As if Greece, Spain and Portugal were not enough of a concern for the European financial system, another villain has emerged from behind the curtains: Hungary.
A new government swept into office in late May and the ruling party leader declared the country had little chance of avoiding a Greek-style credit crisis because the former government had been cooking the books.
A spokesman for Prime Minister Viktor Orban said it was not an exaggeration to talk about the potential for default.
The Financial Accounting Standards Board (FASB) last month proposed an overhaul of accounting standards that would require U.S. banks to record their loans at current market value, giving investors a clearer picture of the banks' financial standing.
The proposal is an effort to tighten banking regulation and improve financial transparency, and coincides with Congress finalizing financial reform.
News of the possible policy change prompted this reader to weigh in on what its enforcement, which has been pushed back to as late as 2013, could do for the banking industry:
"Convergence" between U.S. accounting practices and international accounting practices (from the International Accounting Standards Board) is to be implemented in one year. As part of this convergence, U.S. banks must soon begin to revalue (lower) assets on their books at current market value (mark-to-market).
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If there's one thing U.S. investors need to know about the future, it's this: Oil prices are headed higher – much higher, in fact, and could well double to reach $150 a barrel.
And if that's what the future holds, you may as well go along for the ride…
For a glimpse of this "peak oil" future, please read on...
by Don Miller
As the clock on the Gulf oil spill ticks past 60 days, the costs are approaching $22 billion, with no end in sight. Now, there is growing evidence that errors committed by both the U.S. government and BP PLC (NYSE ADR: BP) may have complicated efforts to clean up the mess. The Coast Guard and […]
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FedEx's unfunded pension problem gives us a clear look at the troubles lurking just around the corner for those who borrowed their way through the recession. Is the recession truly over? It may seem somewhat late to be asking that question. After all, haven't Washington and Wall Street already bragged as to how we have […]
Questions regarding defensive investing in uncertain times continue to fill the Money Morning Mailbag as readers aim to gain more knowledge on protective investment choices like real estate investment trusts, options-straddle strategies and dividend stocks.
In Tuesday's Money Morning article "Defensive Investing: Seven Signs Your Dividend is in Trouble," Contributing Editor Martin Hutchinson detailed how high-yield dividend stocks provide a remedy for market volatility. They generate a yield or capital gains when the market is flat or gently rising, and offer protection against a market decline.
"Dividend-paying stocks provide better long-term returns in all but the most extreme bull markets," Hutchinson said. "Build yourself a diversified portfolio of solid dividend payers and you'll be exceptionally well protected."
Companies consistently paying dividends are less likely to have dramatic share-price declines. Meanwhile, investors who go after short-term gains can be left empty-handed when the stock market reverses.
If you ask me, the current bull market in U.S. stocks is hanging by a thread.
In fact, a decline that takes the Standard & Poor's 500 Index down below the 1,040 level – roughly 7% below where it closed yesterday (Wednesday) – would probably murder the bull-market case for stocks.
But until that decline actually occurs, don't rule the bulls out for the count.
That "thread" may be tougher than you think.
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Somebody is bluffing.
Either Spain's financial system is on the verge of a breakdown, or hedge funds and speculators are exaggerating the vulnerability of Spain's banks to capitalize on short-selling Eurozone securities.
Investors will have a clearer picture of what's going on in Spain when the results of stress tests performed on the nation's banks are released. But until those results are known, rumors of a bailout of Spain will continue to circulate and liquidity will remain tight.
Borrowing costs in Spain and throughout Europe have been on the rise in recent months, as market observers fret over high levels of debt. At a closely watched auction for 12- and 18-month bills on Tuesday, the Spanish government raised $6.4 billion (5.2 billion euros). However, the 2.3% interest rate on the 12-month bills was 0.7 percentage points higher than what it paid last month. And t he yield on the country's benchmark 10-year bond rose 9 basis points to 4.823%, the highest in almost two years.
by Don Miller
A Congressional stalemate over how to stave off a hefty pay cut to doctors treating Medicare patients threatens to undermine President Barack Obama's healthcare reform effort – even as the administration mails out a glossy brochure to reassure seniors the healthcare program is on solid ground. For the third time this year, Democrats and Republicans […]
Assessing the U.S. economic recovery right now is a bit like buying a used car: Although it sure looks good, you can't help but wonder what's really going on under the hood.
In terms of the U.S. recovery, here's what I see: The U.S. economic recovery looks good. And it is good. But the pace of that recovery is about to slow down – which is part of the reason that the U.S. stock market sold off and why the Dow Jones Industrial Average is down about 7% from where it was in early May (and that's even after the 5% rebound the Dow has seen from the June 7 nadir it established down around 9,800).
To put this into context, I had a long discussion about this topic with Lakshman Achuthan, managing director of the Economic Cycle Research Institute. Let me share his thoughts.
