Archive for the 'Economy' Category

20071105 Economy Supermodel Bundchen Joins Hedge Funds Dumping Dollars

Published by admin on November 5, 2007 in Economy. 0 Comments

I have been busy the last few weeks but I could not resist commenting on this headline.  Sorry (guys), the picture of Gisele did not copy.

20071105 Economy Supermodel Bundchen Joins Hedge Funds Dumping Dollars   OK, when the super models are demanding payment in any currency other than the US dollar, something is up. 

The US dollar is going down relative to other world currencies.  So, that is bad, Right?

  Bad:

  1. Costs of imported commodities are going up—think oil and other raw materials.
  2. US consumers will not be able to buy dirt cheap imports for a while.
  3. Imported electronics are going to cost more—or the earnings (stocks) of the foreign manufacturers will take a hit as they compete against US produced products.
  4. US real estate and assets (stocks, etc.) will be cheap for foreign investors to buy—if they want to take the currency exchange hit.
  5. Inflation is on the horizon.

  6. A worldwide recession is on the horizon.

 Good:  Immediate

  1. US goods from US manufacturers will be more competitive in the world and US markets. (Yea, more US jobs!)
  2. US debt will become cheaper to pay back. (Can you say, “subsidize the war?”)
  3. The rest of the world will have a harder time selling their goods to the largest consumer market in the world (the US consumer market) because of prices—the probability of a world wide recession is looking good while the US market and US stocks are looking better due to manufacturing and export market profits.)

 Good:  Potential

  1. As the worldwide economic boom slows down, so will consumption of commodities and therefore commodity prices will drop.  (Can we say lower oil prices?)
  2. Inflation is on the horizon.  (Nothing like a little inflation to boost the economy out of the real estate crash.)
  3. US Jobs will pay more and unemployment will go down (if possible).  (Yea, more US jobs!—but I repeat myself.) 
  1. Real estate will look cheap to foreign investors.  (Prices are going up.

 

If this scenario works out, then it might make sense to invest in rental properties in blue collar areas near new, efficient manufacturing plants that make export and high tech products.  Can we say Ohio and Michigan?  How about cities with 100,000 populations with new manufacturing plants?

 

As oil prices come down, the OPEC countries might show some restraint with the arab terrorists with respect to bombing the consuming countries because it will reduce oil consumption even further.  (Who knows the minds of the crazies?)

 

China might have some difficulty in handling a down turn in their economy.  Capitalistic societies are geared for the inevitable market cycles.  Communist, socialist and other controlled societies that play with capitalism always have difficulties in handling downturns.  The leaders never seem to experience any hardship while the peons go without.  That situation makes for unstable times.  As China struggles to develop a middle class to consume its production while exports to the US market slows, China’s growth will slow and possibly turn down.  Cashing out its US debt while the dollar is down would create further losses for the government and higher interest rates worldwide and in the US.

 

The US dollar will strengthen once more as the US economy comes out of its down real estate cycle.

As Michael Farber (gold and hard money investor from Hong Kong) says, the US will be a bad market in which to invest, but it will be better than any other world market.

As the wars in the Middle East wind down and the US economy is singing along, the Democratic messages of cutting and running in Iraq and more massive taxes (the Rangel/Clinton Tax Bill) might not look so good.  Of course, they will take credit for it all, anyway.  Go figure.

 

Meanwhile, save (make) cash and accumulate appreciating assets with a strong positive cash flow.

 

http://www.bloomberg.com/apps/news?pid=20601103&sid=aeNqAOY4dNJE&refer=news By Bo Nielsen and Adriana Brasileiro Nov. 5 (Bloomberg) — Gisele Bundchen wants to remain the world’s richest model and is insisting that she be paid in almost any currency but the U.S. dollar.

Like billionaire investors Warren Buffett and Bill Gross, the Brazilian supermodel, who Forbes magazine says earns more than anyone in her industry, is at the top of a growing list of rich people who have concluded that the currency can only depreciate because Americans led by President George W. Bush are living beyond their means.

Even after the dollar lost 34 percent since 2001, the biggest investors and most accurate forecasters say it will weaken further as home sales fall and the Federal Reserve cuts interest rates. The dollar plummeted to its lowest ever last week against the euro, Canadian dollar, Chinese yuan and the cheapest in 26 years against the British pound.

“We’ve told all of our clients that if you only had one idea, one investment, it would be to buy an investment in a non- dollar currency,” said Gross, the chief investment officer of Pacific Investment Management Co. in Newport Beach, California, and manager of the world’s biggest bond fund. “That should be on top of the list,” said Gross, whose firm is a unit of Munich- based insurer Allianz SE.

The dollar fell as much as 0.9 percent last week to $1.4528, the weakest since the euro started trading in 1999. It lost 2.8 percent against the Canadian dollar to 93.47 cents and 1.8 percent versus the pound to $2.09. The Fed’s U.S. Trade Weighted Major Currency Index measuring the dollar’s performance versus seven currencies, such as Japan’s, slid to a record low of 72.21.

Bundchen’s Demands

BNP Paribas chief currency strategist Hans-Guenter Redeker, the most accurate foreign-exchange forecaster last quarter in a Bloomberg survey, said the dollar may drop to $1.50 per euro by year-end. The median estimate of 42 strategists surveyed by Bloomberg is for the currency to end the year at $1.43. Among those surveyed last week, the forecast ranges from $1.42 to $1.50.

When Bundchen, 27, signed a contract in August to represent Pantene hair products for Cincinnati-based Procter & Gamble Co., she demanded payment in euros, according to Veja, Brazil’s biggest weekly magazine. She’ll also get euros for the deal she reached last October with Dolce & Gabbana SpA in Milan to promote the Italian designer’s new fragrance, The One, Veja reported. Bundchen earned $33 million in the year through June, Forbes reported in July.

“Contracts starting now are more attractive in euros because we don’t know what will happen to the dollar,” Patricia Bundchen, the model’s twin sister and manager in Brazil, said in a telephone interview in September from Sao Paulo. She declined to discuss details of the arrangements last week, as did Anne Nelson, Bundchen’s agent in New York at IMG Models.

Dollar Support

Procter & Gamble’s Sao Paulo-based external relations director for Brazil, Andre Quadra, said he couldn’t give details of the Pantene contract because of a confidentiality agreement.

Analysts in a Bloomberg survey expect the dollar to strengthen in coming months as stronger-than-forecast reports suggest U.S. consumers will keep the economy out of recession. Payrolls grew by 166,000 in October, double the median forecast of economists in a Bloomberg survey.

The dollar will rise to $1.43 per euro this year and $1.35 by the end of 2008, according to the median estimate in the survey.

“So far the data has shown the U.S. economy may not be slowing to the extent the majority of the market had expected,” said Omer Esiner, an analyst at currency-trading company Ruesch International Inc. in Washington who expects the U.S. currency to strengthen to as much as $1.38 per euro. “That could temper policy easing down the road and lend support for the dollar.”

`Moving to Asia‘

Buffett, whom Forbes in April ranked as the world’s third- richest person behind Bill Gates and Carlos Slim, told reporters in South Korea last month that he is bearish on the U.S. currency.

“We still are negative on the dollar relative to most major currencies, so we bought stocks in companies that earn their money in other currencies,” Buffett said Oct. 25. Buffett, 77, is chairman of Omaha, Nebraska-based Berkshire Hathaway Inc.

Jim Rogers, a former partner of investor George Soros, said last month he’s selling his house and all his possessions in the U.S. currency to buy China’s yuan.

“The dollar is collapsing,” Rogers said last week in an interview. “I’m moving to Asia because moving to Asia now is like moving to New York in 1907 or London in 1807. It’s the wave of the future.”

Better Returns

The dollar is falling as investors seek better returns outside the U.S. Developing Asian nations including China and India will grow 9.8 percent this year, compared with 1.9 percent for the U.S., the International Monetary Fund said last month.

China, India and Russia accounted for half the global expansion over the past year, and the euro region will expand 2.5 percent in 2007, outpacing the U.S. for the first time since 2001, the Washington-based IMF estimates.

“The world has learned to live with a weak dollar,” said Jay Bryson, a former Fed analyst who is now a global economist in Charlotte, North Carolina, at Wachovia Corp., the fourth-largest U.S. bank. “It’s not worried. it doesn’t rely on the U.S. as much as it once did.”

Bryson forecasts the dollar will weaken to $1.50 per euro by the end of June.

The U.S. currency dropped in the past two months as the Fed cut its target rate for overnight loans between banks twice to keep a decline in home sales from starting a recession. The rate was reduced by three quarters of a percentage point to 4.5 percent, including a quarter-point last week. The National Association of Realtors trade group in Washington said on Oct. 10 that existing home sales may fall 11 percent this year.

Housing Recession

Lower rates have made yields on U.S. debt less attractive. U.S. two-year Treasuries yield 0.26 percentage point less than German government bonds of similar maturity. The last time Treasuries yielded less than bunds was 2004.

The weaker currency has cushioned the U.S. economy during the worst housing recession in 16 years. Gross domestic product grew at an annual rate of 3.9 percent in the third quarter, the most in more than a year, the Commerce Department said Oct. 31 in Washington.

The five-year, 67 percent drop against the Canadian dollar has made it cheaper for fans from Toronto to drive the 110 miles (177 kilometers) to Orchard Park, New York, to watch the Buffalo Bills play football.

Canada Day

Canadians account for 11 percent of the team’s season tickets this year, up from 6.5 percent in 2005, according to Scott Berchtold, the Bills’ vice president of communications. At yesterday’s annual Canada Day game, a record 23 percent of the sellout crowd of 73,967 fans were from Canada, he estimated.

“When the Canadian dollar was down around 65 cents, we didn’t get anybody,” Ralph Wilson Jr., the team’s owner, said in an interview. “When the dollar fell, we starting getting some people.” The Canadian dollar bought 61.76 U.S. cents in 2002.

The dollar’s drop also makes American goods cheaper abroad. U.S. exports were a record $138.2 billion in August, government data show. Net exports added 0.93 percentage point to U.S. gross domestic product last quarter, offsetting a 1.05 percentage point drag from housing, government data show.

“As long as the dollar’s decline doesn’t trigger inflation, it’s a good thing, helping the U.S. economy to stay out of recession,” said Robert Mundell, a professor at Columbia University in New York who won the Nobel Prize for economics in 1999.

Wealthy Clients

The Commerce Department’s price index for personal consumption expenditures excluding food and energy rose 1.8 percent in September from a year earlier, the same as in August. The Fed forecasts the index will increase 1.75 percent to 2 percent next year.

Wealthy clients at San Francisco-based Union Bank of California have doubled their deposits in foreign currencies to $60 million the past two months as a hedge against a decline, said Bradley Shairson, head of currency and derivatives at the bank.

U.S. investors bought $198 billion in foreign securities this year through August, 72 percent more than in the same period last year, Treasury Department data show.

That’s the same strategy as sovereign wealth funds run by the largest exporters and oil producers, including China, Singapore and Qatar, said Stephen Jen, head of currency research at New York-based Morgan Stanley.

The funds may grow to $17.5 trillion by 2017 from $2.5 trillion now and shift more than $500 billion out of the dollar in the next three years in search of better returns, he said.

“We’re all thinking about diversifying out of the dollar,” said Jen, who is based in London. “It’s a very logical thing.”

To contact the reporter on this story: Bo Nielsen in New York at Bnielsen4@bloomberg.net ; Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net

Last Updated: November 5, 2007 00:41 EST

US Economy Job Growth Accelerates in September

Published by admin on October 11, 2007 in Economy. 0 Comments

20071005 US Economy Job Growth Accelerates in September (Update4)  Initial reports on employment are like weather reports—they are so wrong so often, you wonder why anybody even listens to them. The bottom line:   The

US economy (outside of real estate) is doing better than we had hoped—and it’s getting better.

The Fed rate cut was the right amount at the right time.There is still a lot of blood-letting necessary to deflate the real estate bubble. Along those lines, I have reviewed several situations in which investors have bought large numbers of properties in previously “hot” markets.  Now they are desperate for help because their properties are vacant and underwater.  They owe more than the properties are currently worth—in some instances their potential net losses are more than they have taken out in borrowed “profits”. Unfortunately, if they can’t sell it, rent for payments or afford the negative cash flow, the prices of their properties are in free fall.  How much can they pay to stop the pain?  And can we find someone else who can step up and make payments—even after a deep short sale?  We will find out…and so will thousands of investors and homeowners in similar situations as their property prices fall.  Ironically enough, property values are increasing daily, but who wants to hold onto properties that are falling 30-50% in price while they are still not cash flowing on a monthly basis?   It is still not time to buy on value alone if prices are falling so much with more to come.http://www.bloomberg.com/apps/news?pid=20601087&sid=a1eZDfCaMXto&refer=home By Joe RichterEnlarge Image/DetailsOct. 5 (Bloomberg) –

U.S. employment accelerated in September and revised figures for August showed an unexpected gain, easing recession concerns and making the Federal Reserve less likely to cut interest rates again. Payrolls grew by 110,000 after an 89,000 increase in the previous month, the Labor Department said today in

Washington. The change to the August figure wiped out what had been the first decline in four years, a drop that spurred predictions the six-year expansion would come to end amid the credit-market rout.

Treasury notes fell as traders speculated that the central bank, which reduced borrowing costs by half a point on Sept. 18, will resist lowering them at the next meeting. Analysts said more jobs and rising wages will help consumers weather falling home prices, sustaining the spending that accounts for more than two-thirds of the economy. “It certainly doesn’t look like an economy that’s losing momentum,” said John Ryding, chief U.S. economist at Bear Stearns Cos. in

New York. “The Fed will move to the sidelines or else it’ll become much more apparent that the Fed was cutting for financial stability reasons and not the real economy.” The yield on the benchmark 10-year Treasury note climbed 12 basis points to 4.64 percent at 4:28 p.m. in

New York. Futures traders put the chances of a reduction in October at 48 percent, down from 72 percent yesterday, based on prices at the Chicago Board of Trade. A basis point is 0.01 percentage point. The Standard & Poor’s 500 Index hit an all-time high. `Nimble’ Fed Speaking less than an hour after the figures were released, Fed Vice Chairman Donald Kohn said officials must be “nimble” in setting rates given the risks of both slower growth and faster inflation. Commodity prices had the biggest monthly gain in 32 years in September, with the Reuters/Jefferies CRB Index advancing 8.1 percent. Today’s report validates comments from Fed district bank presidents, who have consistently expressed skepticism about how much the economy has been hurt by the market turmoil of August. Richard Fisher, president of the Fed’s

Dallas branch, said yesterday that “things are healing.” St. Louis Fed President William Poole warned investors a week ago not to assume further rate cuts would be forthcoming. The job number “ eases fears that the economy will take a dramatic turn for the worse,” said Julia Coronado, senior U.S. economist at Barclays Capital Inc. in

New York. “That makes the Fed’s decision a closer call. A rate cut in October is by no means a foregone conclusion.” Impact of Revisions Revisions added 118,000 workers to payroll numbers previously reported for July and August. The jobless rate rose to 4.7 percent from 4.6 percent the previous month. “Now we find out that not only did we not lose jobs, but we gained almost 90,000” in August, said Jim Paulsen, chief investment strategist at Wells Capital Management in

Minneapolis. “This goes a long way to start putting the crisis in the rear-view mirror.” President George W. Bush praised the jobs numbers, saying that the revisions add up to 49 consecutive months of employment growth, the “most on record for our country.” In the six years since the last recession ended in November 2001, the economy has created 7.1 million jobs, compared with 12.5 million during the comparable period following the 1991 contraction. Most of the August adjustment came in government payrolls, which expanded by 57,000 during the month, reflecting hiring of teachers for the new school year. School Holidays Changes in the timing of school holidays during the summer probably made it difficult for the department to count the number of teachers added for the new school year, economists said. Government payrolls further expanded by 37,000 in September, today’s report showed. Employment at businesses rose by 73,000 in September after a 32,000 gain in August. Private payrolls increased 115,000 per month on average from January though July. “The labor market is bending, but not breaking,” said Michael Feroli, an economist at JPMorgan Chase & Co. in

New York. “You still have some pretty good wage growth, some pretty good income growth that should be good for consumer spending.” Service industries, which include banks, insurance companies, restaurants and retailers, added 143,000 workers last month after increasing 153,000 in August. Retailers shed 5,200 jobs after adding 8,700 in August. Factories Lose Jobs Factory payrolls dropped by 18,000 after decreasing 45,000 a month earlier. Economists had forecast a drop of 10,000 in manufacturing employment. Payrolls at builders declined by 14,000 after falling 22,000 a month earlier. Lennar Corp., the biggest

U.S. homebuilder, has cut 35 percent of its workforce and will eliminate more, Stuart Miller, chief executive of the Miami-based company, said in a statement Sept. 25. Lennar last month reported the biggest quarterly loss in its 53-year history. Firings at mortgage companies are also contributing to the slowdown in the labor market. Morgan Stanley, the second-biggest

U.S. securities firm, said this week it plans to cut 600 jobs after a decline in mortgage-related revenue led to lower third- quarter earnings than analysts estimated. “We may be headed for trouble as it is,” said Robert Dederick, president of RGD Economics in

Hinsdale, Illinois. “Remember, economists are saying there’s a 35 percent chance of a recession, which is about as far as they ever go until we’re actually in the recession.” `Act as Needed’ The Fed on Sept. 18 cut its benchmark interest rate by a half-percentage point to 4.75 percent, and said they would “act as needed” to promote stable inflation and economic growth.

Poole said that while he sees “tentative signs” that credit-market turmoil is easing, “financial fragility is obviously still an issue.” So far, income gains have helped prevent a collapse in consumer spending, and some companies are still adding workers as they expand. Wages gained 4.1 percent in September from a year earlier, the biggest increase since February. Workers’ average hourly earnings rose 7 cents, or 0.4 percent, after a 0.3 percent increase the previous month. Hours Worked Average weekly hours worked by production workers were unchanged at 33.8. Average weekly earnings rose to $593.87 last month from $591.50 the prior month. Boeing Co., the second-largest

U.S. defense contractor, won a $1.1 billion award to maintain the Air Force’s fleet of more than 200 KC-135 midair refueling tankers. Maintenance will alternate between Tinker Air Force Base in Oklahoma and Boeing facilities in

San Antonio where 200 new employees will be hired. The payrolls report included the government’s preliminary estimate for annual benchmark revisions. The Labor Department said payrolls for the 12 months ended in March 2007 will probably be revised lower by 297,000, the biggest downward revision since 2002. Currently, government figures show 1.94 million jobs were created during the 12 months ended March 2007. The final estimate will be issued in February. To contact the reporter on this story: Joe Richter in

Washington Jrichter1@bloomberg.net Last Updated: October 5, 2007 16:35 EDT 

Economy Greenspan Recession Risk Up OR NOT

Published by admin on October 11, 2007 in Economy. 0 Comments

20070917 Economy Greenspan Recession Risk Up OR NOT It is easier to always be right when you state both choices at the same time. 

Here is a video that reports that Greenspan says that US is not headed toward a recession.  http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=4127451&src=finance&ch=1316259  Here is an article about an interview on his new book where he is saying that the danger of recession is increasing. http://news.yahoo.com/s/nm/20070917/bs_nm/usa_greenspan_dc;_ylt=AsWY9elPeJXzBrd9OIVtCRKb.HQA  

Greenspan: Recession risk up

By Mark Felsenthal Mon Sep 17, 4:46 PM ET WASHINGTON (Reuters) - Former Federal Reserve chief Alan Greenspan said on Monday there is an increased risk of a recession but cautioned that the Fed must still be on guard for a rise in inflation. “Earlier in the year, I was talking about a one-third probability of a recession,” Greenspan told Reuters. “It’s come up somewhat, but it’s still at this stage somewhat less than 50 (percent).”He said the possibility of a large drop in house prices poses the biggest risk. A mild decline in home prices accompanied by a big pullback in construction that would help clear inventories would put the economy “in fairly good shape,” Greenspan said.“But if the whole thing festers, it will erode household balance sheets and eventually impact on what the critical support has been in this economy: consumer expenditures,” he said.The former Fed chairman spoke with Reuters and numerous other media outlets to publicize the release of his memoir, “The Age of Turbulence: Adventures in a

New World.”

The book, for which Greenspan was reportedly paid an $8 million advance, hit store shelves on Monday. It was the No. 1 seller on Web retailer Amazon.com. GLOBALIZATION TURNSIts release comes as the spotlight turns to Ben Bernanke, the former

Princeton

University professor who succeeded Greenspan on February 1, 2006, and who now faces the biggest test of his tenure.The Bernanke-led Fed — which has been criticized by some on Wall Street for a slow response as housing-related credit market stress mounted in August — is widely expected to lower interest rates on Tuesday to protect the economy.Greenspan said the Fed’s decision-making comes against a more complicated backdrop than he faced as chairman when rapid globalization was keeping inflation in check, allowing the central bank to cut interest rates aggressively when the

U.S. economy stumbled in 2001.“Disinflation is probably close to its peak now, and obviously as disinflation eases, inflation of necessity is picking up,” he said. “I don’t expect an inflation surge. I just think we’re bottoming out on the disinflationary pressures.”“It’s going to make monetary policy a lot more difficult than it was during most of the time when I was chairman.”Greenspan told Dutch newspaper NRC Handelsblad that inflation could rise to about 5 percent in Europe and the

United States over time.“The normal inflation level is closer to 5 percent than the current 2 percent,” he said, adding that a 5 percent level fitted economies with a “paper” currency not linked to gold.Greenspan said in the course of book-related interviews that he doubts he would be reacting differently in the current environment than Bernanke has.“I’m not sure I would have done anything different were I there,” he told CBS television’s “60 Minutes” program on Sunday. “I think he’s doing an excellent job.” THE MAESTRO TAKES THE STAGEThe reappearance in the public eye of the former central bank chair — who was lauded as a “Maestro” and a member of a select “Committee to Save the World” in books and magazines during his time at the Fed — comes as some reassess his legacy in light of the housing slump. Critics charge that the Fed’s decision to slash interest rates to a decades-low 1 percent and to hold them there for a year pumped up a housing bubble whose bursting has placed the economy at risk of recession. But Greenspan defended the long period of low rates as necessary to fend off the possibility of a deflationary spiral — in which falling prices foster further economic weakness. “In 2003 … we thought that the probability of a significant corrosive deflation was definitely less than 50-50, but consequences, were that minority problem to arise, were so potentially destabilizing that we took out in essence an insurance” policy, he told Reuters. Greenspan told cable news network CNBC that the Fed tried to raise mortgage rates in 2004 to temper a housing boom but was unsuccessful. Indeed, long-term rates set by markets actually moved lower in the early stages of a Fed tightening cycle that began in mid-2004. Greenspan also challenged another criticism leveled at him: the perception that he endorsed the very adjustable rate mortgages that have led to mounting foreclosures as interest rates have risen and home loans have reset at higher rates. The former Fed chair says he was saying that borrowers with good credit might save money with an adjustable rate if they were confident they would move before the mortgage reset. “I was discussing a very narrow set of circumstances,” he told Reuters “Indeed, the times I’ve taken out mortgages, I’ve taken out a fixed rate mortgage, because I think the insurance that you get, while the price may be high, is worth it.” (Additional reporting by Steven C. Johnson in

New York)