Finance

• IMF and World Bank Working Together to Tackle Fluctuating Food Prices

  Last week the two leading international banking institutions met in Washington DC to discuss the precarious status of global food security. Though the conversations were fraught with deeply disturbing hypotheticals and harrowing production projections, immediate mitigation strategies were decided upon and set into motion. Executing these plans quickly enough to alleviate some of the poorest nations’ growing pressure is the challenge that the International Monetary Fund & World Bank now face. A Tipping Point These fluctuating food prices make the world’s poor astoundingly vulnerable. The increasing global dependency on large-scale agribusiness made last year’s natural disasters—such as droughts in Europe…

• Currency Wars and the International Monetary System

  The overall lack of international cooperation in the field of foreign exchange rates is best illustrated by the Bank of Japan when between September and December 2010 it intervened to counter the appreciation of the yen. In the wake of the Tsunami and the meltdown at the Fukushima nuclear power plant, however, the Japanese currency is now continuing its steady decline against other major currencies. Yet, in the fall of 2010, the unilateral decision on the part of the Japanese Central Bank blatantly contradicted the statements of world political and international organization leaders according to which international cooperation and coordination…

• Turkey is on the Menu

  I am building lists of merging market ETF to snap up during any summer sell off, and turkey popped up on the menu. The country is only one of two Islamic countries that I consider investment grade, (Indonesia is the other one), the 82 million people of Turkey ranks 15th in the world in population, and 16th with a GDP of $960 billion GDP. Some 25% of the population are under the age of 15, giving it one of the planet’s most attractive demographic profile. The real driver for Turkey is a rapidly rising middle class generating consumer spending that…

• Meet the Risk Off Portfolio

  I believe that several asset classes are in the process of making important medium term tops, and that it is time to start building short lists of trades to execute when the big turn comes. Of course the driving factor will be the end of QE2, Ben Bernanke’s massively stimulative monetary program to prevent the economy from falling back into a double dip recession. You don’t have to execute these today, this minute, or this second. But sometime in the next month, we are going to see a “sweet spot” for a reversal in the trends we have been coining…

• Colombia is Popping Up on My Radar

  My current scenario for global equities has them selling off over the summer, then a rebounding led by emerging markets starting sometime in the fall. In that case you want to start building short lists of high growth countries to pile into, once the turn comes. I would be including Columbia on any such list. It enjoys that sweet spot of being an oil exporting emerging country whose shipments hit an all-time high OF 884,000 barrels a day in March, about half the quantity that Libya once shipped. The quality of the government has improved dramatically over the last decade.…

• The End of QE2 is In the Market

  No one has been more negative about the long term outlook for the Treasury bond markets than I. At the rate that we are piling on spending while chopping back on tax revenues, the collapse of the whole house of cards was a mathematical certainty. That’s why my long term target for the leveraged short Treasury bond ETF (TBT), now trading at $36.40, is $200. So no one was less surprised than me when Standard & Poors put the debt of the United States government on negative credit watch for the first time in history. If nothing else, this reaffirms…

• UK Pension Funds Unhealthy Overweighting of Fossil Fuel Stocks

  The overweighting of the UK stock market towards fossil fuel companies means that UK pension funds are at particular risk of any sudden reassessment of the viability of high-carbon energy sources, according to a leading analyst. According to the most likely projections by climate scientists, “at least one-half of fossil fuel assets will have to be left in the ground,” said Nick Robins, head of the HSBC climate change centre of excellence in London. “We’re still pricing [companies in the extractives sector] as if they are all going to be exploited.” “This is a particular concern for the UK as…

• Goldman Sachs Calls the Top in Oil and Metals: Clients Advised to Close Positions

  Following our two-part article on the price of oil and the consequences for global growth posted April 12, it was interesting to see a Reuters article that reported Goldman Sachs’ recommendation to clients to exit oil positions. Specifically, Goldman Sachs warned clients on Monday to lock-in trading profits before oil and other markets reverse, with the bank’s estimates suggesting speculators are boosting crude prices as much as $27 a barrel. Oil prices promptly dropped 3 percent as speculators anticipated Goldman’s clients would liquidate positions. Goldman’s advice came after US oil futures have risen some 20 percent this year and the…

• Where’s the Beef?

  With the Q1 earnings season now underway, investors seeking a repeat of Q4’s blistering results are about to be sorely disappointed. While calendar 2010 delivered a white hot 41% improvement in reported earnings, the growth rate for the most recent quarter could deliver gains as low as a paltry 13.6%. Still, a gain is still a gain. However, we are about to see divergences between sectors not seen in the past arising from the huge increases in commodities prices. Rising costs against frozen selling prices is not a great business model. The distinction is very simple to predict. Industries that…

• Market Bubbles: Fed's Cheap Money In The Hands of Wall Street

  If you take a look at the unusual market trends--nothing seems to faze the markets and commodities trading in tandem with stocks, then one thing becomes glaringly clear - -- markets are swimming in the excess liquidity courtesy of the U.S. Federal Reserve (See Chart Below). And with that much cheap money around, the markets can no longer function and trade properly.  This is not a good thing for true market based price discovery, and ultimately leads to the creation of market bubbles. There are so many bubbles today that once QE2 ends, and the tightening cycle begins, investors are…