Did you miss this foreign stocks boom? – MarketWatch 07-31-2104

Salient to Investors:

  • Pundits calling for a huge decline in equities are either the absolutely certain types, who have stuck to their prediction for years, and the less media-savvy academics and heads of research at big investment firms who see a decline but after the market goes higher.
  • The last set of economic “reasons” for global markets to implode did not lead to that result.
  • Emerging bonds are back in vogue among big investors. Emerging country stock markets are pushing gains well into the double digits.
  • The US stock market could easily rise for a number of unknowable reasons, including late-arriving investors, Fed pronouncements, and a stronger economy.
  • Owning a diversified portfolio of global index funds benefits from all trends, all the time, regardless of underlying economies or investor sentiment, because a re-balancing strategy would have cashed out gains in up markets for investment in down markets.

Read the full article at http://www.marketwatch.com/story/did-you-miss-this-foreign-stocks-boom-2014-07-31

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Yellen Watching What She Eats Would Help Track Prices: Economy – Bloomberg 07-28-14

Salient to Investors:

  • Michael Bryan at FRB of Atlanta said restaurant menu prices do not change as often as many other goods and services so increases signal restaurant owners see inflation rising as sticky prices give a much better idea of future inflation.
  • The sticky CPI, which only includes items with slowly changing costs such as food consumed away from home and car repairs, and other less conventional gauges indicate inflation has bottomed and is increasing but not yet enough to worry the Fed.
  • Lou Crandall at Wrightson ICAP sees nothing to indicate the Fed will overshoot their target for inflation.
  • The median economic forecast does not call for a rise in rates until Q3 2015.
  • Edward Knotek at FRB of Cleveland says a simple measure of the median price change of all items counted by the BLS gives a better reading on underlying inflation than either the CPI  or its core measure, which excludes food and energy prices, because everybody eats and buys gas.
  • Jim Dolmas at FRB of Dallas said 2 gauges tracking rents and one the cost of eating out have the greatest impact on inflation are not rising .
  • Michael Hanson at Bank of America said gasoline and energy prices have a lot of volatility that says very little about persistent inflation trends, and the current data show the Fed is not materially behind the curve in their read on inflation.
  • Laura Rosner at BNP Paribas said relatively minor items such as plane tickets have played an outsized role in boosting price indexes recently, while there are many headwinds keeping a lid on prices like labor market slack and sluggish wage growth.

 

 

Read the full article at http://www.bloomberg.com/news/2014-07-28/yellen-watching-what-she-eats-would-help-fed-tracking-inflation.html

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Can We Ever Really Retire? Why Americans Stink At Math – Seeking Alpha 07-28-14

Salient to Investors:

George Schneider writes:

  • The trend away from diversification of portfolios into just a few stocks plus Americans’ growing insufficiency in math skills are leading Americans towards dependency on government benefits rather than self-reliance in retirement.  Two-thirds of 4th and 8th graders failed the thermometer math proficiency test in 2013.
  • The average investor retires with $50,000 in assets today and would produce an annual total retirement income of about $24,000 when added to the  average of $20,000 in joint social security, and excluding any private pension. A 30% cut in dividend income on the assets would reduce that retirement income to $22,800, and a 30%-50% average market collapse would probably cause the retiree to liquidate his portfolio, leaving only Social Security income.
  • Diversification keeps most investors from losing unacceptable amounts of capital and dividend income for retirement needs.

 

Read the full article at https://mail.google.com/mail/u/0/#inbox/14782876c37465bb

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Central Banks in Russia to Kazakhstan Boost Gold Reserves – Bloomberg 07-26-14

Salient to Investors:

IMF data show:

  • Central banks lowered world gold reserves for a second month by May.
  • Russia, Kyrgyzstan, Tajikistan, Serbia, Greece and Ecuador boosted gold reserves in June. Turkey increased its gold holdings in May.
  • Germany lowered its holdings in June.

Hedge funds almost doubled their net-long positions in gold during June.

Read the full article at http://www.bloomberg.com/news/2014-07-26/central-banks-in-russia-to-kazakhstan-boost-gold-reserves.html

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Quality Following Quantity in U.S. Hiring With $867 Pay – Bloomberg 07-25-14

Salient to Investors:

Paul Ashworth at Capital Economics said:

  • The 1.3 million private-sector jobs created in half1 2014 paid an average of $867 a week versus $843 per week for the existing 117 million private-sector jobs.
  • Mining, construction and business-services companies – which traditionally pay more than the average – are increasingly hiring.
  • The loss of 17,000 information jobs this year is negative given they tend to pay well above average.
  • Accelerating wage growth may be one of the biggest stories for half2 2014.

Read the full article at http://www.bloomberg.com/news/2014-07-25/quality-following-quantity-in-u-s-hiring-with-867-pay.html

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Emerging ETFs Turn Positive for 2014 as Outflows Reversed Bloomberg 07-25-14

Salient to Investors:

  • Flows into emerging-market ETFs have turned positive for the year, reversing outflows in the first 2 1/2 months of 2014. The most inflows in 2014 have gone to India-focused ETFs. Investors have withdrawn $1.5 billion from China-targeted ETPs over concern over economic imbalances there.
  • The RSI of the BlackRock ETF is approaching the 70 mark that indicates overbought. The MSCI Developing-Nation stock index is at 11.2 times estimated earnings, the highest since 2011.
  • Adam Laird at Hargreaves Lansdown said emerging markets have grown in popularity in the past few months because nobody is 100 percent sure where the growth is going to come, but they know that the emerging economies are likely to see it.
  • Arko Sen at Bank of America said stronger US Treasuries and a more stable China has supported the entire emerging market complex. Sen said the major risk is geopolitics, like in Russia and the Middle East.
  • Mark Mobius at Templeton Emerging Markets predicts Chinese shares will rally, and likes state-owned banks and energy companies because of cheap valuations and plans to open up state-dominated industries.
  • Irene Bauer at Twenty20 Investments said they increased their emerging markets allocation to 25 percent of their portfolios, versus near zero 5-6 months ago, as the macro economic data has improved for many emerging-market countries, with India and China having particularly good outlooks.

Read the full article at http://www.bloomberg.com/news/2014-07-25/emerging-etfs-turn-positive-for-2014-as-outflows-reversed.html

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German Thrift Damps Lending as Cheap Money Is Distrusted – Bloomberg 07-25-14

Salient to Investors:

  • European countries including the UK, Denmark and Switzerland are enacting policies to stem housing bubbles, yet with German mortgage volumes at the highest in 16 years, Germans are taking out smaller home loans and repaying them faster as prudent borrowers and lenders bet that record-low interest rates and rising property values won’t last.
  • Nina Schrader at Deloitte & Touche said the craziness in other countries never took hold in Germany because of the way its banks operate and because Germans would not think of getting a 120 percent mortgage.
  • ECB report that mortgage interest payments comprise 12.8 percent of Germans’ incomes versus the average 15.9 percent in EU countries, while the loan-to-value ratio of German homes is 41.9% versus the EU average of 37.3%.
  • In Germany, average loans are 77.7% of purchase price versus 75% in the UK and 82% in the US.
  • House prices in Germany’s largest cities have risen more than 30% in the past 5 years.
  • The OECD reports that in Germany, private household debt equals 93% of net disposable income, versus 325% in Denmark, 150% in the UK and 151 percent in the US.
  • German households had a median net wealth of €51,400 in 2010, the lowest among Euro countries, partly because of a low home-ownership rate and comparatively inexpensive real estate,  and versus €115,800  in France and €173,500 in Italy.
  • Jochen Moebert at  Deutsche Bank said Germany has been less financially volatile than many other developed countries, with only 3 asset bubbles in 150 years.
  • Reiner Braun at Empirica said Germans don’t get a tax write-off for interest payments and have few incentives to borrow to buy a home in a rental-friendly culture that offers a diverse supply of apartments across all price levels. Only 53 percent of Germans are owners, versus 65 percent of Americans and 67 percent of Britons. Braun said Germans move less frequently and do not use second mortgages to pay for a vacation or a car, unlike in the US.
  • Helmut Straubinger at Bayerische LBS said German personal-liability laws means you cannot simply give back the key, like in the US. Straubinger said the low level of ownership could become a concern as Germany’s population ages and social security benefits are cut.

 

 

Read the full article at http://www.bloomberg.com/news/2014-07-24/german-thrift-damps-lending-as-cheap-money-is-distrusted.html

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Rich French Fleeing Hollande Taxes Find Portugal Haven – Bloomberg 07-25-14

Salient to Investors:

  • Paulo Silva at Aguirre Newman said wealthy French are fleeing French taxes to invest in Portugal to take advantage of preferential tax treatment.
  • The French have overtaken the British as the largest group of foreign home buyers.
  • Gustavo Soares at Sotheby’s International Realty said the tax benefits Portugal offers foreigners has been extremely important in attracting French investors.
  • Luis Filipe Sousa at PricewaterhouseCoopers said French pension income may end up not being taxed at all. Foreigners living in Portugal may have their pension income exempt from taxes as long as it’s paid from a foreign source, while France only taxes its residents.
  • France has the highest tax burden in the euro region: 75 percent on annual incomes of more than 1 million euros and capital-gains tax.
  • The French, British and Chinese accounted for more than 50% of the 3,500 property purchases made by foreigners in Q1 2014.
  • The Chinese are seeking to take advantage of the country’s property-for-visa program.

 

 

 

Read the full article at http://www.bloomberg.com/news/2014-07-23/rich-french-fleeing-hollande-taxes-find-sanctuary-in-portugal.html

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Goldman Sees Risk of Stock Decline on Rising Bond Yields – Bloomberg 07-25-14

Salient to Investors:

  • David Kostin, Kathy Matsui, Peter Oppenheimer et al at Goldman Sachs lowered their rating on stocks to neutral and corporate credit to underweight on belief that global equities and bonds may drop in the next 3 months, and stocks may temporarily fall, as rising inflation boosts government bonds and other yields. Goldman said the selloff in equities will be temporary and in line with, but less than, that of last summer because the need for bond yields to correct is lower, and the S&P 500 will end 2014 at 2050. 2015 at 200 and 2016 at 2200.
  • Goldman expects the 10-yr T-yield to rise to 3 percent by the end of 2014 and to 4 percent by the end of 2017 due to strong growth and accelerating inflation in the US.
  • Goldman is bullish on equities longer term, and overweight global stocks on a 12-month basis on earnings driven by sustained economic growth.
  • 47% of financial professionals see equities at close to unsustainable levels, 14% see a bubble.
  • The S&P 500 is at 18 times earnings, 14 percent above its 5-yr average.
  • US GDP is forecast to rise to 3.3 percent in Q2, 1.7 percent for 2014, 3 percent in 2015 and 2016.

Read the full article at http://www.bloomberg.com/news/2014-07-25/goldman-sees-risk-of-stock-decline-on-rising-bond-yields.html

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BlackRock’s Koesterich Says Buy Volatility During Market Calm – Bloomberg 07-25-14

Salient to Investors:

  • Russ Koesterich at BlackRock said volatility is very low because monetary conditions are easy but when investors see the US and UK central banks tighten then we will get a long-awaited rise to normal levels, but not to those of 2008 with the VIX at 90.
  • Pimco expects a new neutral of low interest rates and lower, more stable global growth.

 

Read the full article at http://www.bloomberg.com/news/2014-07-25/blackrock-s-koesterich-says-buy-volatility-during-market-calm.html

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