You are currently browsing the Capital Comments weblog archives for July, 2009.
20. July 2009 by Dan Walkow, CFA, CMT.
China’s stock market may surpass the U.S. as the world’s largest by value in three years as state- owned companies sell new shares and the nation’s 1.4 billion people put more of their money into equities, Mark Mobius said.“The Chinese population is just dipping its toe into equities and they’ve got a long way to go,” Mobius, who oversees about $25 billion of emerging-market assets as executive chairman of Templeton Asset Management Ltd., said in an interview with Bloomberg Television in London. State-owned companies are “coming up with more huge” initial public offerings, he said yesterday. More on Bloomberg here.
Posted in Economics | No Comments »
18. July 2009 by Dan Walkow, CFA, CMT.
“Forecasts satisfy a deep psychological need that we live in a somewhat predictable and controllable world,” says Philip Tetlock, a professor of organizational behavior at the Haas School of Business at the University of California, Berkeley. “Those are essential stories. People just find the truth” — that the future is unknowable — “too dissonant.”
Most economic forecasts are worth less than the paper they are printed on but fill a need for investors and policy wonks who need “data” to “make a decision” or spin an agenda.
As this article from TIME points out there are too many moving parts in world economics to project forward data points with any degree of accuracy on a consistent basis.
Use economic forecasts as input for your investment decisions at your peril.
Posted in Economics | No Comments »
18. July 2009 by Dan Walkow, CFA, CMT.
Ever wondered how much your state nicks you for sin taxes and fuel?
Look no further check out this data sheet by the TAX FOUNDATION.
Posted in Taxation | No Comments »
17. July 2009 by Dan Walkow, CFA, CMT.
Power companies are scrambling trying to get ahead of the curve for the anticipated demand for power for electric powered vehicles.
There is a lot of work to be done from fixing up an aged power grid to installing power delivery systems capable of “fast charging” electric vehicles.
A new growth driver for electric utilities offers some interesting investment opportunities.
To get a peek of what is on the horizon read: Utilities Scramble to Meet Power Needs of Electric Cars at Time.
Posted in Investments | No Comments »
17. July 2009 by Dan Walkow, CFA, CMT.
The Economist’s Big Mac index, a lighthearted guide to valuing currencies, provides some clues. It is based on the theory of purchasing-power parity (PPP), which says that exchange rates should equalise the price of a basket of goods in each country. In place of a range of products we use just one item, a Big Mac hamburger, which is sold worldwide. The exchange rate that leaves a Big Mac costing the same in dollars everywhere is our fair-value benchmark.
On July 13th, according to the Big Mac Index the Canadian dollar was undervalued by about 6% relative to the US dollar but with the run up in the Canadian dollar over the past fews days we are now at close to fair value.
Noteworthy is the fact that according to the Big Mac Index China is undervalued by 49%.
See the Big Mac Index for most countries around the world here.
Posted in Currencies | No Comments »
15. July 2009 by Dan Walkow, CFA, CMT.
We are witnessing a seismic shift in the world financial markets that is coming at us faster than anyone thought was possible. It is is rise of the Chinese renminbi as a world reserve currency.
According to HSBC China will overtake Japan and Germany as the world’s second largest economy in the next few years.
Why should you care? Right now about 65% of world currency reserves are held in US dollars. If China is successful in becoming a world reserve currency, which I believe is a done deal, then the demand for US dollars is going to decline and not just a little bit.
From an investment viewpoint, it is absolutely critical that diversification of investment assets away from total US dollar exposure is a must do. Simple logic dictates that a rise in the use of the renminbi as a world reserve currency ensures further US dollar devaluation.
American investors who wish to preserve their standard of living and prevent a debasement of their wealth need to take action asap. There are many investment strategies that can be used to mitigate a US dollar devaluation both on the fixed income and the equity markets. As an American investor have a plan and execute as the Chinese “freight train” is moving along quickly and delays could be costly.
Posted in Currencies | No Comments »
15. July 2009 by Dan Walkow, CFA, CMT.
Contrary to the devastation, and continuing dim outlook for real estate in the USA Canada is a relative bastion of stability. Why? Two major reasons are low interest rates and the non-deductibility of mortgage debt. Canadian’s tend to be much more conservative than their American cousins when it comes to real estate financing and the excessive leverage seen in US markets is not as prevalent in Canada.
Posted in Real Estate | No Comments »
13. July 2009 by Dan Walkow, CFA, CMT.
Are we there yet? Maybe some glimmerings but according to T2 and as commented on by Henry Blodgett at Clusterstock its a head-fake.
A well presented analysis can be seen here at Clusterstock.
Posted in Real Estate | No Comments »
12. July 2009 by Dan Walkow, CFA, CMT.
The new rules do not go far enough. Charity fund-raising has had a bad smell for some time now where fund-raisers get the bulk of the take with little actually getting to the underlying charitable cause.
A targeted maximum rate of 35 cents on the dollar to go to the fundraiser for fundraising costs is ok but as the rule states, a charity can exceed the 35% up to 70% but must explain why on an audit. Over 70% the charity will be hauled before the watchdog.
The increase in scams has been a result of the more favourable tax treatment given charitable donations a couple of years ago. Are we surprised at the abuse? No, it would seem anytime “tax loopholes are created” scummy operators come out of the woodwork offering deals.
Bottom line is check out the charity you want to support carefully.
Posted in Investment Industry, Economics | No Comments »
12. July 2009 by Dan Walkow, CFA, CMT.
Hotel room rates have plummeted and perhaps it time to spend a few nights at that swanky resort hotel you always wanted to go to.
One issue for Canadian hoteliers is American tourist traffic and the new passport rules.
Hoteliers say one problem that needs immediate attention is the passport issue. As of his month, Americans needed a passport to re-enter the United States by car. With only about 30% of Americans holding a passport (compared with 54% of Canadians), the U.S. government is pushing its citizens to get the documents. But many have balked at the US$75-to-US$100 fee, which covers U.S. citizens for a decade.
Posted in Economics | No Comments »