg said you can clearly see the economy decelerating at the state level, with increasing bifurcation between areas involved in the extraction of minerals, energy and agricultural development  with those highly dependent on construction and the service sector.

Read the full article at http://www.bloomberg.com/news/2012-06-29/most-states-economies-stalling-in-bees-index-amid-u-s-slowdown.html

Gross Says Europe in Debt Trap After Relief Plan: Tom Keene – Bloomberg 06-29-12

Salient to Investors:

PIMCO’s Bill Gross said a debt trap remains even after the European agreement, continues to avoid the debt of nations including Spain and Portugal in favor of U.S. Treasuries and mortgage securities.

Gross said both the peripherals and the core union nations have too much debt, whose marginal cost is far above nominal GDP growth in respective nations. Gross said we need some sense that the family can now get along.

Gross like Mexico and Brazil with their clean balance sheets – the are much  safer than some of those peripherals. Brazil has a deficit of 2.4 percent while Mexico’s is 0.92 percent.

Read the full article at http://www.bloomberg.com/news/2012-06-29/gross-says-debt-trap-remains-after-european-agreement-tom-keene.html

Treasuries Slide on EU Plan for Loans to Spanish Banks – Bloomberg 06-29-12

Salient to Investors:

The bid-to-cover ratio for 7-year Treasuries securities was the lowest since October.

Marc Ostwald at Monument Securities said it’s very important to focus on the personal consumption and expenditure.

Ira Jersey at Credit Suisse said it’s hard to like these yields unless you think there’s going to be a significant deflationary impulse, and it’s hard to imagine a significant rally if Europe continues to muddle through and the U.S. economy seems to be stabilizing at lower levels.

PIMCO’s Bill Gross said a debt trap remains even after the European agreement, recommends avoiding Spanish and Portuguese debt in favor of U.S. Treasuries and mortgage securities. Gross said both the peripherals and the core union nations have too much debt. the marginal cost of which is far above nominal GDP growth in respective nations.

Read the full article at http://www.bloomberg.com/news/2012-06-29/treasuries-erase-june-loss-as-pimco-s-gross-bets-on-u-s-debt.html

Oil Surges Most in More Than a Year on European Agreement – Bloomberg 06-29-12

Salient to Investors:

Mike Wittner said we’re seeing a massive return of risk appetite as the market was impressed by what the Europeans accomplished and there’s a feeling that the worst may be over.

Sarah Emerson at Energy Security Analysis said the euro move will give oil a lot of support.

Predictions:

Rich Ilczyszyn at Iitrader.com said technical analysis predicts prices may rebound to as high as $90 a barrel if they hold above support near $75.

16 of 42 analysts surveyed by Bloomberg forecast oil will rise through July 6, 14 predict a decline, and 12 see little change.

Michael Lynch at Strategic Energy & Economic Research said the European surprise and U.S. business activity are positive signs for the economy.

Jason Schenker at Prestige Economics expects the saber-rattling set off by Iran to intensify with the imposition of the embargo over the weekend.

Read the full article at http://www.bloomberg.com/news/2012-06-29/oil-rises-from-nine-month-low-on-european-relief-package.html

S&P 500 Caps Best June Since 1999 on European Agreement – Bloomberg 06-29-12

Salient to Investors:

Christopher Orndorff at Western Asset Management said Europe’s deal is a step in the right direction from a longer term perspective.

July has been the best month for the Dow Industrials over the last century with an average return of 1.4 percent, and an average 0.8 percent over the last 50 years.

Read the full article at http://www.bloomberg.com/news/2012-06-29/u-s-stock-futures-gain-after-eu-deal-to-stem-debt-crisis.html

Asian Currencies Rise This Week on Europe Summit, U.S. Data – Bloomberg 06-29-12

Salient to Investors:

Amonthep Chawla at Kasikornbank said the spike in regional currencies is just a short-term reaction – there’s going to be a chronic debt crisis in Europe and investors will fear again that the problems are still there.

Rafael Algarra at Security Bank Corp said good economic data about the Philippines is tempering risk aversion caused by worries in Europe – most of the data, from fiscal to growth to inflation, is supportive.

Stella Lee at Success Futures & Foreign Exchange said China’s economic data is unlikely to be impressive with lingering problems in Europe, government moves to bolster domestic consumption takes time.

Read the full article at http://www.bloomberg.com/news/2012-06-29/asian-currencies-rise-this-week-on-europe-summit-u-s-data.html

Gold Heads for Biggest Drop in Week as Job Data Signals Slowdown – BLoomberg 06-28-12

Salient to Investors:

Phil Streible at R.J. O’Brien & Associates said gold is under pressure because the U.S. economy is showing no signs of strength, while people are moving to the dollar on very little expectation Europe will find a solution.

Scott Gardner at Verdmont Capital said deflation concerns have returned to the forefront, and gold is selling off in sympathy with cyclical commodities.

Read the full article at http://www.bloomberg.com/news/2012-06-28/gold-heads-for-biggest-drop-in-week-as-job-data-signals-slowdown.html