Two Charts Show Global Economy Is Recovering

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While there are many factors to evaluate global economic growth, one factor that is the most important to look at is world trade. According to the latest data on trade, the global economy is in recovery mode. The following two charts confirm that economic growth is back on track after the terrifying fall during the credit crisis.

1. Global container shipping achieved an impressive turnaround in 2010 growing by 11% and is projected to grow about 7-8% per year thru 2015 according to a report by Deutsche Bank Research. Freight and charter rates have recovered from the depth of the crisis levels as well.

container-shipping-growth.png

2. According to a OECD Economic Assessment report, world trade is picking up again based on the global manufacturing new export orders index. Excluding Japan, the GDP of G7 countries are projected to grow by 3.2% in Q1 and 2.9% in Q2 of this year.

world-trade.png

Source: OECD, Deutsche Bank Research

The World’s Top 20 Container Ports

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Asian ports dominate the list of the world’s 20 largest container ports based on container throughput data for 2009. Singapore tops the ranking followed by Shanghai and Hong Kong. The only ports from the western hemisphere are Rotterdam, Hamburg, Antwerp, Los Angeles and Long Beach. Within Asia the majority of the ports in this list are located in China.

Worlds-Top-20-Ports

Source: Deutsche Bank Research

Note: TEU stands for Twenty Foot Equivalanet  Unit which is the standard container size. container throughput is the total of all containers handled by a port, either as imports, exports or transshipment.

Social Security To Run Out Of Money By 2041

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The U.S. social security system is the largest government-run social benefit program in the world. As most employers have eliminated or reduced pensions in the past few decades millions of Americans depend more on social security after retirement. In fact, social security payments help keep a significant number of retired persons out of poverty. This program is funded by a deduction in the payroll of all workers and equal contributions by employers. Just like so many other government programs, the social security program is also based on a flawed design. According to current cost estimates, the social security trust fund trust funds that holds the assets for this program may run out of funds by 2014 as shown in the graphic below:

social-security.png

Source: Pensions & Investments

10 Foreign Bank Stocks to Consider

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Most foreign banks have rebounded strongly since the depth of the credit crisis. Some of them have written off all of the losses and have shored up their balance sheets. Investors who avoided bank stocks in the past few months many want to consider adding some of the stronger banks at current levels. Another round of fresh stress tests planned for European banks in June should further raise confidence in this sector.

Ten foreign banks for review are listed below together with their current price and dividend yields.

1.Bank: Banco Bilbao Vizcaya Argentaria S.A (BBVA)
Current Price: $12.65
Current Dividend Yield: 6.64%
Country: Spain

2.Bank: BNP Paribas SA (BNPQY)
Current Price: $39.42
Current Dividend Yield: 2.36%
Country: France

3.Bank:Westpac Banking Corp (WBK)
Current Price: $128.43
Current Dividend Yield: 5.77%
Country: Australia

4.Bank: National Australia Bank Ltd (NABZY)
Current Price: $27.72
Current Dividend Yield: 5.65%
Country: Australia

5.Bank: Bbva French Bank (BFR)
Current Price: $11.63
Current Dividend Yield: 5.87%
Country: Spain

6.Bank: Nordea Bank AB (NRBAY)
Current Price: $11.67
Current Dividend Yield: 2.92%
Country: Norway

7.Bank: Nedbank Group Ltd (NDBKY)
Current Price: $22.25
Current Dividend Yield: 3.44%
Country: South Africa

8.Bank: HSBC Holdings PLC (HBC)
Current Price: $54.35
Current Dividend Yield: 4.40%
Country: UK

9.Bank: Commerzbank (CRZBY)
Current Price: $7.68
Current Dividend Yield: N/A
Country: Germany

10.Bank: Credicorp Ltd (BAP)
Current Price: $103.60
Current Dividend Yield: 1.89%
Country: Peru

Note: Stock price and dividend data noted above are as of April 8, 2011

Disclosure: Long CRZBY,BBVA

Is Gold the Sponge that Absorbs All Perceived Risks?

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Gold prices closed at $1,458.80 an ounce today. The demand for gold continues to rise as investors seek shelter from volatile equity markets. According to The Wall Street Journal, despite record high prices the price of gold is still below the inflation-adjusted price of $2,348.21 reached in 1980. Gold prices have increased by 146.58% in the last five years in US dollar terms.

Investors have poured billions into physical gold and other gold-related assets in recent years. For example, the SPDR Gold Shares ETF(GLD),the largest gold ETF in the world holds 1,217 tonnes of the yellow metal in its trust valued at over $57.0 billion.

In spite of the rise in gold prices in recent years, Emmanuel Painchault, deputy director and head of commodities and infrastructure, at Edmond de Rothschild Asset Management believes that gold prices will rise further. From an interview in The Asset magazine of Hong Kong:

What do you forecast for 2011?

The start of the year saw two trends. After ending 2010 on a high note (USD1,421/oz), gold price corrected quickly to USD1,313.9/oz in less than a month. It has since rebounded above USD1,400/oz and even reached a new nominal high of USD1,444.95/oz on March 7 2011. This is because the excessive public debt in developed countries does not militate for higher interest rates; the economy has improved but it remains fragile. Besides, inflation is clearly looming: oil is back above USD100/ barrel and soft commodity prices are above their highs seen in 2007 and 2008 when food riots broke out.

These factors contradict the consensus view at the start of 2011 that we would enjoy an inflation-free recovery, which meant that real interest rates could be soon on the rise. In fact, we might stay in a low interest rate environment for longer than expected and in any case, if interest rates were to be raised, it would be to fight inflation. The net effect is that real interest rates are set to stay low -and even negative, as is currently the case in the US — and this has always been bullish for gold prices.

Gold is a safe haven, and the rebound in its price has also been driven by the current upheaval in North Africa and the risk of contagion in other countries like Algeria and Morocco. It will eventually abate, but there will be other geopolitical events that will take the price of gold higher. Our world is certainly not as safe as we previously thought.

Gold is a sponge that absorbs all the perceived risks on this planet, whether they are financial or geopolitical.

Many gold bulls would agree with Emmanuel’s views on gold. Gold prices may continue to rise over the long-term with occasional downs. Some expect prices to reach $2,000 an ounce soon. In an interview last year investment guru Jim Rogers mentioned that he plans to own gold till it reaches $2,000 an ounce.

Update: MoneyWeek article The next big driver of gold’s bull market – China’s middle classes notes that in addition to rising Chinese demand for gold, demand is outstripping supply for many years now as shown in the chart below:

Gold-Demand-Supply-Comparison

Disclosure: No Positions