Roseman's Eruptions



MSCI EAFE vs. MSCI Emerging Markets

 

-Dugald Malcolm, Montreal, Canada

Banks Still Hoarding Cash, Money-Supply Contracts

Montreal, Canada

If you're looking for an indicator to confirm the legitimacy of the bond market rally since April, then look no further than money-supply data. The U.S. economy is stuck in a rut; if the trend in loan contraction continues, a recession or a double-dip is almost unavoidable.

According to The Wall Street Journal (June 24), U.S. banks continue to rein in lending.

Plunging Bond Yields Signal Danger in Mid-2010

Montreal, Canada

A milder replay of mid-2008 is underway across financial markets. Sovereign bond spreads in the weaker European peripherals are widening again and Treasury bonds are about to breach the important 3% yield level amid growing fears of a double-dip in U.S. housing.

The easy money has already been made. That’s the case now as it pertains to the 2009 global rally that saw just about everything and anything with a risk bias take-off.

Steel Prices Join Broader Decline in Commodities

Montreal, Canada

The list of commodity indicators turning bearish continues to grow since April. If these trends continue then it's a pretty sure thing that stocks and other risk based assets haven't seen their lows in this correction.

Over the past eight weeks copper, lumber, the Baltic Dry Index and steel prices have all rolled over suggesting the big rally in Treasury bonds (lower yields) is indeed justified as new fears of a double-dip economic recession emerge in the United States.

China Currency Drama is all Hype

Montreal, Canada

The Chinese decided to widen the trading band of the yuan on Saturday and everyone on the planet is excited about the move – including investment strategists scrambling to find ways to play a new bull market in Chinese domestic consumption and currency appreciation.

Bullish on a European Holiday in 2010

Montreal, Canada

Every summer I debate where to spend my holiday. I'm partial to Europe because of the fantastic food, wine, beaches and local culture, especially in the Mediterranean belt. I've spent numerous vacations in the Greek islands and Spain; this year I'm contemplating the Amalfi Coast in Italy. I'm incredibly fond of almost everything Italian – especially the food and Tuscan wine.

This year is special because for the first time since 2000 Europe will be far more affordable.

No Boom in Sight

Montreal, Canada

In the 1980s, Wendy's was all the rage in television advertising with a loveable senior citizen complaining about the lack of meat in restaurant hamburgers; the famous motto, "Where's the Beef" was a big hit.

The same is true about this economic recovery. Manufacturing has indeed rebounded strongly since the depths of the recession in late 2008, but that's not the case for other parts of the economy, which remain sidelined by weak domestic consumption, tepid employment growth and a struggling housing industry.

After the Crash: European Oil Majors on “Sale”

Montreal, Canada

The disastrous oil spill in the Gulf of Mexico has smashed out many large-cap oil stocks worldwide since May. Oil drillers have declined even harder.

EURIBOR Tension Mounting as Interbank Lending Rates Rise for 11th Straight Day

Montreal, Canada

Bank are under pressure across Europe again as interbank lending rates continue to rise, credit default swaps surge to protect against sovereign and bank default as Europe's largest banks resume cash hoarding.

Earlier this spring U.S. dollar LIBOR rates rallied to 0.54% from barely 0.30% several weeks earlier as overnight lending grew cautious prior to the EU-IMF announcement to bail out Greece.

Economy Dependent on Corporate Spending

Montreal, Canada

U.S. non-financial companies are sitting on almost $1 trillion dollars of cash in 2010 and continue to hoard liquidity at the fastest clip since records began in 1952. According to The Financial Times, U.S. non-financial companies boosted cash by 26% over the last 12 months through March – a record.

Unless big companies start spending, the ongoing recovery since March 2009 looks vulnerable because traditional sources of stimulus are exhausted in mid-2010.