Knowledge is Power: China’s Success, Spanish Housing Market Edition

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Not to be flippant about a new stock-market plunge that’s doubtless causing heartburn in many offices and households, but is this really such a huge surprise? And just as important, is it really such a bad thing?.U.S. consumer weakness painful but needed

In the aftermath of Iceland’s financial collapse, many citizens are planning to leave the country to find work and a more secure future.Brain drain hits cash-strapped Iceland

Reykjavik

Reykjavik, Iceland

Twenty Percent of Spanish Mortgages Now Considered To Be High Risk.According to an article which appeared in the Spanish newspaper Expansion this morning, one in five Spanish mortgages is now considered as being high risk and liable to become “non performing”.

GDP in the OECD area stabilised in the second quarter of 2009.Gross domestic product (GDP) in the OECD area stabilised in the second quarter of 2009 (minus 0.002%), according to preliminary estimates, following a fall of 2.1% in the previous quarter.

The recovery has started. Sustaining it will require delicate rebalancing acts, both within and across  countries.Sustaining a Global Recovery

US President Barack Obama has lost his messianic status in the row over health care reform, say German media commentators. The debate reveals the downside of America’s ideological aversion towards government: Americans are ready to put up with an inferior health service in the name of freedom, it seems.Americans Want ‘Freedom to Pay Too Much for Inferior Health Care’

Five years ago today, Google sold shares to the public for the first time, amid lots of skepticism about how the offering was being handled and whether the Web search company was overhyped and overvalued.Google’s I.P.O., 5 Years Later

Nicholas Taleb attacked Barack Obama for increasing his tax bill as part of anti-recessionary measures.

China’s rapid growth is no accident: it has had the right policies both practically and from the viewpoint of economic theory.No secrets to China’s success

BB&T Corp. calls itself a “fast follower”—a player that doesn’t try to get there first with technology, but takes advantage of every smart play.Capitalizing on Opportunities

Poverty Rate and Income Distribution in the USA

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The latest poverty data available from the Census Bureau is for the year 2007. The official poverty rate in the US was 12.5 % in 2007. Put another way, 37.3 million people were in poverty up from 36.5 million the previous year.

Click to Enlarge

Poverty-Rate-US-2007

Source: U.S. Census Bureau

The 37.3 millions does not include people in institutional group quarters (such as prisons or nursing homes), college dormitories,military barracks and living situations without conventional housing (and who are not in shelters). The poverty threshold in 2007 for a couple with two children was $21,027.

The above chart shows that number of people in poverty has been rising since 2000. The latest population of the US is 307 million. With unemployment rate at 9.4% in July and household debt at high levels, more people may be pushed into poverty.

When we compare the rising poverty levels to the income distribution, the correlation is  interesting.As the charts below show clearly, the rich are getting richer and the poor are getting poorer.

Click to Enlarge

Rich-US

Income-Distribution-USA

Source:  Striking It Richer. The Evolution of Top Incomes in the United States, by Emmanuel Saez,
UC Berkeley

In the past few years, the wealth and income inequality in the US is rising to record high levels. During the 2000 presidential campaign in New York, gazing at the diamond-studded $800-a-plate crowd Presidential candidate George W. Bush commented:

“This is an impressive crowd – the haves and the have-mores,” quipped the GOP standard-bearer. “Some people call you the elites; I call you my base.”

Top 10 Canadian Dividend Stocks

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The Dow Jones Canada Select Dividend Index represents 30 of the top dividend stocks in Canada. These stocks are selected to the index annually based on yield.

The index is up 29.04% year-to-date as of July 31,2009 with dividends reinvested. Last year the index was down about 31%.The 10-year annualized return is 10.62%. One of the interesting features of this DJ Canada Select Dividend Index is that about 73% of the index is made up of financials.Telecom, utilities and energy form about 7% each.

The Top 10 Components in the Index are:
National Bank of Canada
Bank of Montreal (BMO)
Canadian Imperial Bank of Commerce (CM)
Toronto-Dominion Bank (TD)
IGM Financial Inc.
Bank of Nova Scotia (BNS)
Royal Bank of Canada (RY)
Manitoba Telecom Services Inc.
TMX Group Inc.
Sun Life Financial Inc (SLF)

The only utility in the above list is telecom provider Manitoba Telecom Services Inc whose stock does not trade in the US markets. Among the financials all the large banks are in the list with one life insurance company. SunLife Financial (SLF) has a dividend of 4.43%.The five largest Canadian banks weathered the credit crisis well and have shown their strength with a strong rebound since the March lows. Their dividends range from 3.69% to 5.62%. One of the biggest advantage with holding the Canadian bank stocks is that due to strict regulation and highly conservative business practices, they produce consistent profits year after year. Some even call these banks the “cash cows” of Canadian stocks due to their dividend payments.

Another point is that these banks and insurance companies such as Manulife, Sun Life, etc. are in many of the mutual fund portfolios held by Canadian thru their 401-K equivalent for retirement savings called the RRSP account.

While its true that these banks took some unwanted risk thru the use of derivatives in recent years they have written most of the losses.Unlike the US, the housing market in Canada is relatively holding up well and consumer debts such as credit card debt is not a huge problem due to strict underwriting standards. None of the banks in Canada are in serious risk of collapse like some of the large US banks.

Disclosure: Long all five banks

Knowledge is Power: Sensex and Shanghai Indices Correlation Edition

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Sensex and Shanghai index show high positive correlation. The movements of Sensex and the Shanghai Composite Index show a high positive correlation at 0.9 in 2008 and 2009. This linear relationship appears to have strengthened in the decline since January 2008.Chinese curse on Indian shares

China-India-markets

Shares in five Nigerian banks, which were bailed out by the government last week, have been suspended.  Shares suspended in Nigeria banks

Fidelity’s John Ford says the prospects for further recovery have not been adequately priced into Asian equities.More buying opportunities of Asian shares over next 18 months

China received 5.36 billion U.S. dollars of foreign direct investment (FDI) in July, down 35.7 percent year on year, said Ministry of Commerce spokesman Yao Jian on Monday.China’s FDI falls 35.7% in July

After going into a tailspin for a year, the German economy is experiencing slight growth once again. But experts are divided over whether it is merely a temporary respite or a sign of genuine recovery.Is the Recession Really Over?

Despite the Bank of Canada’s most recent economic forecast that the current recession is over, diminished..Commercial real estate activity remains down: CBRE

Top Performing Asian and Latin American ADRs

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As of July 31,2009 the S&P; 500 Index and the Dow Jones Composite Index are up 10.97% and 2.47% respectively . But many of the ADR indices are gone up much higher. The Year-To-Date (YTD) performance of some of ADR indices are as follows:

BNY Mellon ADR Index: 21.44%
BNY Mellon Asia ADR Index: 27.54%
BNY Mellon Dev Mkts ADR Index: 16.65%
BNY Mellon Emg Mkts ADR Index: 43.22%
BNY Mellon Europe ADR Index: 15.59%
BNY Mellon Lat. Amer. ADR Index: 53.96%

So far this year, the developed markets are lagging the performance of emerging markets.

The Top Performing Latin American ADRs for the Month of July are listed below:

Gafisa S.A.(GFA) – Up 55.21%
Gruma S.A.B. de C.V. (GMK) – Up 44.50%
Votorantim Celulose e Papel S.A. (VCP) – Up 39.50%
Nortel Inversora S.A. (NTL) – Up 36.42%
Aracruz Celulose S.A. (ARA) – Up 34.50%
GOL Linhas Aereas Inteligentes S.A. (GOL) – Up 30.69%
TIM Participacoes S.A. (TIM) – Up 26.33%
Desarrolladora Homex S.A.B. de C.V.(HXM) -Up 26.32%
Telemig Celular Participacoes S.A.(TMB)- Up 22.18%
Companhia Brasileira de Distribuicao(CBD) – Up 21.68%

The Top Performing Asian ADRs for the Month of July are listed below:

Woori Finance Holdings Co. Ltd.(WF) – Up 45.21%
Internet Initiative Japan Inc. (IIJI) – Up 43.49%
China Eastern Airlines Corp. Ltd. (CEA) – Up 43.02%
WNS (Holdings) Ltd. (WNS) – Up 41.67%
Patni Computer Systems Ltd. (PTI) – Up 39.14%
SINOPEC Shanghai Petrochemical Co. Ltd. (SHI) – Up 32.72%
Shinhan Financial Group Co. Ltd. (SHG) – Up 32.36%
CNinsure Inc. (CISG) – Up 31.39%
KB Financial Group Inc. (KB) – Up 28.82%
China Southern Airlines Co. Ltd. (ZNH) – Up 27.18%

Note: ADRs under $5 per share are not included in the list above.

Many of the top performers for July have also performed very well year-to-date. For example Korean Bank Kookmin is up 62.90% YTD. Last month alone KB went up 28.82%. The above picks can be starting point for investors looking to gain exposure to the Latin American and Asian markets. However many of the emerging markets have soared already this year. The main indices of China and India may experience pullbacks as some folks consider them to be over-priced relative to earnings and growth.