Archives for November 2009

November 2009 - Page 6 of 10 - Money Morning - Only the News You Can Profit From

Removal of Stimulus Packages Next Year Poses Bubble, Credit Risks Says World Bank’s Zoellick

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The global economy must be wary of bubble and credit risks in 2010 as central banks around the world begin removing stimulus, warned World Bank President Robert Zoellick yesterday (Wednesday).

Speaking to the press at the Singapore Foreign Correspondents Association, Zoellick said policymakers must be vigilant in preventing asset bubbles and that the private sector is needed to stoke demand.

"And so when that stimulus money has run its course, then the question will be, will the private sector rebuild demand?" he said.

Part of the problem going forward for East Asian economies is policymakers typically follow the U.S. Federal Reserve. However, nations choosing to do this may face challenges because the recovery won’t be symmetrical.

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Investors Needn’t Fear a Double-Dip Recession

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A new report contains some very good news for investors: Double-dip recessions are very rare. That means that a drop back into recessionary conditions looks less and less likely even as unemployment creeps higher and has crossed the 10% threshold for the first time in a quarter century. After reviewing U.S. economic history all the […]

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Jeremy Grantham: With Great Depression II Nowhere in Sight, Look to the "Emerging Markets Bubble" for Maximum Profits

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The good news is that we have not fallen off into another Great Depression. With the degree of stimulus there seemed little chance of that, and we have consistently expected a global economic recovery by late this year or early next year.

The operating ratio for industrial production reached its lowest level in decades. It should bounce back and, if it moves up from 68 to 80 over three to five years, will provide a good kicker to that part of the economy. Inventories, I believe, will also recover.

In short, the normal tendency of an economy to recover is nearly irresistible and needs coordinated incompetence to offset it – like the 1930 Smoot-Hawley Tariff Act, which helped to precipitate a global trade war. But this does not mean that everything is fine longer term.

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The Three Key Economic Issues Obama Will Tackle In His First Asia Trip

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When U.S. President Barack Obama this week makes his first visit to Asia as the nation's chief executive, he will have no shortage of issues to address. However, there are three key subjects that he will pay particular attention to.

  • China's currency, the yuan, which Beijing keeps undervalued to boost exports.
  • The large trade imbalance between China and the United States.
  • And a pending free trade agreement (FTA) with South Korea.

Analysts believe President Obama will push to ratify a free trade deal with South Korea that was signed in 2007 but has failed to pass legislatures in both countries. Many also hope he will pursue other agreements like it.

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Investment News Briefs

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Dodd Introduces Financial Overhaul Bill; Ex-Bear Stearns Managers Innocent of Fraud; Job Openings Still Scarce; AMEX: Credit Card Spending Up in Oct.; EU Objects to Oracle; Oil Falls As Hurricane Ida is Downgraded; Apple Cell Phone Profits Pass Nokia's; JPMorgan to Hire 1,200 Mortgage Salespeople

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IEA World Energy Outlook: Declining Investment Threatens Recovery

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Declining investment and a lack of progress on alternative energy development could lead to sharply higher oil prices in the decades ahead, the International Energy Agency (IEA) said in its 2009 World Energy Outlook.

The IEA for the past year has warned that the financial crisis was undermining investment in energy development. The advisor to 28 developed nations says the financial crisis is already responsible for a $90 billion drop in worldwide oil and natural gas investment, which is 19% below last year's levels.

"Falling energy investment will have far-reaching and, depending on how governments respond, potentially serious consequences for energy security, climate change and energy poverty," said the IEA.

The decline in energy supplies combined with a sharp rise in prices could "undermine the stability of the economic recovery," it added.

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Global Investing Roundups

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Borders Ousts CEO; Front Page Ads in New York Times; Steve Jobs Speaks, Apple Soars; U.K. Short Selling Ban Ending; Whitman's Future; Oil Rises on MidEast Violence; Russia Cuts Gas Supplies to Europe

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It Was a Wonderful Life - And Then Came Securitization

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Massachusetts Land Court judge Keith C. Long recently ruled that foreclosure sales of two properties with securitized mortgages were invalid, a decision that ties up thousands of Massachusetts real-estate transactions.

If nothing else, this landmark court case should make one thing very clear: Securitization – the product of the finest brains of Wall Street for more than two decades – doesn't work as advertised.

Historically, mortgage loans were made by small local institutions, which knew the borrowers personally and took the credit risk themselves.

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G20 Fizzles as China-Africa Summit Leads to a $10 Billion Loan

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While U.S. and European officials this weekend squabbled over the specifics of an economic recovery plan, China took another step to ensure long-term economic growth by inking another multibillion-dollar deal with Africa.

Finance ministers from the Group of 20 (G20) met over the weekend to discuss the ongoing healing process taking place in the world's financial system. Officials agreed that stimulus measures should remain in place, as the global economic recovery is still vulnerable. They also acknowledged that while the dollar is weakening, its downside risk is outweighed by the need to "continue to provide support for the economy until the recovery is assured."

Analysts say that the dollar's decline will take a back seat to the economic recovery so long as it remains orderly.

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Investment News Briefs

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Currency Battle Continues; Dow Hits 13-Month High; Fannie Could Need More TARP Money; Google Buying Mobile Ad Firm; Dish Network Surprises; GMAC Fails to Meet Fed's Capital Deadline; Sprint Cuts Up to 2,500 Jobs; Las Vegas Sands Macau Business to Go Public; EA Off Its Game

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