Archive - Mar 2010 - Blog entry

The problems of aging and pensions were already challenging enough. Current attempts to buy short-term expansion with artificially low interest rates can only make the long-term problems greater than ever. Recent Treasury-bond auctions have seen fairly weak demand, forcing yields higher. Is this a sign of things to come?

With the world’s weakest major economy, Japan is certain to be the last country to raise interest rates. This is inciting big hedge funds to short yen to finance longs in every other corner of the financial markets. The world’s worst demographic outlook assures problems will only get worse. They’re not making Japanese any more. The sovereign debt crisis in Europe is prompting investors to scan the horizon for the next troubled country. Japan is at the top of the list. The Japanese long bond market, with a yield of 1.4%, is a disaster waiting to happen. (YCS).

Expect the other sovereigns and related domiciled banks that we have covered to follow suit within the next couple of quarters.

I can easily make the argument that a 40% gain in over a year implies strong momentum that is likely to continue. But I won't make that argument, and instead, I will just state that this appears to be what it is: another data point that doesn't provide too much clarity.

Thoughts on Vodafone and Russia

Is blogging making any real difference? Are bloggers turning the tide, or howling into the wind?

It’s really all about a few big car companies pandering to growing numbers of “green” consumers. The low hanging fruit for investors in the fuel efficiency race can be found by pushing forward existing, simpler, and cheaper technologies. A look at European “stop/start” technology. (XIDE), (JCI)

This is a very meaty piece, written for those who are serious about the true state of affairs in sovereign Europe as NOT reported in the mainstream media. Though not necessarily for freshmen, it is more than worthwhile for those who want to know what is not being said.

Economic contagion begets financial contagion, which will spread across much (if not most) of Europe, causing further economic contagion. This is what is written on the tea leaves in Ireland.

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay. Goldman Sachs, in a research report last week, acknowledged the pension issue but concluded the states were very unlikely to default on their debt and noted the states had 30 years to close pension shortfalls. Others, including me, disagree with Goldman's benign assessment, fearing Greek-style debt woes are already upon us.

The headline should have been "Consumers had to dip into savings to buy the necessities of life: food and clothing." Instead we are given the cheery headline that consumer spending rose for a fifth month. Check out the real story.

It's got a reassuring name and a nice, sugary taste ... but there's no real medicine in it.

Guess what the top performing asset of 2010 has been? Decades of production downsizing, huge Chinese buying, and waning competition from Canada because of a strong loonie, conspire to take lumber up a blistering 39.9% YTD. (WY), (LPX), (CUT).

The General Accounting Standards Board, or GASB, is likely to move toward changes that would increase the pension liability that local governments display on balance sheets by tens of billions of dollars. If the modifications are approved, many already cash-strapped states and municipalities would likely have to increase the amount they are supposed to pay annually to their pension funds to help cover the shortfall. As if that isn't bad enough, federal criminal investigators are looking into possible wrongdoing involving investment transactions of public pension funds including Calpers, the nation's biggest public pension fund. How many more pension bombs are set to explode?

One of our daily scans returned an oddball pattern at the end of last week that is extremely rare and extremely interesting from a technical perspective; 4 consecutive "filled white" candles. The culprit: none other than Boeing, the big BA, who just yesterday completed an "ultimate-load wing up-bending test on the 787 Dreamliner" with "positive initial results." Though analysis of the data for the long-delayed Dreamliner will take several weeks to sift through, we took a few snapshots and present a technical profile for the big BA and Continental Airlines (CAL), which stood out as another utterly fugly issue ripe for reversal.

The “tough guy” approach to Iran. Taking on the “America Bashers”. The spectacular growth of China and India is largely the result of open American trade policies. The biggest threats to American dominance are runaway borrowing and entitlements. “Even our power has its limits.” An exclusive interview with former Secretary of State and Secretary of the Treasury, James Baker III.