Many high profile investors, economists and companies got burned during China's recent woes. We look at the errors they made and what you can learn from them.
With euphoria returning to equity markets, it's worth remembering that stocks are unlikely to make you really rich. We have some ideas what might though.
Danger and opportunity arrive hand in hand.
- ICE's NYSE to determine the rate used by key competitor CME: NYSE Euronext to Take Over Libor (WSJ)
- Japan slams China over maritime disputes (FT)
- The Twinkie Returns, With Less Baggage (WSJ)
- Pentagon Workers From Pennsylvania to Ghana Hit by Cuts (BBG)
- Why Prostitutes Aren't Enough to Deprive the World of Eliot Spitzer (BBG)
- Groups gather in Turkish protest park after night of clashes (Reuters)
- Apartment Rents Rise, But the Pace Is Slowing (WSJ)
- Asiana Seen Saving Millions With Tactic to Bar U.S. Suits (BBG)
- Bin Laden's life on the run revealed by Pakistani inquiry (Reuters)
- Fracking Firms Face New Crop of Competitors (WSJ)
As the escalation in violence between members of the pro-Mursi Muslim Brotherhood and the military-backed victors of this week's coup gets worse with at least 6 dead now according to Al Arabiya, the US Secretary of State is busy...
a) Getting debriefed and preparing for a diplomatic statement
b) In the air between point A and point B promoting US domestic and foreign interests abroad
c) Informing Warren Buffett about the aphrodisiac benefits of ketchup
d) Spending a (second consecutive) exhausting afternoon on his sailboat.
And the correct answer is...
Demand for Warren Buffett, the investor, peaked in 2012 when an anonymous donor bid $3,456,789 for the annual Glide Foundation's eBay lunch with the Octogenarian of Omaha. Demand for Warren Buffett, 82, the Obama tax and fairness advisor, however, is a mere fraction as the stunned Glide Foundation found out last night when the final bid for the "Power Lunch for 8 with Warren Buffett to Benefit GLIDE Foundation" auction closed at the lowest possible 6 digit increment, or an embarrassing $1,000,100. This was the lowest demand to have lunch with Buffett since 2007. This is a stunning result considering that with every passing year, for obvious reasons, the likelihood of many more such "power lunches" drops exponentially. We hope Buffett-demand is not a proxy leading indicator for the stock market or else a 71% plunge is coming.
One of the problems with QE is that the Fed is forcing people to buy riskier investments than they otherwise would have. The immorality of their actions aside, they create a significant psychological mismatch between assets and their holders. Stocks are in weak hands, insuring one great stampede for the chairs when the music stops.
Is the coming financial collapse going to be inflationary or deflationary? Are we headed for rampant inflation or crippling deflation? This is a subject that is hotly debated by economists all over the country. Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation. Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts. So what is the truth? Well, for the reasons listed below, we believe that we will see both.
Since before the tech bust, we’ve been suggesting that while Americans “think” they’re getting richer... they’re actually heading in the other direction. They’re getting poorer. This proposition has been easier for folks to entertain since housing busted and the financial crisis reversed the “wealth effect” in 2008. With that in mind, let’s take a look at the logic of the American Empire and what you can expect in the year(s) ahead.
- Hilsenrath: A Top Contender at the Fed Faces Test Over Easy Money (WSJ)
- Yen drops further as G7 avoids criticizing Japan (Reuters)
- Markets missed Flaherty’s clues on next Bank of Canada chief (G&M)
- Republicans turn screws over Tea Party tax probes (FT)
- Dual-track Libor replacement lined up (FT)
- Risks to China recovery seen as factory output underwhelms (Reuters)
- Barack Obama’s goal of universal healthcare could be set back significantly by Texas Governor Rick Perry (FT)
- Gold Bears Pull $20.8 Billion as BlackRock Says Buy (BBG)
- Mexico sets shelters as volcano shakes, spews ash (AP)
- Europe Eases Corporate Tax Dodge as Worker Burdens Rise (BBG)
- IPOs Set to Raise Most Cash Since Crisis (WSJ)
- Melting Ice Opens Fight Over Sea Routes for Arctic Debate (BBG)
- Top hedge funds bet on Greek banks (FT)
- Icahn Asks Investors to Make Big Bet on a Debt-Laden Dell (BBG)
While, as we recently destroyed here, the current meme is that "bonds are mispriced" due to the Fed and so holding them is an idiot's play as at some point they will normalize (which somehow means equities are a great investment - as they apparently never drop in price). DoubleLine's Jeff Gundlach appeared on CNBC this morning laying out a few very obvious (but entirely overlooked by the mainstream) reasons why a 'rise' in interest rates (and the bond price drop implicit in that) is not necessarily positive for most of the equity-type investments currently. We see four reasons why the "bonds bad, stocks good" meme is fundamentally flawed and why a great rotation remains a myth... Gundlach also warned flow-driven equity bulls, "QE effects are in the eighth inning."
- Lesson From Buffett: Doubt Yourself (WSJ)
- Gold Bulls Split With Buffett as Traders Say Sell (BBG)
- Apple Misses IPhone Customers as Global Carriers Balk (BBG)
- Russia extends Cypriot loan by 2 years, cuts interest: troika document (Reuters)
- Tax Rewrite in Play in Capitol (WSJ)
- No early warning for U.S. on Israeli strikes in Syria (Reuters)
- Germany riveted at start of neo-Nazi murder trial (Reuters)
- JPMorgan Investors Urged to Split Chairman Role, Oust Directors (BBG)
- Leniency for Offshore Cheats (WSJ)
- Brussels steps up efforts over tax avoidance (FT)
- Ambulance chasing: Mesothelioma Doctors, Lawyers Join Hunt for Valuable Asbestos Cases (WSJ)
- Web Sales-Tax Bill Set to Face Bumps (WSJ)
- Colleges Cut Prices by Providing More Financial Aid (WSJ)
- U.S. Bulks Up to Combat Iran (WSJ)
- Taking sides in Syria is hard choice for Israel (Reuters)
- Gold Traders Most Bearish in Three Years After Drop (BBG)
- It's a Hard Job Predicting Payrolls Number (WSJ)
- EU economies to breach deficit limits as economic picture darkens (FT)
- IBM Says U.S. Justice Investigating Bribery Allegations (BBG)
- At Texas fertilizer plant, a history of theft, tampering (Reuters)
- SAC Sets Plan to Dock Pay in Cases of Wrongdoing (WSJ) - "in case of"?
- EU to propose duties on Chinese solar panels (Reuters)
- Billionaire Kaiser Exploiting Charity Loophole With Boats (BBG)
- SEC Zeroing In on 'Prime' Funds (WSJ)
- Apple Avoids $9.2 Billion in Taxes With Debt Deal (BBG)
- China April official services PMI at 54.5 vs 55.6 in March (Reuters)
Healthy female participation rates in the labor force and in leadership are a reflection of inclusiveness in countries and companies; and as Goldman Sachs recently noted, inclusive institutions lead to more innovation, more enduring competitive advantages and a more efficient use of available resources (capital, physical and people). The idea that empowering women employees and entrepreneurs contributes to a virtuous cycle as higher female disposable income trickles down to increased spending on education and healthcare, is not lost on Warren Buffett who writes at length in his latest Op-ed of the possibilities for America should the other 50% of America become productive, "women should never forget that it is common for powerful and seemingly self-assured males to have more than a bit of the Wizard of Oz in them. Pull the curtain aside, and you'll often discover they are not supermen after all." And with the oracular Omahan now on Twitter, can we expect more bitesize insights - perhaps the anti-Bill-Gross tweet.
Update: 87 year old Giorgio Napolitano has been reelected as president of Italy during the 6th consecutive vote. He becomes the first Italian president to serve two terms.
Earlier today the fifth consecutive round of presidential voting in Italy failed to produce the sufficient majority for the country to elect a president courtesy of its fractured political system, especially following the announcement last night from the PD's leader Pier Luigi Bersani that he would quit his post after a president is elected. More than 440 blank ballots were cast in the fifth ballot today, with the leading vote-getter Stefano Rodota -- the candidate of Beppe Grillo’s 5 Star Movement -- at 210. Shortly thereafter an ingenious solution has emerged: reelect the current figurehead president Giorgio Napolitano for a second consecutive 7 year term so if not a prime minister, Italy, which has devolved into total political chaos since the February 25th inconclusive elections, would at least has a president. There is one problem: Napolitano is 87 years old.