Grim unemployment figures, growing worries about crushing debt loads and the apparent absence of any inflation are causing many investors to ask a tough question: Is the U.S. economy catching the "Japan disease," the dreaded and dreadful malaise that has left the onetime Asian powerhouse in a stagnant state since 1990?
It's a crucial question.
And the answer will guide your investment decisions for the next 20 years.
To find out the best investments to be making right now, please read on...
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Investing Strategies: How to Protect Yourself if the U.S. Economy Catches the "Japan Disease"
Is it Time to Bet Against the U.S. Dollar?
The U.S. dollar has been one of the world's strongest currencies in the first part of 2010. But, is the greenback really the bet choice for safety, quality and security? Read this report to find out why it's time to bet against the dollar...
From Leader to Laggard: Is it Time to Bet Against the U.S. Dollar?
The U.S. dollar has been one of the world's strongest currencies in the first part of 2010, posting double-digit gains through the end of May.
And little wonder. The Greek debt crisis continues to threaten Europe's overall health, and could unleash an entirely new contagion on the rest of the global economy. Then there's China, - the engine of world growth during much of the financial crisis - which now appears to face the near-term triple threat of slowing growth, accelerating inflation and workplace unrest. Add in concerns about commodity prices and global debt levels and it's easy to see why currency investors have sought the safe haven of the U.S. dollar.
In short, it appears that "everybody" knows the greenback is the best choice for safety, quality and security.
But is that really the case? To me, the dollar is looking more and more like a colossal short that could wind up being one of the biggest moneymakers of the year for traders gutsy enough to take a stand.
To see why the dollar could roll over - and to see how to play it - please read on ...
And little wonder. The Greek debt crisis continues to threaten Europe's overall health, and could unleash an entirely new contagion on the rest of the global economy. Then there's China, - the engine of world growth during much of the financial crisis - which now appears to face the near-term triple threat of slowing growth, accelerating inflation and workplace unrest. Add in concerns about commodity prices and global debt levels and it's easy to see why currency investors have sought the safe haven of the U.S. dollar.
In short, it appears that "everybody" knows the greenback is the best choice for safety, quality and security.
But is that really the case? To me, the dollar is looking more and more like a colossal short that could wind up being one of the biggest moneymakers of the year for traders gutsy enough to take a stand.
To see why the dollar could roll over - and to see how to play it - please read on ...
Spain's Banco Santander Stands Strong Against Debt Crisis with Confident Global Expansion
The Eurozone's largest bank, Banco Santander, S.A. (NYSE ADR: STD) of Spain, showed the European debt crisis has not hurt its prospects by announcing today (Wednesday) it would buy Bank of America Corp.'s (NYSE: BAC) stake in its Mexico unit. The $2.5 billion purchase increases Santander's exposure to the high growth opportunities of Mexico's banking sector.
Despite Eurozone debt concerns and rocky markets, Santander's move to expand into Mexico shows a healthy balance sheet that has stood strong against the debt problems plaguing other European banks. Santander has managed to keep solid footing among Spain's unstable banking sector, where the nation's debt has hurt financing conditions and smaller unlisted savings banks have been suffering losses on property and housing loans.
"Santander is showing that it can still make decisions and go on with its business plan despite the liquidity problems in the markets," Venture Finanzas analyst Ignacio Mendez told Reuters.
Despite Eurozone debt concerns and rocky markets, Santander's move to expand into Mexico shows a healthy balance sheet that has stood strong against the debt problems plaguing other European banks. Santander has managed to keep solid footing among Spain's unstable banking sector, where the nation's debt has hurt financing conditions and smaller unlisted savings banks have been suffering losses on property and housing loans.
"Santander is showing that it can still make decisions and go on with its business plan despite the liquidity problems in the markets," Venture Finanzas analyst Ignacio Mendez told Reuters.
China's Exports Surprise Contradicts the Critics
Chinese exports in May posted a 50% gain over last year, blowing away estimates and suggesting that the risk of a Chinese economic slowdown is overblown, Reuters reported, citing anonymous sources.
China's official export numbers will be reported tomorrow (Thursday) as part of broader trade data, but had been expected to rise 32% year-over-year after recording 30.5% growth in April.
Chinese economic figures are often leaked widely in markets and government circles ahead of their official release, and are sometimes subject to last-minute revisions.
China's official export numbers will be reported tomorrow (Thursday) as part of broader trade data, but had been expected to rise 32% year-over-year after recording 30.5% growth in April.
Chinese economic figures are often leaked widely in markets and government circles ahead of their official release, and are sometimes subject to last-minute revisions.
Question of the Week: Readers Respond to Money Morning's Market Volatility Query
The Dow Jones Industrial Average last week dipped below 10,000 for the first time since February as a month of market volatility and price declines continued. Analysts predicted volatility to continue into June as government exit strategies begin and liquidity dwindles.
The zooming rebound in U.S. stock prices from their March 9, 2009 bottom - the strongest rebound since the Great Depression - has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Figures show that the bulls are still hanging around - on the sidelines - but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.
"I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst."
The zooming rebound in U.S. stock prices from their March 9, 2009 bottom - the strongest rebound since the Great Depression - has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Figures show that the bulls are still hanging around - on the sidelines - but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.
"I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst."
Global Recovery Gaining Momentum, but Obstacles Remain
The Organization for Economic Cooperation and Development (OECD) announced yesterday (Wednesday) that it has lifted its economic growth outlook, but warned that governments must enforce strict fiscal policies to sustain the global recovery and balance global expansion.
The OECD reported that the combined economy of its 31 members would grow 2.7% this year and 2.8% in 2011. Troubles of debt-plagued developed economies will be offset by the rapid economic growth of emerging markets. The numbers have been revised upward from November predictions of 1.9% growth in 2010 and 2.5% growth in 2011.
The OECD estimated global gross domestic product (GDP) would rise 4.6% this year and 4.5% in 2011, up from the previous expectation of 3.4% and 3.7%, respectively.
The OECD reported that the combined economy of its 31 members would grow 2.7% this year and 2.8% in 2011. Troubles of debt-plagued developed economies will be offset by the rapid economic growth of emerging markets. The numbers have been revised upward from November predictions of 1.9% growth in 2010 and 2.5% growth in 2011.
The OECD estimated global gross domestic product (GDP) would rise 4.6% this year and 4.5% in 2011, up from the previous expectation of 3.4% and 3.7%, respectively.
U.S. Treasury Bonds: The Not-So-Safe "Safe Haven"
In the last few weeks, international investors spooked by the budget crisis in Greece and the turmoil in southern Europe have been flocking into the U.S. Treasury bond market as a "safe haven."
The huge resulting funds flows have pushed the 10-year Treasury bond yield down to 3.16%, very little above its level during the crisis of October 2008. To a rational investor, this is extremely peculiar: After all, what on earth is safe about the "haven" of long-term U.S. Treasury bonds?
To learn about the potential investment dangers posed by U.S. government debt, please read on...
The huge resulting funds flows have pushed the 10-year Treasury bond yield down to 3.16%, very little above its level during the crisis of October 2008. To a rational investor, this is extremely peculiar: After all, what on earth is safe about the "haven" of long-term U.S. Treasury bonds?
To learn about the potential investment dangers posed by U.S. government debt, please read on...
Sell in May – But Don't Go Away From the U.S. Stock Market
If you embrace the old Wall Street adage "Sell in May and Go Away" as an investing strategy, you could end up with a bad case of the U.S. stock market summer blues, a new research study has found.
That concept is based on the notion that the May-to-November span provides a weak environment for U.S. stock market investors. According to Jon Markman, a best-selling author and contributing writer to Money Morning, that viewpoint started gaining traction in late April. And why not? The major U.S. indexes were already up a lot more than anyone expected, making that a seemingly convenient point to take profits.
Those who didn't follow that strategy probably now wish that they had.
That concept is based on the notion that the May-to-November span provides a weak environment for U.S. stock market investors. According to Jon Markman, a best-selling author and contributing writer to Money Morning, that viewpoint started gaining traction in late April. And why not? The major U.S. indexes were already up a lot more than anyone expected, making that a seemingly convenient point to take profits.
Those who didn't follow that strategy probably now wish that they had.
Borrowing Costs on the Rise as Banks Cope with Contagion Fears
LIBOR (London Interbank Offered Rate) - the rate banks pay each other for three-month loans in dollars - yesterday (Tuesday) rose to its highest level since last July.
The rise in borrowing costs is directly attributable to Europe's debt crisis, which is forcing financial institutions to re-think their peers' creditworthiness.
The Libor increased to 0.536%, the highest level since July 7, from 0.510% on Monday, the 11th consecutive day it has increased, according to data from the British Bankers' Association (BBA). German and French bonds surged, pushing 10-year yields to record lows, as investors moved into the safest assets.
The rise in borrowing costs is directly attributable to Europe's debt crisis, which is forcing financial institutions to re-think their peers' creditworthiness.
The Libor increased to 0.536%, the highest level since July 7, from 0.510% on Monday, the 11th consecutive day it has increased, according to data from the British Bankers' Association (BBA). German and French bonds surged, pushing 10-year yields to record lows, as investors moved into the safest assets.
Money Morning Investment Report Update: German Economy Shows Surprising Strength
The German economy – Europe's largest, and one of three markets highlighted in Money Morning's most recent investment-research report – is demonstrating some real muscle. Just as we expected it to. The country's statistics office, Destatis, said Germany's gross domestic product (GDP) expanded at a better-than-expected rate of 0.2% in the first three months of […]
Greek Bailout Fails to Defuse the Ticking Global Debt Bomb
The ticking global debt bomb is in the in the spotlight again.
Or, at least, it should be.
Greece's woes draw attention to the looming financing problems of other countries with a lot of debt. The strain of funding these requirements - the global debt bomb - is the greatest threat to global growth prospects. This is why central banks have flooded the financial system with money. It's the biggest and most critical financial battle of our time.
The Bank for International Settlements - essentially the central bank of the central bankers - said as much in a recent research paper, noting that governments around the world are overspending in an effort to make up for the lack of activity from cash-strapped consumers and companies. To maintain those high spending levels at a time when tax-receipts are down, however, governments have no choice but to borrow - a strategy that they cannot follow forever, BIS researchers said.
"Our projections of public debt ratios lead us to conclude that the path pursued by fiscal authorities in a number of industrial countries is unsustainable," the researchers said. "Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability."
Or, at least, it should be.
Greece's woes draw attention to the looming financing problems of other countries with a lot of debt. The strain of funding these requirements - the global debt bomb - is the greatest threat to global growth prospects. This is why central banks have flooded the financial system with money. It's the biggest and most critical financial battle of our time.
The Bank for International Settlements - essentially the central bank of the central bankers - said as much in a recent research paper, noting that governments around the world are overspending in an effort to make up for the lack of activity from cash-strapped consumers and companies. To maintain those high spending levels at a time when tax-receipts are down, however, governments have no choice but to borrow - a strategy that they cannot follow forever, BIS researchers said.
"Our projections of public debt ratios lead us to conclude that the path pursued by fiscal authorities in a number of industrial countries is unsustainable," the researchers said. "Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability."
European Debt Contagion Puts U.S. Stock Market on Rollercoaster Ride
Panic over European debt contagion sent the U.S. stock market on a wild ride today (Thursday), at one point sending the Dow Jones Industrial Average briefly below 10,000 for the first time since November 2009 before the market turned again.
The Dow was down nearly 1,000 points at 9,869.62 at about 2:40 p.m. EDT when it suddenly rebounded. The Dow ended up closing at 10,517 down 350.97 points or 3.2 % on the day. The Nasdaq Composite Index closed at 2319 down 82.65 points or 3.4%, and the Standard & Poors 500 Index closed at 1127 down 37.85 points or 3.2%.
The trading left the Dow down 6.1% from its yearly high of 11,205, set less than two weeks ago on April 26.
The Dow was down nearly 1,000 points at 9,869.62 at about 2:40 p.m. EDT when it suddenly rebounded. The Dow ended up closing at 10,517 down 350.97 points or 3.2 % on the day. The Nasdaq Composite Index closed at 2319 down 82.65 points or 3.4%, and the Standard & Poors 500 Index closed at 1127 down 37.85 points or 3.2%.
The trading left the Dow down 6.1% from its yearly high of 11,205, set less than two weeks ago on April 26.
Despite Spiraling Contagion Fears, Spain Debt Worries Are Overblown
It had a huge housing boom, and is now dealing with the fallout. It has a left-of-center government and a big budget deficit, but relatively low debt in relation to its gross domestic product (GDP). And it has a worrisome current account deficit.
I'm talking, of course, about Spain, which investors clearly fear will be the next domino to fall as a result of the Greek debt contagion.
I disagree.
I'm talking, of course, about Spain, which investors clearly fear will be the next domino to fall as a result of the Greek debt contagion.
I disagree.
To see why Spain will shrug off the Greek contagion, please read on...
$147 Billion Bailout Package for Greece Won't End European Debt Crisis
In an effort to stabilize the widening European debt crisis, the International Monetary Fund (IMF), together with Eurozone countries, agreed to extend an unprecedented $147 billion (110 billion euro) bailout package to Greece in return for deep cuts to the country's budget.
Under the three-year agreement reached late Sunday, Greece would receive $105 billion (80 billion euros) in loans from other Eurozone members and $40 billion (30 billion euros) from the IMF. The planned rescue is the largest ever attempted by the IMF and a first for the 16-member Eurozone. It still requires final approval from national governments.
Also, the European Central Bank (ECB) said on Monday it would indefinitely accept the country's debt as collateral regardless of its credit rating. The ECB didn't release figures, but the value of Greek assets used as collateral in its liquidity-providing operations is thought to be worth tens of billions of euros.
Many observers felt the huge bailout was designed not only to support Greece, but to shore up confidence in the euro, which has come under fire by currency traders. Just a few weeks ago, EU countries offered only $40 billion (30 billion euros) to help Greece.
Under the three-year agreement reached late Sunday, Greece would receive $105 billion (80 billion euros) in loans from other Eurozone members and $40 billion (30 billion euros) from the IMF. The planned rescue is the largest ever attempted by the IMF and a first for the 16-member Eurozone. It still requires final approval from national governments.
Also, the European Central Bank (ECB) said on Monday it would indefinitely accept the country's debt as collateral regardless of its credit rating. The ECB didn't release figures, but the value of Greek assets used as collateral in its liquidity-providing operations is thought to be worth tens of billions of euros.
Many observers felt the huge bailout was designed not only to support Greece, but to shore up confidence in the euro, which has come under fire by currency traders. Just a few weeks ago, EU countries offered only $40 billion (30 billion euros) to help Greece.
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