Claiming Foreign Taxes: Credit or Deduction? (Charles Schwab)
India reproduces, US seduces (The Hindu Business Line)
The Poverty Lie: How Europe’s Crisis Countries Hide their Wealth (Der Spiegel)
Can we ever consider gold a ‘safe haven’ again? (Financial Post)
Chart of the week: time for EM equities to bounce back? (beyondbrics)
The best airports in the world (Canadian Business)
German blue-chip companies pay record dividends (Deutsche Welle)
Hello Readers
Regular posting will resume on Monday, April 15th.
-David
What the BRICS need: Education, employment, equality, and soft infrastructure (OECD Insights)
Why Grocers Like Tesco Find Trouble in the U.S. Market (Bloomberg)
Jack Bogle warns ‘Prepare for two massive market declines in the next decade’ (Financial Post)
Emerging Markets: Proceed with Caution (Charles Schwab)
The rise of China’s ghost cities (News.com.au)
Too thin a cushion, One expensive euro (The Economist Blog)
What happened to Canada’s economic miracle?, America’s economy is back (McCleans)
Lessons from the financial crisis (Fidelity)
The Brics are building a challenge to western economic supremacy (The Guardian)
BRIC(S): Important, but not because of the “grand plans” (Deutsche Research)
Niagara Falls, Canada
The U.S. equity market indices reached another record high yesterday.The S&P 500 closed at 1,569.19 crossing the high reached in October 2007 before the financial crisis. Similarly the Dow Jones Industrial Average closed at another record high of 14,578.54.
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Source: S&P 500 Climbs to Record Amid GDP Growth, Europe Optimism, Bloomberg
Despite the ongoing crisis in Cyprus and a few other European countries and sluggish growth in the domestic economy, U.S. stocks continue to soar higher.
Many investors are wondering if the disconnect between the economy and the equity market continue forever. More importantly, investors who missed the bull market since the lows of March 2009 are trying to determine if this is the right time to jump back into the market given that the S&P 500 has reached another record.
Here are one sobering fact about the U.S. economy:
Though the unemployment rate has dropped to 7.70% as of February, wages have not increased. In fact, wages have decreased substantially across the board in most industries. In fact, even people having a job are depending on food stamps to survive and feed their families. This is shocking in any way one can think of. An article in The Wall Street Journal noted the following:
In 1975, 8% of all Americans were on SNAP. That percentage is 15% today. Enrollment soared to 47.8 million participants in recent months, an increase of 70%. The Congressional Budget Office predicts unemployment will drop to 4.6% by 2017, but that SNAP enrollment will only drop to 43.3 million people.
In an article published last week, Seth J. Masters is Chief Investment Officer of Bernstein Global Wealth Management, a unit of AllianceBernstein states that U.S. stocks are priced attractively.
From “US Stocks: Third Time’s the Charm“:
At 1550, the S&P 500 has regained the peak it reached in March of 2000 (when the tech bubble burst) and again in October of 2007 (before the credit crunch hit). But we think the third time’s the charm: We think the stock market still has room to rise because equities are now more attractively valued and of higher quality than they were at previous peaks.
The price is right. The S&P 500 now trades at about 13.7 times consensus estimates of this year’s earnings—below its price multiple in October 2007 and much lower than in March 2000, as the display below shows. So stocks are priced attractively, in our view.
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Some of the other factors noted by Mr.Masters in favor U.S. equities are: S&P 500 companies have higher-quality balance sheets, expectations are modest, U.S. economic growth to increase slightly this year, firms are returning more to shareholders in the form of dividends and increasing share buybacks.
For investors willing to bet on U.S. stocks, ten S&P components are listed below with their current dividend yields:
1.Company: Ecolab Inc (ECL)
Current Dividend Yield: 1.15%
Sector: Chemicals
2.Company: Emerson Electric Co (EMR)
Current Dividend Yield: 2.94%
Sector: Electrical Equipment
3.Company: Halliburton Co (HAL)
Current Dividend Yield: 1.24%
Sector: Energy Equipment & Services
4.Company: First Horizon National Corp (FHN)
Current Dividend Yield: 1.87%
Sector: Banking
5.Company: Kimberly-Clark (KMB)
Current Dividend Yield: 3.31%
Sector: Household Products
6.Company: Marathon Oil Corp (MRO)
Current Dividend Yield: 2.02%
Sector: Oil, Gas & Consumable Fuels
7.Company: Visa Inc (V)
Current Dividend Yield: 0.78%
Sector: Electronic payments processing
8.Company: Franklin Resources (BEN)
Current Dividend Yield: 0.77%
Sector: Diversified Financial Services
9.Company: LyondellBasell Industries NV (LYB)
Current Dividend Yield: 2.35%
Sector: Chemicals
10.Company: Praxair Inc.(PX)
Current Dividend Yield: 2.15%
Sector: Industrial Gases
Note: Dividend yields noted are as of Mar 28, 2013
Related ETFs:
Disclosure: No Positions
Banks in Cyprus opened today after being closed for 12 days due to the ongoing crisis. The most anticipated event of the crisis – namely a good old-fashioned bank run – did not occur. Instead it appears that this Cyprus drama will drag for a few months.
The tiny island of Cyprus was thrown in the international spotlight a few days ago. Up until that moment investors and everyone else were focused on PIIGS for many months. Indeed the poorest country in Europe but known for being the birthplace of democracy, Greece dominated the media for years in a row requiring multiple bailouts and is still struggling to get its act together. Portugal and Spain faded off with their crises solved one way or another. Italy has been in the news recently as it is still trying to put its political and fiscal situation back in order.
Similar to other bailed-out countries, the worst culprit to cause the crisis in Cyprus are the banks.The island’s tiny banks took in huge amounts in deposits from Russian oligarchs and local people alike. But instead of running the bank conservatively like banks are run in emerging and frontier countries, as an EU member Cyprus gambled heavily on Greek bonds and other high-risk investments leading to this crisis. The good thing about this crisis is that Cyprus is not a major economy in Europe and hence the crisis will be contained sooner or later.
When I was browsing through the top global banks that sustained the most losses last year I noticed two Cypriot banks appear among the top 25 banks.
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Source: The Banker
Cyprus Popular Bank and Bank of Cyprus are in the above chart.When this list was first published last July I did not realize that Cyprus would one day revive the perpetual European sovereign debt crisis.
All the banks in the above list are European banks with the exception of Hudson City Bancorp, Inc. (HCBK) of the U.S. Among the major British Llyods Banking Group (LYG) and Royal Bank of Scotland(RBS) were the worst performers and are still a long way to go from reaching their pre-crisis levels. Investors are better off avoiding these two banks like the plague.
Disclosure: Long LYG