S&P 500 Set for Longest Rally Since March After Bernanke – Bloomberg 08-31-12

Salient to Investors:

Bespoke Investment Group study going back to 1928 shows the S&P 500 Index has returned an average 0.12 percent in September when up year-to-date through August – the index is up 12 percent so far in 2012

Bob Janjuah at Nomura Holdings predicts a major risk-off phase in the coming four months with global stocks falling by as much as 20 percent to 25 percent.

Manish Singh at Crossbridge Capital the S&P 500 would have followed the 2011 script but for Draghi’s ‘we will do everything’ remark” – the ECB has played the main role in making 2912 different

Daniel McCormack at Macquarie Securities expects decent returns going forward – valuations were extreme so you don’t need much good news to move the markets

Read the full article at http://www.bloomberg.com/news/2012-08-31/u-s-stock-index-futures-advance-before-bernanke-speech.html

Decline in U.S. Seen Without More Immigration: Cutting Research – Bloomberg 08-31-12

Salient to Investors:

Professor Robert Gordon at Northwestern University said:

  • The U.S.’s best 250 years are behind it as economic growth may gradually sputter out, contradicting the nearly universal view promoted by Robert Solow and others that economic growth is a continuous process that will persist forever.
  • Future growth in GDP per capita could slow to 0.2 percent by 2100 from 2 percent over the past 150 years, and as high as 2.5 percent in the middle of the 20th century.
  • Before, 1750 there was virtually no expansion. The past 250 years saw three industrial revolutions which explain the growth spurt. The first lasted until 1830 and was driven by steam engines and cotton spinning. The second, from 1870 through 1900 was driven by the harnessing of electricity, running water and the internal combustion engine. The third began around 1970 and was driven by computer and Internet revolutions.
  • Innovation will still support living standards, but demographics, rising inequality, globalization, more expensive education and poorer performance in secondary schooling, environmental regulations and taxes are obstacles to increasing prosperity.

Gustavo Reis at Bank of America Merrill Lynch said the global money gap, or money supply as a share of GDP, has turned negative, meaning less money is available to fuel economic activity, while credit as a percentage of GDP is dipping below zero. The result is the world’s largest central banks look poised to deliver significant policy easing in the months ahead as the global economy remains subdued into year-end.

The Taylor Rule suggests global money policy will remain accommodative even though it’s not as loose as earlier in the year.

Joerg Kraemer, Ralph Solveen and Bernd Meyer at Commerzbank  say easy monetary policy, accelerating inflation and a soft currency may become the hallmarks of the euro region, stabilizing its economy and obscuring structural weaknesses of peripheral countries: supporting equities and corporate debt into 2014 as investors unwind bets on the euro breaking up and as investment grows as uncertainty diminishes. Longer-term, economies including Germany, would overheat – it took a decade for Spain’s property bubble to burst

Christian Schulz at Berenberg Bank said exports are the ultimate yardstick of competitiveness, and suggest the euro region is succeeding in global markets – its estimated trade surplus of $50.1 billion over 12 months is the best since 2005.

Read the full article at http://www.bloomberg.com/news/2012-08-30/decline-in-u-s-seen-without-more-immigration-cutting-research.html

Half of Americans die with almost no money – MarketWatch 08-29-12

Salient to Investors:

Professor James Poterba at M.I.T. said that while 46% of retirees have just $10,000 in savings when they die, they may have a relatively generous pension plan, and most of them will have Social Security.

Retirees whose spouse had died saw their income drop almost 75% between 1993 and the last year of being surveyed.

In the last year before death, 57% of single-person households and 50% of surviving spouses had no housing wealth when they died.

Those who remain married tend to have higher income levels, while single individuals on average have lower retirement income and financial assets.

The rich are much more likely to live longer.

Read the full article at http://www.marketwatch.com/story/half-of-americans-die-with-almost-no-money-2012-08-29

Billionaires Dumping Stocks, Economist Knows Why – MoneyNews 08-29-12

Salient to Investors:

Berkshire Hathaway has been drastically reducing his exposure to stocks that depend on consumer purchasing habits, including Johnson & Johnson and Intel.

John Paulson in Q2 2012 dumped 14 million shares of JPMorgan Chase, his fund’s entire position in Family Dollar and Sara Lee.

George Soros recently sold nearly all of his bank stocks, including JPMorgan Chase, Citigroup, and Goldman Sachs.

Robert Wiedemer expects a large drop in the stock market due to the reckless Fed printing a massive amount of money out of thin air in an attempt to stimulate the economy – once these funds pass through the reserves and hits the markets, inflation will surge, causing interest rates to increase dramatically and real estate values to collapse, causing the stock market to collapse.

Wiedemeyer says companies will be spending more on borrowing costs than business expansion costs, causing lower profit margins, dividends, and hiring, and more layoffs.

Read the full article at http://www.moneynews.com/MKTNews/billionaires-dump-economist-stock/2012/08/29/id/450265?PROMO_CODE=110D8-1&utm_source=taboola.

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Fareed Zakaria GPS – CNN 08-26-12

Salient to Investors:

Ruy Teixeira at the Center for American Progress said ethnic groups historically vote in clusters and this favors President Obama mightily.  The American minority population surprisingly grew by 30 percent over the last decade versus 1 percent for whites – up 3 percent alone since 2008.

Read the transcript at http://transcripts.cnn.com/TRANSCRIPTS/1208/05/fzgps.01.html or watch the show at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/

Global Food Reserves Falling as Drought Wilts Crops – Bloomberg 08-09-12

Salient to Investors:

Stockpiles of the biggest crops will decline for a third year on drought in three continents.

U.S. crops are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall is 20 percent below normal.

Goldman Sachs, Macquarie Group and Credit Suisse say crops will continue to be the best-performing commodities this year.

The U.S. drought in June was the widest since December 1956, while the past 12 months were the hottest on record.

U.S. nuclear plants’ output on July 27 was the lowest for the day since 2001 because water was too hot to be an effective coolant.

Global food prices are still 10 percent below the record reached in February 2011.

Barclays  is “modestly overweight” in grains and soybeans, but recommended investors reduce bullish bets as improving weather, declining demand or an easing of U.S. requirements for ethanol in gasoline may send prices lower

Goldman predicted $9 corn, $20 soybeans, $9.80 wheat in three months.

Danske Bank predicts global food prices will jump 25 percent this year .

Gates Foundation says U.S. households spend 6 percent of their total expenditures on food versus 35 percent in India and 45 percent in Kenya. The USDA says with less than 5 percent of the world population, the U.S. consumes 31 percent of global corn production, 18 percent of soybeans, 32 percent of cheese and 20 percent of beef and veal.

The National Intelligence Council says nations reliant on food imports, including Egypt, Pakistan, Bangladesh and Sudan, are especially vulnerable to unrest. More than 60 food riots erupted worldwide from 2007 to 2009 as prices surged, the U.S. State Department estimates, while the U.N. says production will need to expand 70 percent by 2050 as 2 billion people are added to the population.

Professor Tim Hagle at the University of Iowa says retail-food costs keeps the economy in a fragile position, the big issue in this election.

Steve Hatz at Bank of the West said U.S. farmers are less likely to feel the pinch because about 85 percent of crops are insured.

Ron Plain at the University of Missouri said livestock ranchers lost $260 a head in June versus a $156 loss a year earlier.

Steve Shafer at Covenant Global Investors said global beef inventories are dropping in part because rising incomes in emerging markets mean consumers want to eat more meat, causing a rising supply/demand imbalance.

Read the full article at http://www.bloomberg.com/news/2012-08-08/global-food-reserves-falling-as-drought-wilts-crops-commodities.html

Busson Talking Tie-Ups Shows Decline of Hedge-Fund Middlemen – Bloomberg 08-09-12

Salient to Investors:

Raising cash has gotten a lot harder as underperformance in the past four years has investors doubting the value of funds-of-funds.

Funds-of-funds usually charge fees of 1 percent of assets and 10 percent of profits, on top of the 2 percent management fee and 20 percent performance fee charged by the underlying hedge funds.

Hedge Fund Research claim hedge funds returned an annual average of 13 percent from 1993 through 2007 versus 8.9 percent return for the Vanguard Balanced Index Fund (mix of stocks and bonds) – since 2008 an average 0.9 percent annually versus 3.8 percent for the Vanguard Fund. Funds-of-funds returned an annual average of 9 percent between 1993 and 2007, an average loss of 2.5 percent annually since.

Goldman Sachs survey showed 40 percent of hedge funds came from fund-of-funds at year-end 2011 versus 71 percent in 2004, the peak about four years ago.

Matt Simon at Tabb Group said we are seeing the industry naturally slow die.

Hedge Fund Research report investors withdrew a net $12.1 billion from funds-of-funds in Half1 2012, the most since 2009. Barclays survey shows 23 percent of investors are looking to cut allocations to funds-of-funds in 2012 and near double the amount of those that plan to increase. Funds of fund assets grew about 10 percent in the past 2 1/2 years to $627 billion and versus 2007 peak of $799 billion.

Anurag Bhardwaj at Barclays’s said firms are increasingly advising clients on investing and constructing portfolios, competing with pension-fund consultants who charge lower fees.

Read the full article at http://www.bloomberg.com/news/2012-08-08/busson-talking-tie-ups-shows-decline-of-hedge-fund-middlemen.html

China Adds Scope to Cut Rates as Japan, S. Korea Hold: Economy – Bloomberg 08-09-12

Salient to Investors:

Reports from three of Asia’s four largest economies signal the jump in commodity prices has not yet constrained the consideration of further monetary stimulus.

Satoshi Osanai at Daiwa Institute of Research said inflation is not yet a major issue for Asian central bankers – Asia and emerging nations have more room to cut rates or ease.

Shen Jianguang at Mizuho Securities Asia said slowing inflation will trigger one more rate reduction in China and at least two more cuts in Chinese banks’ reserve requirements this year, including one this month.

Sun Yoo at Woori Investment & Securities said the market expects the European fiscal crisis to last and that a slowdown in the Korean economy needs policy support.

David Sumual at PT Bank Central Asia said cutting rates can trigger asset bubbles, and the current Indonesian rate is adequate to support its economy amid global turmoil that won’t be resolved in the short-term.

Read the full article at http://www.bloomberg.com/news/2012-08-09/china-adds-scope-to-cut-rates-as-japan-s-korea-hold-economy.html

Asian Stocks Rise After China Inflation, Production Data – Bloomberg 08-09-12

Salient to Investors:

Koji Toda at Resona Bank said money that risk money that fled Europe’s debt crisis is gradually returning to places where there is policy optimism.

Tim Leung at IG Investment said China’s economic momentum is slowing – the market expects the Chinese government to help accelerate the economy.

Richard Fisher at Federal Reserve Bank of Dallas opposes additional stimulus and said global central banks may not be able to undertake further stimulus.

Bloomberg said the MSCI Asia Pacific Index trades at 12.3 times estimated earnings, versus 13.6 for the S&P 500 Index and 11.6 for the Stoxx Europe 600 Index.

Read the full article at http://www.bloomberg.com/news/2012-08-09/asian-stocks-rise-fourth-day-before-boj-meet-china-data.html