Sovereign Debt Holdings by Select Banking Systems

Posted by on

Japan has the highest debt to Gross Domestic Product (GDP) in the developed world. Late last year, Japan’s sovereign debt exceeded over 200% of the GDP. At that time, the OECD Secretary-General Angel Gurria commented that Japan’s debt load was in “Uncharted Territory”.

However unlike most countries in the developed world, 90% of Japanese government debt is held by domestic investors. In fact, more than 40% of  all government bonds are held by Japanese banks according to “Financial Stability Report” published by The Bank of England.

Click to enlarge

Soverign-Debt-Holdings-of-Banking-Systems

Via  The Absolute Return Letter , February 2013,  Absolute Return Partners

The combined holdings of Japanese government bonds by domestic banks is equal to 9 times of their tier 1 capital. While it can be argues that this is a disaster waiting to happen it is also true that the country’s economy remains stable and is not susceptible to the tyranny of global capital as foreign investors do not hold most of Japan’s public debt. With one of the highest savings rate in the world and most of the public debt held by domestic investors, the Japanese economy remained stable even during the global financial crisis and has started to expand under the leadership of new Prime Minster Shinzo Abe.

Related ETFs:

iShares MSCI Japan Index (EWJ)

Disclosure: No Positions

How to Profit From Rising U.S. Coal Exports

Posted by on

According to an article in The Wall Street Journal recently, U.S, exports of coal continues to soar. Last year 120 million tons of black gold was exported compared to about half of that amount in 2009. The following chart shows the gradual increase in coal exports:

Click to enlarge

US-Coal-Exports-by-Year

Two interesting facts from the article:

  • Contrary to popular beliefs coal is not being exported to emerging markets such as India and China but rather to Europe especially the UK, The Netherlands and Italy where coal-powered power plants are having a resurgence.
  • Unlike in the past when metallurgical coal used to exported, now steam coal which is used in power plants is being exported.

Source:  U.S. Coal Finds Warm Embrace Overseas, The Wall Street Journal

From the U.S. EIA site:

The United States holds the world’s largest estimated recoverable reserves of coal and is a net exporter of coal. In 2011, our nation’s coal mines produced more than a billion short tons of coal, and more than 90% of this coal was used by U.S. power plants to generate electricity. While coal has been the largest source of electricity generation for over 60 years, its annual share of generation declined from 49% in 2007 to 42% in 2011 as some power producers switched to lower-priced natural gas.

U.S. coal production has also increased since 1950 as shown in the chart below:

US-coal_production_consumption_exports

Source: U.S. Energy Information Administration

U.S. net exports has slow increased in the past few years.

Some of the top coal producers are  Peabody Energy Inc(BTU), Arch Coal Inc (ACI) and Alpha Natural Resources Inc (ANR). One way to profit from the rising coal exports is not invest in coal producers but to invest in railroads that transport coal from coal producing regions to export terminals and power plants as noted in my previous article here.

Related ETF:

Market Vectors-Coal ETF (KOL)

Disclosure: No Positions

Why Invest in Railroad Stocks

Posted by on

The U.S. railroad industry is one of the key pillars of the economy. Railroads are highly efficient and help move goods from one point to another cheaply and efficiently.

1869-Golden_Spike

 Joining tracks of Central Pacific Railroad and Union Pacific Railroad to complete the transcontinental railroad at Promontory, Utah May 10, 1869

Some of the reasons to invest in railroad stocks are listed below:

  • The railroad industry is a oligopoly as shown in the chart here.
  • Railroads are the best form of transportation to transport natural resources such as coal, minerals, timber, etc.
  • Other goods such as autos and petroleum products are also moved by rail in increasing quantities.
  • Railroads have pricing power since in many places only one railroad serves the area. For example, a former in Iowa may not have options to move his produce other than one single railroad serving his rural community.
  • Automation and continued investments in technology and innovation makes the industry highly efficient.
  • Railroads move goods economically across the vast distances of the country.
  • The majority of the U.S. railroads are involved in freight transportation and not on passenger traffic.

Five railroad stocks are listed below with their current yields:

1.Company: CSX Corp (CSX)
Current Dividend Yield: 2.59%

2.Company: Kansas City Southern (KSU)
Current Dividend Yield: 0.92%

3.Company: Norfolk Southern Corp (NSC)
Current Dividend Yield: 2.91%

4.Company: Union Pacific Corp (UNP)
Current Dividend Yield: 2.09%

5.Company: Providence and Worcester Railroad Co (PWX)
Current Dividend Yield: 0.99%

Note: Dividend yields noted are as of Feb 5, 2013

Disclosure: Long NSC and CSX

Will BRICs Outperform U.S. Markets In This Decade?

Posted by on

Economist Jim O’Neill of Goldman Sachs coined the term “BRICs” in November 2001 to identify the core set of emerging markets at that time. These countries – Brazil, Russia, India and China – did not have many things in common other than all being emerging countries. For example, in terms of political systems Brazil and India follow democracy, China follows communism with a capitalist economic system and Russia is not yet democratic though it claims to be a democracy. Similarly Brazil and Russia are rich in many natural resources while China and India have limited natural resources and import most of the commodities needed for growth. Population wise, China and India have two of the world’s largest populations while Brazil and Russia’s population is relatively small.

Despite all the differences between these countries, the BRIC markets took off from 2001. From an article in the FT beyondbrics blog:

In investment terms, it paid off spectacularly. In the ten years since O’Neill launched the Brics in November 2001, the MSCI indices for the four Brics all comfortably outperformed the S&P 500. An investment of $100 in each of the four Brics,would have been worth $674 in Brazil, $451 in China, $459 in India and $414 in Russia. An investment in the S&P500 over the same years would have made just $112. See chart below.

Click to enlarge

MSCI_Bric_SP_from-2001

Source: Goodbye Mr Bric, FT beyondbrcis

However the BRICs have lagged the S&P 500 in recent years as shown in the chart below:

SP500-vs-Bric-Indices-Best

Source: Yahoo Finance

Brazil’s Bovespa index is in the negative territory so far this year compared to the other BRIC benchmark indices and the S&P 500. It remains to be seen if the BRICs will outperform the S&P 500 this decade. Global investors will be eagerly watching the performance of the BRICs as their economies continue to expand although at a slower pace than before.

Related ETFs:

iShares MSCI Brazil Index (EWZ)
Market Vectors Russia ETF (RSX)
iShares FTSE/Xinhua China 25 Index Fund (FXI)
PowerShares India (PIN)
iShares S&P India Nifty 50 (INDY)

Disclosure: No Positions

Download: The Complete List of Foreign Stocks Trading on the NYSE

Posted by on


NYSE

A total of 525 foreign stocks traded on the New York Stock Exchange at the end of 2012. The complete list of these companies by country, ticker, listed date, etc. are shown in the PDF below:

Download: The Complete List of Foreign Stocks Trading on the NYSE (pdf)

Update #1: Current List of Foreign Stocks on NYSE as of  Jan 31, 2013 (pdf)

Data Source: NYSE