Posts Tagged ‘china’
The U.S. dollar is still regarded as the reserve currency of the world. The majority of international transactions are settled in U.S. dollars and most central banks around the word hold it in their foreign exchange reserves.
But since the Credit Crisis of 2008, and the multi-trillion-dollar printing program by the Federal Reserve, the supremacy of the U.S. dollar as the “world’s currency” has been challenged.
The BRICS countries (Brazil, Russia, India, China, and South Africa) have agreed on starting a new development bank that will compete with the International Monetary Fund (IMF) and the World Bank. (Source: Washington Times, August 5, 2014.) Both the IMF and World Bank are “U.S. dollar”-based.
Since the year 2000, the U.S. dollar composed about 56% of all reserves at central banks. But after the Credit Crisis, that percentage started to decline. In 2013, the greenback made up only 32.43% of all foreign exchange reserves at foreign central banks. (Source: International Monetary Fund COFER data, last accessed August 11, 2014.)
Yes, the $3.5 trillion in new money the Federal Reserve has created out of thin air has made other central banks nervous about holding U.S. dollars in their vaults. After all, if you were a foreign central bank with U.S. dollars as your reserve currency, how good would you feel to know the U.S. just printed more dollars as it needed them without any backing of gold?
But it’s not just the money printing. It’s the massive debt the U.S. government has accumulated…currently at $17.6 trillion and soon to be $20.0 trillion.
In the short-run, the U.S. dollar is still considered a safe … Read More
The Chinese economy is showing signs of stalling, but there are numerous areas that continue to show decent growth metrics, including automobiles and mobile phones.
Now, if you think AT&T Inc. (NYSE/T) or Verizon Communications Inc. (NYSE/VZ) are big, take a look at China Mobile Limited (NYSE/CHL). China Mobile is the largest mobile phone operator in China, with about 790 million subscribers as of June 30—that’s more than the entire population of Europe! The company’s growth is even expected to expand as 3G and 4G networks grow in popularity.
You cannot ignore the fact that China is the top mobile market in the world with more than one billion users. Plus, you not only have the urban dwellers using these services, but we are seeing massive demand in the rural areas as well, especially when rural workers migrate to the cities, looking for jobs.
And with the mobile sector in the country being heavily regulated by the Chinese government as far as licenses and the landscape, there are currently only three major mobile operators in the country.
What’s most intriguing is the development of advanced mobile technologies. China Mobile only introduced its 4G network six months ago and already it has coverage in 300 cities and approximately 6.5 million users.
China is a key global growth market for Apple Inc. (NASDAQ/AAPL), too, which is searching for growth in the emerging markets. Apple’s deal with China Mobile will definitely help.
China Mobile is regarded as the top brand in BusinessWeek’s “20 Best China Brands.” The stock pays an annual dividend of $1.88, for a current dividend yield of 3.8% … Read More
Good numbers are one thing, but stocks did go up in advance of what’s turning out to be a fairly decent earnings season.
It’s not unreasonable at all to expect the market to take a solid break, perhaps for the next two to three months. Of course, predicting corrections and/or consolidations among stocks is a difficult endeavor in an era of extreme monetary stimulus. The Federal Reserve is slowly chipping it away, but it remains very committed to helping capital markets, especially as the economic data continues to be pretty soft.
Stocks are still looking stretched and this market is tired. A 10% to 20% correction would be a healthy development for the longer-run trend. Stocks need a catalyst for this to happen. It could come out of nowhere, and I’m reluctant to be a buyer with so many positions trading at record-highs.
Johnson Controls, Inc. (JCI), a large U.S. auto parts manufacturer, had a modestly positive third fiscal quarter with sales growing three percent to $10.8 billion due to more sales in China.
The company had some one-time restructuring charges during the quarter. Earnings per share from continuing operations (excluding restructuring and one-time items) grew a hefty 17% to $0.84. Management confirmed its full-year guidance, which pleased the Street, but the position is breaking down a bit.
E. I. du Pont de Nemours and Company’s (DD) numbers were uninspiring and the company tried to keep investors interested with a four-percent increase to its quarterly dividend. The position’s starting to roll over and with agriculture being such an important part of the company’s business, changing preferences among farmers hurt its … Read More
The tally as of this morning:
The stock market is up 2.4% so far in 2014 as measured by the Dow Jones Industrial Average, while gold bullion is up 8.1% for the year.
“As an investor, do I get into gold or stocks at this point in the year?”
Well, if you’ve been reading my articles for a while, you know I’m not a fan of stocks right now. I simply believe the stock market has become a Federal Reserve–induced bubble.
And while there has been a lot written about price manipulation in the gold market, and while mighty Goldman Sachs still says the metal is headed lower in price, investors should look at gold bullion right now…that’s both old gold investors (so they can average down their cost) and new gold investors taking their first position.
Here are my reasons why…
In 2013, the Indian central bank and government imposed tariffs and restrictions on the importation of gold bullion into India, as they believed the demand for gold bullion in the country was hurting its national accounts. In the first quarter of this year, India started to ease its gold importation restrictions, and bang, last month, gold bullion imports into the country increased by 65% over June of last year. (Source: Bloomberg, July 16, 2014.) Demand for gold bullion in China, which I’ve documented in these pages, is also very strong.
Inflation, what gold bullion acts as a hedge against, is starting to gain momentum. The Producer Price Index (which tracks changes in the prices producers pay) increased by 0.4% in June from the previous month; that’s an annualized … Read More
A few years ago, investors couldn’t get enough of Chinese stocks. This led to numerous frauds committed by crooks in China that has since tarnished the reputation and reliability of all Chinese companies, whether they’re legitimate or not, despite their operating in one of the top growth areas in the world.
While I’m not focused on Chinese stocks at this moment due to better trading opportunities in the domestic stock market, I monitor the country and remain convinced it’s still a key place to have some risk capital invested in. When the broader market understands this, I would expect renewed buying in Chinese stocks sometime in the future.
My view is that the country’s current leadership under President Xi Jinping, who assumed power in March 2013, has a vision to create a country of consumers, just like the United States; albeit, I doubt it will come close to what we see here with consumer spending driving 70% of gross domestic product (GDP) growth. In China, consumer spending drives about 30% of GDP so there’s work to do. In the second quarter, retail sales continued at a double-digit growth of 12.4% year-over-year.
The objective to cut the country’s dependence on exports and foreign investment makes sense. With a potential market in excess of one billion people, it’s the right move.
China may not be in the spotlight for investors now, but you cannot ignore the country. With the recent years of underperformance, I see great longer-term upside in Chinese stocks.
The Chinese economy is growing at well below the double-digit growth of the past, but comparatively, the growth is far superior … Read More
One of the best things you can do to learn about the stock market is to read the prospectus of a company that’s either about to list or recently went public.
It’s a learning experience that, in many cases, can reveal how expensive it is to actually become a publicly traded corporation (i.e. Wall Street’s cut) and that each listing is its own unique security, becoming part of a secondary market after the founders cash out.
GoPro, Inc. (GPRO) out of San Mateo, California recently completed its initial public offering (IPO), selling 17.8 million Class A common shares at $24.00 a share—or 20,475,000 shares if the dealer option is fully exercised.
What wasn’t in the headlines is that 8.9 million of those Class A shares were sold by insiders. And there are also Class B common shares. One share of Class A common stock is entitled to one shareholder vote, but Class B shareholders are entitled to 10 votes per share.
So after its IPO, according to the company’s prospectus, GoPro insiders or selling shareholders will have earned proceeds after underwriter fees of $200,784,000.
The company’s executive officers, directors, and related entities still hold about 73% of total shareholder voting power.
The stock had a great debut and the company is no doubt a growth story. But as an individual investor, your ownership of GoPro shares (if you could get any) in their IPO form is mostly an exercise in the willingness of the marketplace to attribute value to an enterprise not giving up operational control.
This is not uncommon in new listings, and it’s why it’s so informative to … Read More
The great monetary expansion is still alive and well and the effect on equity securities continues to be profound.
But what I find striking about the stock market’s continued advancement is that it’s blue chips that are pushing through to new record highs.
Speculative fervor in several sectors has diminished, but hasn’t completely disappeared. But it’s the big brand-name companies—a lot of which pay dividends—that just keep on trucking as institutional investors buy earnings safety and outlook reliability, and are betting on revenue and earnings acceleration going into 2015.
Union Pacific Corporation (UNP), a benchmark railroad stock, just hit another new record high on the stock market, breaking through the $100.00-per-share level. It was $35.00 a share this time in 2010.
And this from an old-economy, industrial enterprise that is probably not on many investors’ wish lists.
Amazon.com, Inc. (AMZN) broke down considerably at the beginning of the year when it was trading around $400.00 a share. It recently broke $300.00 a share, but has bounced back significantly and the position looks to be fighting hard.
And this is one of the speculative stocks on which investors booked their profits. This stock is on the comeback trail and so are Cisco Systems, Inc. (CSCO), The Priceline Group Inc. (PCLN), Oracle Corporation (ORCL), Apple Inc. (AAPL), and Google Inc. (GOOG).
The stock market has been digesting continued mediocrity in domestic economic data and slightly more positive numbers from China. Institutional investors are buying. I think that, in the absence of some kind of shock or new catalyst, the stock market can slowly keep grinding higher. It could very well turn … Read More
If you cannot get through the day without that cup of coffee, you may need to prepare to spend a little more to get it.
Coffee prices have been surging, up more than 30% year-over-year. The cost to have that morning cup of java has edged higher, but not at the same rate as the cash price of coffee.
The coffee industry is a multibillion-dollar industry in the United States and is a competitive marketplace, but at the top of the coffee heap is Starbucks Corporation (NASDAQ/SBUX), which has developed into an iconic brand both domestically and worldwide. In Asia, Europe, and Latin America, no matter where you are, it seems there’s a Starbucks near you. In China, the brand is rapidly growing, and the company plans to expand in this region with thousands of outlets.
Starbucks has also expanded into providing more menu alternatives and is involved in the tea market via its acquisition of the Teavana chain. The company is also marketing juices and operates a small chain of hamburger outlets in California.
For long-term investors, you cannot go wrong with Starbucks, which could serve as a good core holding in your portfolio.
Chart courtesy of www.StockCharts.com
However, in the traditional coffee and donut market, the top player at this time is the “Dunkin Donuts” chain, operated by Dunkin Brands Group, Inc. (NASDAQ/DNKN). The company also operates the “Baskin-Robbins” ice cream chain. Unlike Starbucks, Dunkin is primarily a U.S. brand that doesn’t have much recognition outside American borders; albeit, the company is looking to expand to the United Kingdom via the planned opening of 50 outlets in Greater … Read More
Yesterday was an amazing day for the markets.
Gold bullion hit a three-month low despite: 1) inflation rising rapidly in North America; and 2) the Chinese buying half of this year’s world gold production.
The stock market was up to a new high despite: 1) corporate insiders selling like mad; 2) corporate earnings growth collapsing; 3) the amount of money investors have borrowed to buy stocks standing at a record high; and 4) the economy stinking.
In the words of Robert Appel, my esteemed colleague, the following best describes what is happening with the markets:
“Time to take those ruby slippers out of the closet because we are definitely on our way to the ‘Wizard of Oz’ show once again. There is a view that the government and its ‘special contractor’ (the Fed) have things under control and we are now at the beginning of the biggest stock bull in history. We don’t buy that theory for a minute but we do acknowledge it exists.
“Those opposing this view—an ever-declining number—suggest that if inflation were defined as it was when the greatest economic minds of our age were still alive—the U.S. economy would be in big trouble. The recent corporate earnings wipeout in the retail sector was one of the most under-reported financial stories of the year.
“Interestingly (this is too bizarre to make up) the only major upside surprise in the retail sector in respect to first quarter earnings reports was Tiffany’s…where they can barely keep up with demand. No surprise for our readers as the ‘gap’ between rich and poor under QE [quantitative easing] has only intensified. QE … Read More
The global airline sector is probably at its brightest point in history, having seen a significant improvement following the effects of 9/11 that nearly killed the industry.
The factor that’s pushing up the airline sector has been the renewal in the global economy, particularly the massive buildup of newfound wealth in the emerging markets in Asia, Latin America, and Eastern Europe. The growth is especially strong in Asia, as China continues to develop a significant middle class and consumer generation who want to spend and travel both domestically and internationally.
Future prospects look bright for the airline sector and are on target for higher profits for the second straight year, based on research by the International Air Transport Association (IATA). North America is estimated to retain its top spot in the airline sector, but the Asia-Pacific region is a fast-growing second. (Source: “Industry on Track for Second Year of Improving Profits – Rising Fuel Costs Largely Offset by Increased Demand,” International Air Transport Association web site, March 12, 2014.)
China is estimated to require 5,000 new planes over the next two decades. The key plane makers fulfilling the need will be The Boeing Company (NYSE/BA) and Embraer S.A. (NYSE/ERJ). Yet China is aggressively developing its own domestic plane for the airline sector called the “COMAC,” which is expected to launch its first regional airliner soon and has plans to deliver longer-range planes by 2018.
The S&P Aerospace & Defense ETF (NYSEArca/XAR) is near its highest levels in a year and is trading in an upwards channel, based on my technical analysis of the chart below.
Chart courtesy of www.StockCharts.com
While … Read More
The Chinese economy had been growing at about 10% a year, like clockwork, for years. Now, China is in the midst of an economic slowdown, with growth expected to come in this year at 30%–50% below China’s five-year average growth rate.
Why is China’s economy growing so slowly, and why does it matter to us here in North America?
Manufacturing, the key component of China’s economy, is quickly slowing. The HSBC Chinese Purchasing Managers’ Index (PMI) declined for the sixth consecutive month in April, registering at 48.1. Remember that any reading below 50 for the PMI suggests an outright contraction in the manufacturing sector. (Source: Markit, May 5, 2014.)
Japan isn’t faring any better; the third-biggest hub in the global economy is facing its own economic slowdown. The government and Japan’s central bank are trying to boost the economy by printing more and more money, but they are failing miserably. Japan’s gross domestic product (GDP) growth has been abysmal for years.
Germany is the only country in the eurozone showing some resilience. Other eurozone countries, like France, Italy, and Spain, are also facing an economic slowdown. Bad debt, tight lending requirements, and high unemployment remain the biggest problems in the common currency region; so big, the European Central Bank (ECB) wants to take the same course as the Federal Reserve and the Bank of Japan and start printing more paper money.
In the U.S., we, too, have a soft economy. The first quarter of 2014 proved to be terrible for corporate profits growth. And if the rest of the world is in an economic slowdown, I don’t know how … Read More
Profit Confidential — IT'S FREE!
"A Golden Opportunity for Stock Market Investors"