Byron Wien: Ten Surprises for 2009
January 6th, 2009
Byron R. Wien, Chief Investment Strategist of Pequot Capital Management, Inc., today issued his list of Ten Surprises for 2009. Mr. Wien has issued his economic, financial market and political surprises annually since 1986. The 2009 list follows:
1. The Standard and Poor’s 500 rises to 1200. In anticipation of a second-half recovery in the U.S. economy, the market improves from a base of investor despondency and hedge fund and mutual fund withdrawals. The mantra changes from “fortunes have been lost” to “fortunes can still be made.” Higher quality corporate bonds, leveraged loans and mortgages lead the way.
2. Gold rises to $1,200 per ounce. Heavy buying by Middle Eastern investors and a worldwide disenchantment with paper currencies drive the price of precious metals higher. In a time of uncertainty, investors want something they can count on as real.
3. The price of oil returns to $80 per barrel. Production disappointments and rising Asian demand create an unfavorable supply/demand balance. Other commodities also rise, some doubling from their 2008 lows. Natural gas goes to $9 per mcf.
4. Low Treasury interest rates coupled with huge borrowing by the Treasury send the dollar into a serious downward slide. Overseas investors become concerned that the currency printing presses will never stop. The yen goes to 75 and the euro to 1.65.
5. The ten-year U.S. Treasury yield climbs to 4%. Later in the year, as the economy shows signs of recovery, economists and investors shift their mood from concern about deflation to worries about inflation. A weak dollar, rapid growth in money supply and record-setting deficits (over $1 trillion) are behind the change.
6. China’s growth exceeds 7% and its stock market revives. World leaders credit China’s authoritarian government for its thoughtful stimulus policies and effective execution during a challenging period. The Chinese consumer begins to spend more and save less and this shift is behind the unexpected strength in the economy.
7. Falling tax revenues from the financial sector cause New York State to threaten bankruptcy and other states and municipalities follow. The Federal government is forced to step in and provide substantial assistance. The New York Post screams “When will the bailouts stop?”
8. Housing starts reach bottom ahead of schedule in the fall, and house prices stabilize after dropping 15% from year-end 2008 levels. The Obama stimulus program proves effective and a slow growth recovery begins before year-end. Third and fourth quarter real gross domestic product numbers are positive.
9. The savings rate in the United States fails to improve beyond 3%, as most economists expect. The concept of thrift seems to have vanished from American culture. Peak job insecurity and negative growth drive increased savings early in the year, but spending resumes as the economic growth turns positive in the second half, making Christmas 2009 the best ever.
10. Citing concerns about Iraq’s fragile democratically elected government and the danger of a Taliban-controlled Afghanistan, Barack Obama slows his plan for troop withdrawal in the former and meaningfully increases U.S. military presence in the latter. In a hawkish speech he states that the threat of terrorism forces the United States to maintain a strong military force in this strategic area.
Mr. Wien believes these surprises, which the consensus would assign only a one-in-three chance of happening, have at least a 50% probability of occurring at some point during the year. In previous years, more than half of the elements of the list have proven correct.
Pequot Capital Management is a private investment firm.
Source: Business Wire
http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20090105005763&newsLang=en
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El-Erian: Long-Term US Treasuries Overpriced, Mispriced
January 5th, 2009
Barron’s Andrew Bary writes today that it may be time to exit US Treasury market as it has become
The bubble in Treasuries looks ready to pop, sending prices on government debt sharply lower. But just about every other corner of the bond market beckons — and could provide competitive returns with stocks, even if the equity markets have a strong 2009. (Video)
The bear market may have begun Wednesday, when prices of 30-year Treasuries fell 3%. They lost another 3% Friday. - “Get out of Treasuries. They are very, very expensive,” Mohamed El-Erian, chief investment officer of Pacific Investment Management Co., warned recently. Pimco runs the country’s largest bond fund, Pimco Total Return (ticker: PTTPX). - Treasuries offer little or no margin of safety if the economy unexpectedly strengthens in 2009, or the dollar weakens significantly, or inflation shows signs of reaccelerating. Yields on 30-year Treasuries easily could top 4% by year end.
While Treasuries look rich, other parts of the bond market beckon, including municipals, corporate bonds, convertible securities, some mortgage securities and preferred stock. The average junk bond now yields 20%, compared with 9% at the start of 2008.
“The only part of the bond market that you need to be bearish on is Treasuries,” says Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis. “The other sectors are attractively priced.”
A bearish stance toward Treasuries and a bullish one toward the rest of the bond market represents the consensus view. Most equity and bond analysts surveyed last month by Barron’s projected the Treasury 10-year note would carry a yield of 3% or higher by the end of 2009 (”Out With the Old,” Dec. 22). At the same time, it’s hard to find bears on corporate bonds. It’s nice to be contrary. Sometimes, however, the consensus view is right.
Source: Barrons, Get Out Now!, Andrew Bary, January 5, 2009
http://online.barrons.com/article/SB123094029415750267.html
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“Swap” Inventor Blames Regulators for Financial Crisis
January 5th, 2009
David Swensen, of Yale University Endowment investment management fame discusses the current state of the market and derivatives trading. Swensen is credited with the invention of derivatives now commonly referred to as “swaps.”
Kim Clark from US News and World Report writes today:
The Wall Street trader who invented the swap says he’s dismayed by how other traders have so abused his invention and the “complete and utter failure” of regulators to prevent the abuse that led to the current financial meltdown.
David Swensen, now the legendary manager of Yale University’s endowment funds, says swaps and other financial derivatives ought to be traded on an exchange and hedge funds that get big enough to pose risks to the financial system should be regulated.
“I don’t think it is the tool that is the problem,” he says of swaps. “I think it is the fact that our regulatory authorities aren’t doing their jobs” that allowed derivative trading to balloon dangerously. The bursting of that balloon is one of the main reasons for the Wall Street credit crunch.
In the late 1970s, David Swensen took his new Yale doctorate in economics to Wall Street. While working for Salomon Bros. in the early 1980s, he figured out a way for IBM and the World Bank to trade, or swap, payments in different currencies. It was a key development in a larger Wall Street trend to create and trade new financial “derivatives”–or instruments whose value is derived from an underlying asset or income stream. As a part of this trend, musician David Bowie found investors willing to pay him upfront cash in return for the right to collect future earnings on his hit songs, for example. And an entire industry arose to create and trade derivatives based on the mortgage payments of homeowners.
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The End of the Financial World As We Know It
January 5th, 2009
The Sunday New York Times Op-Ed section was entirely devoted to two fascinating articles co-written by Michael Lewis, famed author of Liar’s Poker, and David Einhorn, of Greenlight Capital, the activist hedge fund manager, and author of Fooling Some of the People All of the Time. This is a must-read.
Here is an excerpt:
“OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest…
The instinct to avoid short-term political heat is part of the problem; anything the S.E.C. does to roil the markets, or reduce the share price of any given company, also roils the careers of the people who run the S.E.C. Thus it seldom penalizes serious corporate and management malfeasance — out of some misguided notion that to do so would cause stock prices to fall, shareholders to suffer and confidence to be undermined. Preserving confidence, even when that confidence is false, has been near the top of the S.E.C.’s agenda…
The commission’s most recent director of enforcement is the general counsel at JPMorgan Chase; the enforcement chief before him became general counsel at Deutsche Bank; and one of his predecessors became a managing director for Credit Suisse before moving on to Morgan Stanley. A casual observer could be forgiven for thinking that the whole point of landing the job as the S.E.C.’s director of enforcement is to position oneself for the better paying one on Wall Street.”
Source:
The End of the Financial World As We Know It
MICHAEL LEWIS and DAVID EINHORN
NYT, January 3, 2009
http://www.nytimes.com/2009/01/04/opinion/04lewiseinhorn.html
How to Repair a Broken Financial World
MICHAEL LEWIS and DAVID EINHORN
NYT, January 3, 2009
http://www.nytimes.com/2009/01/04/opinion/04lewiseinhornb.html
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John Paulson Investing in Distressed Debt - 2009 Outlook
January 5th, 2009
John Paulson, founder of $36-billion hedge fund company, Paulson & Company, (no relation of Secretary Paulson) and now famed for shorting “sub-prime,” is looking to invest in (long) opportunities in the distressed credit market.
John Paulson, who runs the $36 billion hedge fund firm Paulson & Co, is looking to buy distressed mortgages and distressed debt, despite being bearish on the overall economy, Bloomberg reported.
Paulson wrote in a 2009 outlook to investors that he is interested in investing in debt restructurings, bankruptcies, strategic mergers and financial recoveries, the agency said.
His largest fund, the $13 billion Paulson Advantage Plus, has risen about 38 percent through Dec 19, the agency said, citing the undated report.
Creative Capital’s Spencer Ante shares his notes on Paulson’s outlook for 2009:
A big bank invited Paulson on the call with wealth managers to offer his thoughts on the economy and his detailed investment strategy for profiting from today’s financial chaos. With $36 billion under management, Paulson & Co. is one of the 10 largest hedge fund managers in the world, and he recently testified before Congress.
Interestingly, many of the strategies being employed by Paulson’s funds have nothing to do with public equity markets, the focus of most individual investors. Other than shorting financials and doing arbitrage plays on mergers and acquisitions, the focus of Paulson’s funds involve buying arcane financial instruments such as mortgage-backed securities, bonds of distressed companies and defaulted debt securities of bankrupted companies.
This is heavy-duty stuff that most people won’t be able to take advantage of. But given Paulson’s foresight and cojones it’s fascinating to see how some people are finding a way to profit from the losses of others. Crisis = opportunity.
Among the highlights:
- He thinks the housing market won’t bottom until 2010, with housing prices to falling another 10% to 20% from current levels before they bottom.
- The financial sector has only written off half of the toxic assets on its balance sheet, so avoid investing in financials for now.
- He sees no threat of inflation in the short term but it will be hard to contain once the economy rebounds.Here are the notes:
We believe it will be the worst recession since WWII and possibly the Great Depression.
Reasons:
1. The decline in housing that shows no signs of stabilization.
We expect housing prices to fall another 10% to 20% from current levels before they bottom.
2. Consumer: the consumer can no longer borrow to the extent they have in the past.
3. Global crunch: pressuring economy. Global stocks down 50%
- We think the headwinds are very strong.
- We don’t believe we are through the crisis in the financial area.
- Total write-downs will approach $ 1.8 trillion.
We are about halfway through the writedown process.
Most investors who invested capital in banks have lost money.
Hence the government increasing its role in recapitalizing the banks.- The terms are going to become increasingly onerous, which will put pressure on the equity of financial institutions.
- We are very bullish on the investment opportunities available.
- The stress in markets have caused many prices to fall.
- The best opportunities for us in 2009 and 2010:
* Distressed mortgages. We’ve been buying the triple AAA tranches of these securities. Quite aggressively buying them at yields in the 20% to 25% range. We like mortgage securities because they self liquidate.
* Distressed debt, both leveraged loans and high yield debt; we’ve started to allocate money to that area. It’s very tricky. Targeting companies that will not go bankrupt. Yields north of 30%. There are thousands of issues out there.
* Bankruptcies: defaulted debt securities of bankrupted companies. i.e. Tribune Co. Those bonds went from 80 cents to 27 cents on dollar for senior secured loans. $110 billion in bankrupt bonds. There is a tremendous amount of supply but limited buyers. We are finding attractive opportunities. 2 to 4 times multiple
* Merger arbitrage: a lot of money has come out of the sector. We focus on the corporate strategic deals for all stock. i.e. Merrill Lynch and BofA. We buy Merrill and short BofA to lock in the spread. 31% return currently. Arbing National City/PMC, Wachovia/Wells Fargo. Returns are in 30% to 60% range. 3-6 month time frame. These are some of the highest spreads we’ve seen. Most successful deal we’ve seen was Budweiser/InBev.
* Debt restructuring: GMAC, we buy the old bonds and swap them for new bonds.
* As we get further on in the cycle investing in financials that are recapitalizing will be an attractive area. It is premature to make those investments today. After most of the writedowns are done. That will represent a highly attractive long-term investment opp.
Factors driving home prices down:
* high percent of foreclosures; banks must sell homes quickly. Current inventory of homes is 11 months. Banks have to lower prices to sell homes. Takes 12 months to foreclose home. The backlog of homes is enormous.
* Limitations on financing: 40% of mortgages made during boom would not get made today. Need income and down payment. The pool of potential acquirers is more limited.
* We are going into a recession, which reduces the pool of buyers.Why buy these securities?
We factor these declines as much as 25% into our analysis. We then estimate default percentages. Then estimate losses in pools and cash recoveries.I don’t think we’ll hit the bottom until 2010.
How much will the bold moves by Washington help?
There’s a limit to what you can do. You can’t help people who can’t afford their mortgages.How much leverage do your funds use?
Generally our funds don’t use leverage. There’s a thing called Reg T. It calls for 50% margin. That’s the only type of leverage our base funds use.Over last 5 years our base fund equity to capital under management was 90%. Peak was 33%.
Inflation?
The economy is unlikely to see inflation in the short term.But once the economy returns to moderate growth that’s when it becomes an issue.
It will be hard for the government to contain inflation at that point.
Raising interest rates or lowering gov spending could slow the economy.
Source: Reuters, December 31, 2008
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Yale’s Swensen: “Extraordinary Opportunities in Distressed Debt
January 5th, 2009
Legendary Yale University Endowment investor, David Swensen, says there are extraordinary investment opportunities in the credit world and is “pursuing a recovery” by acquiring distressed debt.
“There are some really extraordinary opportunities in the credit world,” said David Swensen, the school’s investment chief, in a phone interview from his office at the New Haven, Connecticut, university. “Everything, from bank loans to investment-grade bonds to less-than-investment grade bonds, is priced at really extraordinarily cheap levels.”
Among Swensen’s core principles identified in “Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment” (Free Press, 408 pages, $35) is the importance of diversifying holdings while focusing on equities. In a recession, the advantages of diversification get overwhelmed by investors’ selling equities in favor of U.S. Treasury bonds in a “flight to quality,” he said.
“When you have a market in which any type of equity exposure is being punished, it’s going to hurt long-term investors,” he said.
In the current environment, distressed corporate securities can produce “equity-like” returns, Swensen said.
“You want to make sure you’re with companies that have the ability to survive in a really tough economic environment” he said, declining to name any of the companies.
Until financial institutions resume lending, the economy will remain stagnant, Swensen said.
“I don’t think the Fed or the administration has figured out how to fix credit markets,” he said. “We are going to experience economic and financial stress as long as the credit markets are broken and it’s not until we start seeing the credit markets functioning properly will we be able to see a path to economic recovery.”
Swensen advocates federal guarantees for deposits in money- market funds as a way to encourage investment in the vehicles that buy corporate debt.
Source: Bloomberg.com, January 2, 2009
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Words from the (investment) wise for the week that was (Dec 29, 2008 – Jan 4, 2009)
January 4th, 2009
Changing the digits on the calendar from ’08 to ’09 may not have transformed the dire outlook for the global economy, but during the holiday-shortened New Year week investors appeared adamant to put the rout of 2008 behind them.
Although mercifully the door has been closed on 2008, let’s recap some of the unprecedented movements experienced in financial markets during the year.
Equities:
• MSCI World Index: -42.1% (worst yearly performance since start of Index in 1970)
• S&P 500 Index: -38.5% (worst annual percentage decline since 1937 and 3rd worst on record; largest quarterly [4th quarter: -298] and daily [September 29: -107] points decline ever; 6th worst daily percentage decline [October 15: -9.0%])
• Dow Jones Industrial Index: -33.8% (worst annual percentage decline since 1931 and 3rd worst on record; largest quarterly [4th quarter: -2,330] and daily [September 29: -778] points decline ever; 6th worst daily percentage decline [October 15: -7.9%])
• S&P 500 and Dow Jones: There was no point in 2008 where the indices were up for the year at the close of a trading day. Since 1900, 2008 was only the 4th year (after 1910, 1962 and 1977) where the Dow never had a single day where it closed up for the year, according to Bespoke.
• FTSE Eurofirst 300 Index: -44.8% (worst yearly percentage fall since its creation in 1986)
• Nikkei 225 Average: -42.1% (biggest annual percentage decline on record)
• CBOE Volatility Index (VIX): Historical high in November based on new calculation, but remained below levels seen during the 1987 crash based on an previous calculation.
Treasuries:
• US Treasuries: Yields dropped to lowest levels since 1950.
• US 10-year Treasury Notes: Yields fell by 182 basis points – biggest yearly points decline since 1995 and the second biggest in the last 20 years.
Currencies:
• Japanese Trade-weighted Index: +25.0% (largest annual rise since currency was allowed to float freely in 1973)
• Pound against US dollar: -26.2% (worst annual decline since gold standard was abandoned in 1971)
• Pound against euro: -22.8% (worst yearly decline since launch of single currency in 1999)
Commodities:
• Reuters/Jeffries CRB Index: -36.0% (worst annual performance since inception of Index in 1956)
The table below highlights the performance of the principal asset classes for 2008. While West Texas Intermediate Crude (-53.5%), the S&P 500 Index (-38.5%) and the Reuters/Jeffries CRB Index (-36.0%) recorded large losses, US 30-year Treasury Bonds (+18.6%) fared very well, and the US Dollar Index (+6.0%) and gold bullion (+5.5%) also provided safe havens for risk-averse investors. (The returns for indices in individual countries are given in my December 31 “Stock market performance round-up”.)
But the few trading days since Christmas Eve witnessed a strong rebound in global stock markets as investors brushed aside bleak economic data. This resulted in market participants scooping up beaten-down stocks and commodities, mending some of the bruising sustained earlier in 2008. The better spirit of equities was reflected in losses for some government bonds.
Despite a grim ISM report (see section on Economy below), the S&P 500 Index jumped by 3.2% after the release of the data, propelling many stock market indices to almost two-month highs. The MSCI World Index (+5.9%), MSCI Emerging Markets Index (+5.3%), Dow Jones Industrial Index (+6.1%), S&P 500 Index (+6.8%), Nasdaq Composite Index (+6.7%) and the Russell 2000 Index (+6.1%) all gained handsomely (albeit on thin volume) during the week straddling New Year’s day.
Source: Daryl Cagle
December also marked the first monthly gain since August for the major US indices, with the Dow Jones and S&P 500 now up by 19.6% and 23.9% respectively since the lows of November 20, 2008.
The “storm” of 2008 has undoubtedly grown quieter in December, with the CBOE Volatility Index (VIX) having declined from 80.9 in November to 39.6 on Friday. Also, the average daily swing in the Dow Jones has fallen to ~300 points compared to ~430 points in November and ~590 points in October, according to Briefing.com.
Christmas Eve trading on Wednesday, December 24 marked the start of the Santa Claus Rally period, made up of the last five trading days of December and the first two of January. With one trading day to go on Monday, the combined gain for the S&P 500 Index for the first six days was 8.0%. The absence of a rally – and one now seems highly unlikely – has often been the harbinger of a sizeable correction or a bear market in the coming year. Hence the saying: “If Santa Claus should fail to call; bears may come to Broad & Wall.”
But risks remain plentiful and Bill King (The King Report) reminds us that “just as night follows day, international conflicts follow economic crises”. Escalating violence in the Middle East and tensions between Russia and the Ukraine served as a reminder and caused a 22.9% spike in the price of West Texas Intermediate Crude on the week.
Next, a quick textual analysis of my week’s reading material (done between New Year’s celebrations). No surprises here with keywords such as “economy”, “financial”, “market”, “prices” and “rates” featuring prominently.
Readers often ask me about Richard Russell’s (Dow Theory Letters) viewpoint on the stock market. Here is his latest take on matters: “It occurs to me that this is a good time to remember my old friend Marty Zweig’s classic warnings: ‘Don’t fight the tape, don’t fight the Fed’. Well, if you are bearish on 2009, you are indeed fighting the Fed and probably the tape. Why do I say that? Because the Bernanke Fed is going all out in its effort to turn the US economy around. Bernanke says the Fed will do whatever it takes to halt the current trend to deflation and to bring back prosperity and mild inflation to the US.
“The stock market seems to have finally climbed aboard the Fed’s bullish bandwagon. All of which brings us to a very dramatic and critical juncture. If the market heads higher in early January, I believe that money on the sidelines [$8.85 trillion – 74% of US market cap] could begin to turn optimistic and even bullish,” said the R man.
From across the pond, David Fuller (Fullermoney) added: “The crucial missing ingredient for stock markets to date has been confidence. Nevertheless that could change in January, given the high levels of cash held by most institutional investors. … if stock market indices surprise the bearish consensus and start to break upwards rather than downwards from their trading ranges, institutional investors will be under increasing pressure to participate.”
What the market does over the next few days will give a clue as to the rest of the year, according to Jeffrey Hirsch (Stock Trader’s Almanac). “S&P gains during January’s first five trading days preceded full-year gains 86% of the time.” He also draws attention to the so-called “January Barometer” which states “as the S&P 500 Index goes in January, so goes the year”. “The January Barometer predicts the year’s course with a .741 batting average. 12 of the last 14 post-election years followed January’s direction,” said Hirsch. Also, the “ninth” year of decades is generally an up year for the stock market with the Dow Jones down only three times in the last twelve decades.
The table below shows the key resistance and support levels for the major US indices. With most global indices having breached the 50-day moving average (and after year-end also having taken out the December peaks), the next target is the November 4 highs, followed by the key 200-day average. On the downside, the December 1 (not shown on table) and the all-important November 20 lows must hold for the uptrend to remain intact.
In my opinion, selective buying in global markets is in order, and ’09 may turn out to be a good year for a discerning stock picker. However, make sure to separate the wheat from the chaff because many companies will fall by the wayside during the new year. (Also see my posts “Stock market internals: further headway in 2009” and “Video-o-rama: Ring out the old, ring in the new” for more discussion of the outlook for stock markets in 2008.)
Economy
“Overall business confidence improved just a bit at the close of to 2008, but remains very dark with hiring intentions and expectations regarding the outlook in mid-2009 dropping to record lows,” said the latest Survey of Business Confidence of the World conducted by Moody’s Economy.com. The Survey results indicate that the entire global economy is solidly in recession.
Further evidence of the worldwide economic crisis came from the Semiconductor Industry Association, reporting that global sales of semiconductors declined by 9.8% in November compared with a year ago, and by 7.2% since the previous month.
Data reports released in the US during the New Year week mostly confirmed the dismal economic outlook.
• The Institute for Supply Management’s Manufacturing Index is still contracting and fell by a larger-than-anticipated 3.8 points to 32.4 in December. The index is at its lowest level since 1980, with the forward-looking details also downbeat as new orders plunged to their lowest level since January 1948.
• The S&P/Case-Shiller Home Price Indices reported record annual declines, with the 10-City and 20-City Composite Indices falling by 19.1% and 18.0% respectively.
• The Conference Board’s Consumer Confidence Index declined in December to a historic low of 38 – down by 6.6 points from November’s 44.7. With consumer confidence in a perilous state, the outlook for spending appears dismal.
• Initial jobless claims decreased by 94,000 to 492,000 for the week ended December 27. Fewer-than-expected claims were filed, but holidays have been known to be more volatile for this indicator. Overall, labor market trends suggest persistent weakening.
• The ECRI Weekly Leading Index increased from 106.8 to 108 during the week ended December 26, but does not alter the Index’s overall downward trend. The meaningful decline in the ECRI indicates a severe slowdown that could last deep into 2009.
Commenting on the implications of the worsening employment situation for the US consumer, Mark Vitner (Wachovia Economics Group) said credit availability and housing affordability were two important elements of consumer buying decisions, but that an even more important variable was consumers’ comfort about their own employment and income prospects.
“Consumers typically have to have a job if they are going to buy a home or automobile. And even if consumers have a job, they are less likely to borrow and spend if they feel their job is at risk or their income could take a hit,” said Vitner.
Elsewhere in the world, major economies remain mired in a severe slump. “Europe, Germany, France, and the UK all reported declines in indexes of purchasing managers in December,” said Asha Bangalore (Northern Trust). China’s factory sector has contracted for the fifth month running according to the CLSA China Purchasing Managers’ Index. … the Australian … Manufacturing Index has recorded readings below 50 for seven consecutive months … In sum, weak economic conditions across the world is a challenge for policy makers in the months ahead.”
Source: US Global Investors – Weekly Investor Alert, January 2, 2009.
Assessing the global economic outlook, Nouriel Roubini (RGE Monitor) posed the following questions on RealClearMarkets: “So what lies ahead in 2009? Is the worst behind us or ahead of us?
“The United States will certainly experience its worst recession in decades, a deep and protracted contraction lasting about 24 months through the end of 2009. Moreover, the entire global economy will contract. There will be recession in the Eurozone, the UK, Continental Europe, Canada, Japan, and the other advanced economies. There is also a risk of a hard landing for emerging-market economies, as trade, financial and currency links transmit real and financial shocks to them,” said Roubini.
Week’s economic reports
Click here for the week’s economy in pictures, courtesy of Jake of EconomPic Data.
Source: Yahoo Finance, January 2, 2009.
In addition to the Federal Open Market Committee (FOMC) releasing the minutes of its December 16 meeting (Tuesday, January 6) and the Bank of England’s interest rate announcement (Thursday, January 8), the US economic highlights for the next week, courtesy of Northern Trust, include the following:
1. Employment Situation (January 9): Payroll employment is predicted to have dropped by 450,000 in December after a loss of 533,000 jobs in the prior month. The unemployment rate is expected to have risen to 7.0% during December from 6.7% in November. Consensus: Payrolls – -478,000 versus -533,000 in November, unemployment rate – 7.0% versus 6.7% in November.
2. Other reports: Consumer Confidence (December 30), Construction Spending, Auto Sales (January 5), Factory Orders, ISM Non-manufacturing, Pending Home Sales Index (January 6).
Markets
The performance chart obtained from the Wall Street Journal Online shows how different global markets performed during the past week.
Source: Wall Street Journal Online, January 2, 2009.
Good riddance to 2008! Let’s hope that after one of the most tumultuous years in history, conditions will calm down – as always happens after a storm. And may this compilation of news items and words from the investment wise assist in keeping our portfolios on a profitable course.
To all the Investment Postcards readers, thank you for your loyalty and support. And remember, the biggest compliment you could give us is to broadcast word about the site and encourage your family, friends and colleagues to subscribe to the e-mail updates or RSS feeds.
Here’s wishing you a blessed and calm 2009!
Source: Daryl Cagle
YouTube: Uncle Jay’s review of 2008
“It’s been a whole year since Uncle Jay has SUNG an entire episode, and here’s the reminder why! It’s the year-end review of the news, and maybe it’ll seem a little better with music.“
Source: YouTube, December 21, 2008.
The New York Times: The year in the markets
Click the image for an interactive graph.
Source: The New York Times, December 31, 2008 (hat tip: Barry Ritholtz).
Bloomberg: A recap of 2008
“A two-minute look into the year that changed the economic landscape.”
Source: Bloomberg (via YouTube), December 31, 2008.
Win Rosenfeld (The Big Money): The five worst days of 2008
“You know it’s been a bad year when you’re arguing about what the five worst days were. Between the massive market fluctuations and the biggest banks going belly up, it’s hard to know where to start. From a crowded field of contenders, here are The Big Money’s five biggest buzz-killers.”
Source: Win Rosenfeld, The Big Money, December 30, 2008.
Bloomberg: Marc Faber’s 2009 outlook
Marc Faber says the global economy is going into severe recession and emerging markets will be hit the hardest.
Source: Bloomberg (via YouTube), December 31, 2008.
Bloomberg: Jim Rogers – “I’m prepared for the worst”
Source: Bloomberg (via YouTube), December 29, 2008.
CNBC: Map of the markets
“Where to put your money in 2009, with Michael Pento, Delta Global Advisors; David Kotok, Cumberland Advisors; Diane Brady, BusinessWeek; Dave Maney, Headwaters MB; and CNBC’s Rebecca Jarvis.”