How Britain’s cultural revolution transformed the world
5 high-yielding stocks that have been good to investors
How Kodak Succumbed to the Digital Age
Strong dividends signal global recovery
Are the US bears set to come out and play?
What all the China bears are getting wrong
Emerging economies don’t always produce the best equity opportunities
Time to panic about the housing market
Income Investing in a Low-Yield World
Moscow, Russia
In an earlier article I discussed about the total tax revenues as a percentage of GDP.In this post lets a look at three charts about corporate taxes in the U.S.
Chart 1:
Click to enlarge
Chart 2:
Chart 3:
Source: Ten Charts that Prove the United States Is a Low-Tax Country, Center for American Progress.
U.S. corporate profits are at historic levels as companies experience strong growth overseas and cut costs in the domestic market. Booming profits and low tax rates have benefited companies tremendously with an estimate putting the cash pile they hold at over a $1 Trillion. Despite the huge cash pile, most companies have a low dividend payout ratio. The average yield on the S&P 500 is just around 2%. Due to lack of growth in the local market most companies avoid investing at home. As a result, the unemployment rate continues to be high and most government policies have failed to to stimulate economic growth.
The following table shows the World’s Natural Gas Reserves by Country:
Russia, Iran and Qatar account for over 50% of the world’s reserves with Russia alone holding over 25% of the world’s reserves.
The following table shows the World’s Oil Reserves by Country:
The top three oil-rich countries are Saudi Arabia, Venezuela and Canada. The U.S. holds less than 2% of the world’s total reserves but depends on oil more than any other country.This also forces the U.S. economy permanently addicted to foreign oil.
Source: International Energy Outlook 2011, U.S. Energy Information Administration
Related ETFs:
United States Natural Gas Fund (UNG)
United States Oil Fund (USO)
Disclosure: No Positions
Crude oil prices have risen in the past few months on fears of war on Iran, global supply disruptions and a multitude of other factors. From $96.0 a barrel last month oil rose over $110 recently but closed down $2.24 at $106.60 for April delivery on the New York Mercantile Exchange.
Despite the rise in oil prices equity markets across the world have soared since late last year.The S&P 500 is up 8.9% YTD. Germany’s DAX has shot up over 17% YTD. Many of the emerging markets are also up by digit digit percentages so far this year.
Based on conventional wisdom one would assume that stock prices would fall when the price of oil increases since higher oil prices translates into higher gasoline prices and other costs which may drive consumers to reduce consumption. However that is not true. The relationship between oil prices and stock markets is actually positive as shown in the chart below. Hence stocks markets will not fall heavily due to higher oil prices alone.
Chart showing the relationship between oil prices and S&P 500:
Source: Black: Swans and Crude, Liz Ann Sonders, Charles Schwab & Co., Inc.
Related ETFs;
iShares MSCI Emerging Markets Indx (EEM)
Vanguard Emerging Markets ETF (VWO)
SPDR S&P 500 ETF (SPY)
United States Oil Fund (USO)
Disclosure: No Positions
In the past few months global equity markets rose on the hopes of an economic recovery. During that time crude oil prices also steadily increased. However in recent weeks crude oil prices have shot up strongly with the Greek economic crisis and the war on Iran taking center stage again. While an attack on Iran is highly unlikely this year the fear of disruptions to the global oil supply is causing oil prices to rise.
From an article titled Analysis: Oil price rise raises specter of global recession by Reuters:
(Reuters) – A jump in energy prices is jamming the slow-turning cogs of an economic recovery in the West, but that may be nothing compared to the economic shock an Israeli attack on Iran would cause.
Oil rose to a 10-month high above $125 a barrel Friday, prompting responses from policymakers around the world including U.S. President Barack Obama, watching U.S. gasoline prices follow crude to push toward $4 a gallon in an election year.
Europe may have more to fear as its fragile economic growth falters and Greece, Italy and Spain look for alternative sources to the crude they currently import from Iran, where an EU oil embargo, intended to make Iran abandon what the West fears are efforts to develop nuclear weapons, comes into force in June.
Oil stocks are performing well this year with the rise in gasoline prices. The following table lists the exchange-listed foreign oil industry-related ADRs with their year-to-date returns and current dividend yields:
[TABLE=1056]
Disclosure: Long PBR