General News

Hey, remember Fukushima? Arnie Gundersen is freaking me out! Gundersen is no tin-foil hat guy, he’s the chief engineer of energy consulting company Fairewinds Associates and a former nuclear power industry executive who served as an expert witness in the investigation of the Three Mile Island accident. Gundersen has said that the U.S. nuclear industry and regulators need to reexamine disaster planning and worst-case scenarios, especially in reactors such as Vermont Yankee, which have the same design as the crippled nuclear plant at the center of the 2011 Japanese Fukushima nuclear emergency. Vermont Yankee and similar plants are vulnerable to a similar cascade of events as in Japan. The Nikkei had fallen down to 8,227 from 10,678 (23%) at the quake and has since recovered 10,017 on May 2nd but was back to 9,648 on Friday (3.6% off the bounce) and the 50 dma has now formed an aptly-named "death cross" below the 200 dma. Japan is already on the hook for...

It’s been an exciting month for our Income Portfolio (also updated here). Our goal was to set up a virtual portfolio of $500,000 that produces at least $4,000 a month in income and we are miles ahead of goal already with only a little bit of our cash deployed and we haven’t even hit our first dividend cycle! So we are loving a market sell-off as it gives us more buying opportunities as stocks we want go on sale. Keep in mind we are trying to establish a low-touch retirement portfolio so we’re not "going for it" with these positions as we are with the $25,000 Portfolio, which is already up 38% in 3 months on very aggressive (and often gut-wrenching) positions. The goal of that portfolio is to practice rolling and saving the positions that go against us and it requires almost daily care. This portfolio is designed for my Mom, who has no time or interest to play the markets...

Economic News The Thomson Reuters/University of Michigan consumer sentiment index for May rose to 72.4 from 69.8 in April. Economists had expected the index to rise to 70. The consumer price index gained 0.4 percent in April, largely due to rising food and energy costs, compared with a 0.5 percent gain in March. The result was in line with expectations. The core CPI, which excludes volatile food and energy prices, rose 0.2 percent in April, up from a 0.1 percent gain in March. Gasoline prices rose 3.3 percent in April, which accounted for nearly half the rise in the overall CPI. European shares fell after hawkish comments by European Central Bank President Jean-Claude Trichet. The Greek debt problem continued to unfold, with Greek Prime Minister George Papandreou saying that the current spreads of Greek bond yields over those of other Euro Zone states were not sustainable in a monetary union. Meanwhile, European Central Bank Governing Council member Ewald Nowotny said Greece has notmet the...

Even from the grave Osama Bin Laden is exacting revenge on American civilians, more specifically on the American taxpayers. The US is suffering massive national debt of $9.68 trillion. 20 percent of this figure, equal to $2 trillion was spent on fighting Bin Laden over the last ten years. This includes money spent on waging wars in Afghanistan and Iraq, as well as national defense, additional military costs and intelligence. The interest repayment of the money borrowed in the fight against Al Qaida, over the last year alone is $45 billion. It will take years to pay off the debts built up by Bin Laden’s actions and will continue to have a growing impact on the already deepening debt of the US indefinitely. The costs didn’t stop amassing at the demise of Bin Laden, the US have plans to continue military operations in Iraq and Afghanistan and to spend a further $118 billion on these operations over the next year. Human costs have...

Anybody who has been following me since 2006 knows me to be a real estate bear. I was massively bullish from 2000 to 2005, after which I started selling off my investment assets. No, it wasn’t perfect timing, luck or a gift from God. It’s called a spreadsheet. Simply do the math and the truth will be self-evident! The Wall Street Journal and Bloomberg ran articles earlier this week on the home market tumbling further in the US: Home Market Takes a Tumble – WSJ.com. I warned thoroughly of this occurrence throughout last year and this – see The Latest Case Shiller Index – Housing Continues Freefall In Aggressive Search For Equilibrium Monday, February 7th, 2011. The .gov bubble blowing accomplished the mission of taking observers eyes off of the fundamentals and macro environment and back into optimism central. To Bloomberg TV’s credit, they gave me the opportunity to call it like it is. Reggie Middleton on Bloomberg TV’s Fast Forward Bloomberg TV:...

Despite the guilty verdict, Raj Rajaratnam is somewhat of a free man, at least for the time being. He will be under house arrest with electronic surveillance until sentencing on July 29. Was this the appropriate punishment for the former hedge fund manager? “Well, it should have been more severe given that he was found guilty on every single count across the board,” answers Brian Sozzi, an analyst with Wall Street Strategies. Still, Sozzi believes that the verdict sends a strong message to the investment community that “behavior along these lines is not going to be tolerated.” Quality of Research While the long-term ramifications have yet to be seen, Sozzi is concerned that analysts will water down their research in the near-term to avoid making a risky call. “Well, going back to the Global Research Advisory Settlement that followed the Enron scandal, banks had used third-party research,” Sozzi said, adding that since that time, the quality of research has gone down. “I think there is [some...

Anecdotally, I’ve been hearing reports and thoughts that the US housing market, if not at a bottom yet, should be close to one.  While this may be true for certain markets, it doesn’t appear that a base is being formed, at least yet, across the board. From the WSJ: Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, pushed down by an abundance of foreclosed homes on the market, according to data to be released Monday by real-estate website Zillow.com. Prices have now fallen for 57 consecutive months, according to Zillow. Since the home buying tax credits have expired, demand for homes has surprised – to the downside: While most economists expected sales to decline after tax credits expired, the drag on the market has been greater than many anticipated. “We expected December and January to be bad” as the market reeled from the after-effects of the tax credit, said Stan Humphries, Zillow’s...

After a period of speculation over the probability for Finland’s new parliament to block Portugal’s aid package came to an end as the nation will back the bailout as far as Portugal agrees to the conditions of the bailout including asset sales. Finance Minister Jyrki Katainen told reporters yesterday that Portugal who needs the agreement of all the 17-euro members to acquire the bailout must also start seeking private investors to ensure that the funds will stay in the country before the bailout can be made. As for the parliament that was the matter of debate and speculation after the serge in euro-skeptic parties, an agreement has been made as well. Katainen who leads the parliament’s biggest party after the elections said “we have reached a common understanding” as he held talks with the Social Democrats the second-largest group since the vote. The initial understanding between parties comes as Katainen struggled to attain this consensus ahead of the EU meeting on May 16...

South Africa is suggested as a new member of the BRIC with the extension of the abbreviation to BRICS. We have a working model to estimate the SA’s economic performance relative to other BRICS countries. As in the previous post, we calculate the difference between real GDP per capita in the USA and that in South Africa. Figure 1 shows all differences (1990 US dollars at Geary-Khamis PPPs, as published by the Conference Board). Four of the five were already analysed. What can we say about the new member? Honestly, its performance is far from standard, when the difference does not change over time. South Africa underperforms as India and Brazil did during the past 20 years. These BRIC members are really big (in top ten worldwide) what makes their membership justified by the size of economy. It is not valid for SA.     Figure 1. The differences between real GDP per capita in the USA and the BRICS countries

Debate continues to rage between the inflationists who say the money supply is increasing, dangerously devaluing the currency, and the deflationists who say we need more money in the economy to stimulate productivity. The debate is not just an academic one, since the Fed’s monetary policy turns on it and so does Congressional budget policy. Inflation fears have been fueled ever 2009, when the Fed began its policy of “quantitative easing” (effectively “money printing”). The inflationists point to commodity prices that have shot up. The deflationists, in turn, point to the housing market, which has collapsed and taken prices down with it. Prices of consumer products other than food and fuel are also down. Wages have remained stagnant, so higher food and gas prices mean people have less money to spend on consumer goods. The bubble in commodities, say the deflationists, has been triggered by the fear of inflation. Commodities are considered a safe haven, attracting a flood of “hot money”...