19. June 2009 by Dan Walkow, CFA, CMT.

Buried in President Obama’s proposed regulatory overhaul is a change that could upend Wall Street: Brokers would be held to a higher “fiduciary” standard that would compel them to place their client’s interests ahead of their own.

Currently, brokers are only required to offer investments that are “suitable,” which means they can’t put clients in inappropriate investments, such as a highly risky stock for an 80-year-old grandmother. The move could change the way products are sold and marketed and even how brokers are compensated.

This will be a sea change for the brokerage industry who will be forced to be held to the same standard as Investment Advisors if this legislations gets past.

Read more on what the difference is between a broker and an investment advisor.

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18. June 2009 by Dan Walkow, CFA, CMT.

Tyler Durden comments on a report by Albert Edwards of Societe Generale who has a dim view of the China bull story.

Most areas in the markets have now discounted a V-shaped recovery. Any doubt will trigger a rapid reversal in prices. I continue to be extremely sceptical and see recent events as part of a 1930s-like, long march to revulsion. Talking about long marches, nowhere in the world fills me with more scepticism than the Chinese economic recovery. The continued enthusiasm for all things China reminds me so much of the way investors were almost totally blind to the fact the US growth miracle was built on sand. China could be the biggest disappointment yet.

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18. June 2009 by Dan Walkow, CFA, CMT.

Posted in Uncategorized | No Comments »

17. June 2009 by Dan Walkow, CFA, CMT.

As a proxy for US stock market valuation it is worthy to note that the Standard & Poors 500 Index is currently trading at 16 times “normalized earnings”. Without doing the math I would suggest most major markets around the world including Canada trade at fairly rich valuations given the current earnings projections. First yellow flag.

Our technical indicators, after hanging in at high levels for a few weeks, have now started to indicate a market correction is a very strong possibilty. Second yellow flag.

IPO (new securities financings) have been hot and heavy over the past month as companies raise capital, taking advantage of higher prices. Third yellow flag.

Insider buying, (company executives buying their own stock) has been almost non-existent over course of the rally since early March. Fourth yellow flag.

See John Hussman’s comments on market valuation.

Posted in Markets | No Comments »

11. June 2009 by Dan Walkow, CFA, CMT.

Rahm Emanuel was only giving voice to widespread political wisdom when he said that a crisis should never be “wasted.” Crises enable vastly accelerated political agendas and initiatives scarcely conceivable under calmer circumstances. So it goes now.

Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That’s more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers’ expense, acquired enormous stakes in the banking, auto, mortgage, health-care and insurance industries.

Noted economist Arthur Laffer confirms my view that economically we are in for a redux of the 1970s. Excellent piece in the Wall Street Journal.

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10. June 2009 by Dan Walkow, CFA, CMT.

Russia is the third largest creditor to the United States and holds about 400 billion in US dollar Treasuries. They announced today that they will be reducing their USD dollar holdings in favour of bonds issued by the International Monetary Fund (IMF).

This follows on China, who last month indicated that they would be increasing their IMF allocations.

If major creditors to the United States are reducing their USD holdings implying that we will see further depreciation in the value of the USD then maybe you should too!

Posted in Currencies | No Comments »

10. June 2009 by Dan Walkow, CFA, CMT.

As reported by Mark Peery at Carpe Diem —-RICHMOND FEDERAL RESERVE — In May, the seasonally adjusted manufacturing index—our broadest measure of manufacturing activity—jumped to 4 from April’s reading of -9 (see chart above). Among the index’s components, shipments gained twelve points to 9, new orders rose twelve points to finish at 10, and the jobs index advanced fourteen points to end at -12.

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7. June 2009 by Dan Walkow, CFA, CMT.

“How do you feel about the economy today? A little worse, maybe, than you did two weeks ago? But a lot better than you did in March? Things feel better to me too, but I can’t explain exactly why. It might be because for most of last fall, I walked around in an apocalyptic trance, and you can’t keep that up forever. I was bewildered by the breadth and intensity of the financial crisis. Among other odd behavior, I convinced myself that if I learned everything there is to know about things like credit-default swaps and “Pick a Pay” Option ARMS, I could defend myself against a dysfunctional future.”

Great article by Hugo Lindgren at the New Yorker follows on my previous post about investors having too much information. You can find an “expert” to justify any view you want to take. With todays 24×7 stock market TV, the internet and of course aggresive print media using “grab your attention headlines” to sell media you can be excused for wanting to lead a simpler life…

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7. June 2009 by Dan Walkow, CFA, CMT.

Of course, we now know that more choice isn’t a universal good. Because the brain is a bounded machine - it can only process so much information at any given moment - people actually find excessive choice repellent. When we’re given too many options and no way of distinguishing between them - the different varieties of floss all seem equivalent - we experience a tremor of anxiety, the mild panic of supermarket uncertainty.

Jonah Lehrer comments on a recent study done at Columbia University on how people react when given more investment choices for their retirement programs.

 Bottom line, too much choice tends to make investors “freeze up” rather than enhance their investment experience and investment returns.

I would take that one step further and suggest the major problem investors face today is ” too much information” when it comes to making investment decisions. The Internet along with aggressive marketing programs by investment service providers lead to more confusion and subsequently “more stress” for investors.

Posted in Investments | No Comments »

6. June 2009 by Dan Walkow, CFA, CMT.

Mitsubishi, Nissan and Suburu are rolling out all-electrics cars which are currently being tested in Japan. Not much more than “boxes with a battery” these cars are going to cost about US $48,000 and run for about a penny mile vs gas powered vehicles which cost about 10 cents a mile.

Think cost is going to hold sales back? Think again, there is a waiting list in Japan as auto companies ramp up production. Government incentives and mass production will drive the cost down over time and it will not be long before you will be considering a all electric car for your city commute.

This move to electric cars augurs well for electrical power companies and distributors. I suspect that  a remake and upgrade of the ageing electrical grid across North America and around he world is going to offer some interesting investment opportunities.

Here in British Columbia and next door province of Alberta it is estimated that it will cost 4-6 billion dollars in terms up electrical grid upgrading to meet demand over the next 10 to 15 years. All-electric cars will only accelerate this demand for electricity. Until more nuclear power plants come online coal and natural gas are the inputs of choice for power generation.

Stocks of interest in Canada include Atco, Canadian Utilities, Fortis and Transalta and in the USA Florida Light and Power along with AES Inc.

See full article on all-electric cars in this weeks Time Magazine.

Posted in Economics | No Comments »