Corporate America’s record cash building
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Gross Domestic Product by Industry Graph http://www.bea.gov/newsreleases/glance.htm
Gross Domestic Product (GDP) Graph
http://www.bea.gov/newsreleases/national/gdp/gdp_glance.htm
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U.S. Household Worth Declines by $149 Billion
http://www.bloomberg.com/news/2011-09-16/household-worth-in-u-s-fell-by-149-billion-in-second-quarter.html
Net worth for households and non-profit groups decreased by $149 billion, a 1 percent drop at an annual pace, to $58.5 trillion, theFederal Reserve said today in its flow of funds report from Washington. It rose at a 7.4 percent rate in the previous three months. Housing wealth decreased for a fourth consecutive quarter from April to June.
A loss of $947 billion in real estate assets over the past year was compounded by a drop in the Standard & Poor’s 500 Index last quarter, the first decline in a year. The erosion in wealth, which remains below pre-recession levels
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Gold Tops $1,880 in Longest Weekly Rally Since ’07 - Aug 19, 2011
http://www.bloomberg.com/news/2011-08-19/gold-climbs-to-record-set-for-best-weekly-run-since-2007-on-haven-demand.html
"Gold is the currency of the world at the moment, with the world convinced that the monetary and fiscal authorities are likely to do nothing right and everything wrong when it comes to resolving the world’s current fiscal problems ,” Dennis Gartman, the economist who correctly forecast 2008’s commodities slump, said in his daily Gartman Letter today.
".Medium term - the disorder of the global monetary system
and long-term -inflation threat will amplify gold’s nature as a currency and an inflation hedge,”
said Cai Hongyu, an analyst at China International Capital Corp., the country’s biggest investment bank.
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Treasury 30-Year Yields Poised for Biggest 5-Day Drop Since 2008
Treasuries have returned 2.2 percent since S&P lowered the U.S. credit rating for the first time on Aug. 5 and are up 3.3 percent this month, the most since December 2008, according to Bank of America Merrill Lynch’s Treasury Master Index. The firm’s Global Government Bond Index, which excludes the U.S., has increased 2.2 percent in August.
asr: Treasuries RETURN means, if you BUY Treasury futures , you can get that gain that is 3.3% in this month of AUGUST 2011 .
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APR = PeriodicRate x Periods in a Year
.04619 = 0.00353 x (365/28)
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APY = (1 + PeriodicRate)^(Periods in a Year) – 1
= 1.00353^(365/28) – 1 = .0472 = ~4.70% APY
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S&P 500 Payout Beats Bond Yield in 2008 Echo: Chart of the Day
Falling bond yields were primarily responsible for the latest crossover. The Treasury’s yield tumbled 89 basis points in 12 days as investors sought a haven from a stock-market rout. Each basis point amounts to 0.01 percentage point.
The decline ended with the 10-year yield at 2.11 percent two days ago, when it dropped below the S&P 500 dividend yield. The stock index yielded 2.32 percent. The relationship didn’t last, as the Treasury yield closed about 12 basis points higher yesterday.
“This may be more of a short-term event than in 2008,” Kevin Pleines, an analyst at Birinyi Associates in Westport, Connecticut, said yesterday in an interview. “We were in real trouble then.” Pleines helped put together a similar chart that Birinyi published on Aug. 10.
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Bernanke’s Lower Bond Yields Make Sitting Tight Painful
The Fed’s decision this week to keep its benchmark interest ratenear zero through mid-2013 sent five-year Treasury yields as low as 0.82 percent, below the 2.21 percent two-year rate before the collapse of Lehman Brothers Holdings Inc. in 2008. Lower returns on the safest investments will spur equities purchases, said David Kellyof JPMorgan Funds.
“The Fed’s making it extremely painful not to take on some risk,” said Kelly, who helps oversee $408 billion as chief market strategist for the New York-based firm. “People will tend to push money into equities.”
This is aimed at encouraging people to leverage up, with the knowledge that their borrowing costs will likely be very low for a long period of time,” said Lou Crandall,Buying Back Stock
“The lower yields are, the more these companies are going to have an incentive to either invest directly in the stock market or even simpler, just buy back their own stock,” he said. “The incentive for a clear-thinking CEO must be huge.”
“The Fed has vindicated its power over the term structure of interest rates by being clear about the expected path of short-term rates,” said Peter Fisher, head of fixed income at BlackRock Inc., the world’s biggest asset management firm, who was markets chief at the Federal Reserve Bank of New York from 1994 to 2001. “It does encourage those looking for returns to look in credit assets and then further out the yield curve.”
“It is mainly a signal that the Fed will do more, including buying government bonds, if the Fed believes the economy needs it,” said Goodfriend, a former research director at the Richmond Fed. The Fed in June ended a $600 billion bond- purchase program.
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Pimco’s Gross Proves Summers Wrong as Selloff Shows ‘New Normal’ Is Real
Now Gross and co-chief investment officer Mohamed El-Erian, who coined the term more than two years ago, have been vindicated by the U.S. Federal Reserve, which said yesterday that the economic recovery is “considerably slower” than anticipated, following the biggest stock market loss since December 2008. Being right on the big call hasn’t prevented Gross from making a tactical miscalculation when he stayed out of Treasuries just as concern about the economic slowdown fueled a rally in U.S. debt.
“A lot of the new normal characteristics have played out,” El-Erian, chief executive officer ofNewport Beach, California-based Pimco, said in an interview. “Some people confused new normal with fatalism, but the intention was the opposite. There was the hope that policy makers would recognize that there are structural responses they needed to embark on.”
Missing the Rally
Gross dumped U.S. Treasuries earlier this year from his $245 billion Pimco Total Return Fund (PTTRX), only to miss a rally as investors fled to U.S. debt amid market volatility and the sovereign debt crisis in Europe.
- His fund has advanced 4.1 percent this year, lagging behind 65 percent of peers, according to data compiled by Bloomberg. ( asr: due to he sold T-notes early with his expected slow growth ..)
- Over the past five years, the fund has advanced at an average annual rate of 8.7 percent, beating 98 percent of rivals, according to the data.
- His fund has advanced 4.1 percent this year, lagging behind 65 percent of peers, according to data compiled by Bloomberg. ( asr: due to he sold T-notes early with his expected slow growth ..)
- Over the past five years, the fund has advanced at an average annual rate of 8.7 percent, beating 98 percent of rivals, according to the data.
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Money managers called the summer market plunge
Commentary: In June, they were ridiculed, but now they are geniuses
The Summer Crash of 2011, Or the Great Re-Adjustment
1/ Gayed wondered: If a bull market was truly on, why were defensive sectors — consumer staples, health care and utilities — -outperforming the broader market? Typically, these stocks are where investors run to hide in a recession. Oh, and why were bonds beginning to outperform stocks — -even as the Federal Reserve ended its QE2 bond buying program?
2/ “The bond market is clearly afraid of something,” Gayed wrote. “The stock market has not yet noticed what the bond market is screaming.”
3/ “If Wal-Mart is outperforming the S&P 500, what does that tell you?” Gayed said. “Wal-Mart only does well when the economy does poorly.”
4/ “And bonds are out-performing stocks in a way that has not been seen since the Lehman collapse,” he said.
Going forward, the guys who predicted the summer market plunge remain bearish on stocks but bullish on bonds, even as Standard & Poor’s has dashed America’s AAA credit rating.
Loan demand, they argue, is so low interest rates won’t go higher anytime soon. So S&P’s downgrade simply means a shift in credit quality. “If the AAA is no longer AAA, then everything else has to get downgraded,” Dempsey explained.
The U.S. will remain one of the safest borrowers, relatively, even if it is only rated AA+, Dempsey said.
Meantime, the risks of investing in stocks remain too great because too many things have yet to happen in a fragile global economy, said Gayed, who believes the stock market has further to fall on events that are out of anyone’s control.
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