S&P Downgrades Were Premature: The Role Of Credit-Rating Agencies [View article]
So you argue that France should be on the same level as Germany in terms of credit rating? I'm not sure you know precisely what a credit rating is. Just to make sure, a credit rating is an ability of a creditor to pay in full on it's obligation. And if you are making a case that an indebted nation with huge current account deficits should be on a scale with a nation with a current account surplus and timid debt to GDP ratio - you are sadly mistaken, sir.
I'm not sure where you are going with the following article, but S&P had every right to downgrade those nations. And keeping German rating at AAA is not only prudent, but a fair assesement of the credit worthiness of a nation.
Why American Express Is A Better Buy Than Visa Or Mastercard [View article]
Dear author,
I tend to disagree with your financial metrics that constitute your comparison analysis.
I will try to make this short and sweet. First off, lower P/E does not necessarily suggest the stock is cheaper to it's peers. It may just suggest that the investors are not willing to pay more dollars for a single dollar of earnings. That is what P/E ratio is how much dollars you are willing to spend for a single dollar of earnings. There may be plenty of reason for that, but let's just take your reason credit risk and slowing growth of the business model.
This brings me to another point, you should be looking at the PEG to determine if the stock is cheaper to the peers. Obviously, you have to look at beta (personally I prefer adjusted beta, but this is besides point) to gauge for risk.
Lastly, I would use P/B ratio for Amex as it resembles a financial institution with it's interest earned. As you should know financial companies are generally gauged by P/B values and not P/E for fair evaluation.
I completely agree with the dollar weakness part. However, the European Union possesses its own underlying problems. Weak growth, lack of interest rate hikes, and PIIGS + France. So despite the fact that the United States dollar is likely to lose value, the gains in the euro will be capped. Furthermore, I believe volatility will drop as risk appetite resurges, therefore, my analysis points me to 1.47 threshold.
Needless to say, the EUR/USD currency pair can range significantly, going over the proposed mark. Yet, by the year end, my rationale brings me to the figure.
Thank you for shamelessly promoting your company - or whatever, blog. However, this article was ment for EUR/USD - FXE.
Strong buy on FXY? Why? There is hardly any volatility. The Japanese authorities can intervene into the market place at any time, to depress the currency. The government is providing more liquidity....QE. So why is it a strong buy?
How the U.S. Dollar Will React to a Government Default [View article]
Sebastian,
I am going to be brief in some of the responses, although I did enjoy some of your statements.
Regarding the diminishing returns of QE3. I do agree on yourpremise, but I will play devils advocate. The fed was using the returns provided by the equities as one of the gems during the recovery. (granted those returns evaporated, and using that as a proclamation of better times is absurd). Nonetheless, I will reiterate that perception is the key. By perceiving to the public that stocks are growing, the Fed attempted to create confidence, not only among the general public but throughout the corporate world.
As basic as financial behavior might be, people want optimism. So if the stocks rebound 50 odd %, optimism returns, and with that spending. If my IRA is back where it was prior to 2008-2009 bloodbath, I am a happy camper. There I go, buying again may be not at the same rate, but I am not saving every penny that there is. In tun, Fed hoped with resurgence of stock market, and some confidence back on the table, spending will increase - which it had for a while. Unfortunately, jobs did not return at a pace anticipated as corporations instead of ramping up spending sat on top of the cash. Well, that did not pan out as Fed anticipated, holting the progress of the recovery.
Taking all the models that are used for forecasting economic performance, can be thrown away. Heck, the Fed never did QE before (here obviously I defend the Fed), and the reaction can never be completely identified if past historical data is nearly obsolete with changing conditions.
Needless to say, QE did not work as we expected. It didn't for Japan, and is not doing to well for us. But doing something is what counts, may be not in aspect that - you should have known better, but in aspect we tried this, it didn't work, I don't think we should do that again and find something else. Personally, I wouldn't mind if they would attempt to do QE3 to promp up equities, may be the economy, and certainly gold. But, who am I to conduct any type of monetary policy. I merely react to what happens in the global financial market.
Comment as appropriate, thanks for insightful responses.
Currency War: Intervention in the Air [View article]
Ben,
I do agrre with roughly 90 percent of your rationale. I do disagree on the United States although. The economy will remain in control of the market force at least up until 2050, may be even longer.
China is a different story. I think they have one huge bubble upcoming in the housing sector, and quite possibly municipal debt. Half of the economic figures released are smokes and mirrors, in China. Yes, I do not doubt the robust growth that they have right now. Yet, how many bridgets, roads to no where, and tunnels can you build in order to keep up the growth?
But Japan, absolutely needs a Asian-Pacific currency. PIIGS will be PIIGS until they change their economies.
Currency War: Intervention in the Air [View article]
Ben,
You do have a valuable point, yet it is strategy in the end. Who wins with all of the peripheral problems? Germany. Despite the fact the fact that they have to slightly increase taxes to help out less fiscally conservative nations, Germany actually wins in the end. How, you may ponder. Well, if for argument sake PIIGS leave the Euro, it will destroy the current currency. If the following occurs, German Mark will be high in value. In turn, German products will not going to be as competitive in a global market place.
Germany economy has been performing at full cylinders since the inception of the Euro as they may able to sell to other nations at depresses currency prices. Any divination where currency rises tremendously, will negatively impact German economy not on a short term frame, but on a long run.
Mentioning the following facts, require Germany among other northern European nations to keep the Union intact. Pay a small price, to be more successful in the end. Not a bad idea in my humble opinion. Remember German unification in 80's, well western Germany paid a small price for a decade to be where it is right now.
Keeping a depressed currency helps out, to industrialized nations with solid products that the world requires. A country based upon grapes and tourism, on the other hand is completely different.
How the U.S. Dollar Will React to a Government Default [View article]
By the way 10-YR Treasury Yield as at low of the year, in the time of my writting. So, funds flow to Treasuries in risk aversion mentality. Correlation is always upheld, and continues to be so.
How the U.S. Dollar Will React to a Government Default [View article]
Sebastian,
"A downgrade in the credit rating will drive up long-term interest rates." Precisely, allowing the United States Dollar to appreciate in the process. The United States is still the biggest economy in the world as well as military superpower. In turn, this is the most risk free asset that you may find. Remember when Japan got downgraded to AA from AAA, funds still came into the Japanese economy since it was the second largest economy in the world. When risk aversion happens, funds hide in the Treasuries. Simple as that.
Peripheral Nations Are Making the Euro Pay Its Dues [View article]
Yes, a lot of market participants are making this claim. I think it is prudent to watch if ECB/EU venture will be able to resolve contagion effect. But I do agree, if Italy falters, Spain is next, and there is not enough funds to bail them out. Granted EU Project may come under plenty of scrutiny.
Greece May Be the Achilles' Heel of EU [View article]
Personally, I think EU would be better off without it. However, it helps Germany to export to a nation with the same currency. But a combination of France, Germany, Netherlands, and possibly Belgium would be a better combination.
Can VIX Educate Us About the Dollar? [View article]
I absolutely agree, but in general risk aversion flows go towards the currenices with the lowest interest rates and historically safe haven statuses. Swiss Franc and Japanese Yen are attuned to that definition. Unfortunately, during this past rally the United States Dollar deviated away from risk aversion status. Hence, I wrote the article about this discrepency.
Can VIX Educate Us About the Dollar? [View article]
Jeff,
You are half way right. Historically, Gold and Silver are risk aversion vehicles. Interestingly enough they are also safe haven's during rapid inflation around the globe.
However oil, copper, coal, etc, etc are not historically safe havens.
S&P Downgrades Were Premature: The Role Of Credit-Rating Agencies [View article]
I'm not sure where you are going with the following article, but S&P had every right to downgrade those nations. And keeping German rating at AAA is not only prudent, but a fair assesement of the credit worthiness of a nation.
Why American Express Is A Better Buy Than Visa Or Mastercard [View article]
I tend to disagree with your financial metrics that constitute your comparison analysis.
I will try to make this short and sweet. First off, lower P/E does not necessarily suggest the stock is cheaper to it's peers. It may just suggest that the investors are not willing to pay more dollars for a single dollar of earnings. That is what P/E ratio is how much dollars you are willing to spend for a single dollar of earnings. There may be plenty of reason for that, but let's just take your reason credit risk and slowing growth of the business model.
This brings me to another point, you should be looking at the PEG to determine if the stock is cheaper to the peers. Obviously, you have to look at beta (personally I prefer adjusted beta, but this is besides point) to gauge for risk.
Lastly, I would use P/B ratio for Amex as it resembles a financial institution with it's interest earned. As you should know financial companies are generally gauged by P/B values and not P/E for fair evaluation.
Just my two cents.
Broad U.S. Dollar Weakness Ahead [View article]
I completely agree with the dollar weakness part. However, the European Union possesses its own underlying problems. Weak growth, lack of interest rate hikes, and PIIGS + France. So despite the fact that the United States dollar is likely to lose value, the gains in the euro will be capped. Furthermore, I believe volatility will drop as risk appetite resurges, therefore, my analysis points me to 1.47 threshold.
Needless to say, the EUR/USD currency pair can range significantly, going over the proposed mark. Yet, by the year end, my rationale brings me to the figure.
Thanks for your input.
Broad U.S. Dollar Weakness Ahead [View article]
Thank you for shamelessly promoting your company - or whatever, blog. However, this article was ment for EUR/USD - FXE.
Strong buy on FXY? Why? There is hardly any volatility. The Japanese authorities can intervene into the market place at any time, to depress the currency. The government is providing more liquidity....QE. So why is it a strong buy?
Swiss Franc Intervention by the SNB May Come Soon [View article]
Precisely.
How the U.S. Dollar Will React to a Government Default [View article]
I am going to be brief in some of the responses, although I did enjoy some of your statements.
Regarding the diminishing returns of QE3. I do agree on yourpremise, but I will play devils advocate. The fed was using the returns provided by the equities as one of the gems during the recovery. (granted those returns evaporated, and using that as a proclamation of better times is absurd). Nonetheless, I will reiterate that perception is the key. By perceiving to the public that stocks are growing, the Fed attempted to create confidence, not only among the general public but throughout the corporate world.
As basic as financial behavior might be, people want optimism. So if the stocks rebound 50 odd %, optimism returns, and with that spending. If my IRA is back where it was prior to 2008-2009 bloodbath, I am a happy camper. There I go, buying again may be not at the same rate, but I am not saving every penny that there is. In tun, Fed hoped with resurgence of stock market, and some confidence back on the table, spending will increase - which it had for a while. Unfortunately, jobs did not return at a pace anticipated as corporations instead of ramping up spending sat on top of the cash. Well, that did not pan out as Fed anticipated, holting the progress of the recovery.
Taking all the models that are used for forecasting economic performance, can be thrown away. Heck, the Fed never did QE before (here obviously I defend the Fed), and the reaction can never be completely identified if past historical data is nearly obsolete with changing conditions.
Needless to say, QE did not work as we expected. It didn't for Japan, and is not doing to well for us. But doing something is what counts, may be not in aspect that - you should have known better, but in aspect we tried this, it didn't work, I don't think we should do that again and find something else. Personally, I wouldn't mind if they would attempt to do QE3 to promp up equities, may be the economy, and certainly gold. But, who am I to conduct any type of monetary policy. I merely react to what happens in the global financial market.
Comment as appropriate, thanks for insightful responses.
Currency War: Intervention in the Air [View article]
I do agrre with roughly 90 percent of your rationale. I do disagree on the United States although. The economy will remain in control of the market force at least up until 2050, may be even longer.
China is a different story. I think they have one huge bubble upcoming in the housing sector, and quite possibly municipal debt. Half of the economic figures released are smokes and mirrors, in China. Yes, I do not doubt the robust growth that they have right now. Yet, how many bridgets, roads to no where, and tunnels can you build in order to keep up the growth?
But Japan, absolutely needs a Asian-Pacific currency. PIIGS will be PIIGS until they change their economies.
Good Comments though, thank for the input.
Currency War: Intervention in the Air [View article]
You do have a valuable point, yet it is strategy in the end. Who wins with all of the peripheral problems? Germany. Despite the fact the fact that they have to slightly increase taxes to help out less fiscally conservative nations, Germany actually wins in the end. How, you may ponder. Well, if for argument sake PIIGS leave the Euro, it will destroy the current currency. If the following occurs, German Mark will be high in value. In turn, German products will not going to be as competitive in a global market place.
Germany economy has been performing at full cylinders since the inception of the Euro as they may able to sell to other nations at depresses currency prices. Any divination where currency rises tremendously, will negatively impact German economy not on a short term frame, but on a long run.
Mentioning the following facts, require Germany among other northern European nations to keep the Union intact. Pay a small price, to be more successful in the end. Not a bad idea in my humble opinion. Remember German unification in 80's, well western Germany paid a small price for a decade to be where it is right now.
Keeping a depressed currency helps out, to industrialized nations with solid products that the world requires. A country based upon grapes and tourism, on the other hand is completely different.
How the U.S. Dollar Will React to a Government Default [View article]
How the U.S. Dollar Will React to a Government Default [View article]
"A downgrade in the credit rating will drive up long-term interest rates." Precisely, allowing the United States Dollar to appreciate in the process. The United States is still the biggest economy in the world as well as military superpower. In turn, this is the most risk free asset that you may find. Remember when Japan got downgraded to AA from AAA, funds still came into the Japanese economy since it was the second largest economy in the world. When risk aversion happens, funds hide in the Treasuries. Simple as that.
PS US gov will not default.
Peripheral Nations Are Making the Euro Pay Its Dues [View article]
Peripheral Nations Are Making the Euro Pay Its Dues [View article]
Greece May Be the Achilles' Heel of EU [View article]
Can VIX Educate Us About the Dollar? [View article]
Can VIX Educate Us About the Dollar? [View article]
You are half way right. Historically, Gold and Silver are risk aversion vehicles. Interestingly enough they are also safe haven's during rapid inflation around the globe.
However oil, copper, coal, etc, etc are not historically safe havens.