Knowledge is Power: Banks of Brazil Ready to Bounce Edition

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1.In more normal times, shareholder meetings were relatively genteel affairs. A smattering of people, many retired, would show up, ask a few questions and approve the various resolutions before demolishing the wine and sandwiches. A chief executive was more likely to be challenged over the quality of the biscuits than the finer details of the balance sheet. But now revolution is in the air as investors vent their fury over the huge destruction in shareholder value over the past couple of years. Eggs and shoes fly as investors vent their anger at directors

2. The hedge fund industry strikes back over the suggestion that exchange-traded funds are a possible substitute. Exchange-traded funds aren’t the best alternative

3.Kroll’s Tadashi Kageyama speaks about the dangers of fraud in a weak economic environment.The risks of fraud during an economic downturn

4.Strict regulation, high capital and reserve requirements, and low levels of debt mean Brazil’s banks are flourishing and in a good position to capitalise if their US and European competitors should pull back. Brazil’s giants stand ready to pounce

5. A half-century of Chrysler car sales ended when Eldon Howe received a delivery from United Parcel Service Inc.Chrysler Dealers Grope for Answers After Shutdown News Is Delivered by UPS

6. Almost ten years ago to the day, Alan Greenspan, the former chairman of the Federal Reserve delivered one of his first speeches on financial derivatives before the Futures Industry Association in Boca Raton, Florida on March 19, 1999. Given the role financial derivatives played in the meltdown..Financial derivatives

7.Moscow promised to host the most lavish Eurovision Song Contest ever. But as the weekend approaches, controversy may be brewing.The Eurovision Extravaganza Heats Up

8.The invasive dominance of monetarism in macroeconomics has been total ever since central bankers, led by Alan Greenspan, who from 1987 to 2006 was chairman of the Board of Governors of US Federal Reserve – the head of the global central banking snake by virtue of dollar hegemony – embraced the counterfactual conclusion of Milton Friedman that monetarist measures by the central bank can perpetuate the boom phase of the business cycle indefinitely, banishing the bust phase from finance capitalism altogether.Monetarism enters bankruptcy

IMF: European Economies To Contract Sharply This Year

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The IMF released it Regional Economic Outlook for Europe on May 12th. Some of the key takeaways from this release are:

IMF Economy Projections

Source: IMF

  • Europe’s current deep recession there is a risk that it could worsen further
  • Western Europe is projected to see their economies shrink by 4.0% in 2009
  • Output in Emerging European countries would fall by 4.9% in 2009
  • Modest decline for Western Europe and modest recovery for Emerging Europe in 2010
  • Demand for goods fell sharply in 4Q,2008 leading to 26% annual rate decline in trade
  • Domestic real estate crash has severely affected the Baltic economies, Ireland, Spain, and the United Kingdom
  • Large public debt and current account deficits have been the cause of collapse for some countries such as Hungary and Greece
  • IMF suggests more strong actions in the financial sector
  • Better policy co-ordination among countries and more support for emerging eastern Europe is needed

A Look at the Latest US International Trade Data

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The latest US trade data show a small improvement. The trade balance for February 2009 stood at -$26.0B  from $36.2 in January.

Canada, China and Mexico remained the top three countries with which the US trades. Trade with Canada, the largest trading partner of US, stood at $33.02B but that is still 32% less than the figure in February 2008. Similarly trade with Mexico and China are also down as well.

Chart (click to expand):

ustrade.gif

Source: Census.gov

The above chart shows that exports increased in February.However total imports are higher than exports. Total imports of goods were $121.5 billion in February while goods export was just $84.7B. This is understandable since we import lots of cheap goods from overseas. Another observation is that the gap between exports and imports(trade balance) is shrinking since mid-2008.

Emerging Markets Rose Sharply From March Lows

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Emerging market indices have outperformed developed markets since the lows reached on March 9 this year. The following table lists the performance of select indices:

[TABLE=149]

The top markets in the global recovery were Singapore and Hong Kong with both rising over 50%. During the same period the S&P 500 is up 37%. Latin American emerging markets such as Brazil and Mexico were up around 40% and 42% respectively. Among the major European markets, the UK’s FTSE 100 is the laggard with a gain of just 26% in the same time.

Many Foreign Utilities Are Up Nicely Off March Lows

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Foreign utility stocks have performed well similar to the financial sector off the lows attained in March this year.While the financial sector gets most of the media attention due to the stress-tests in the US, bailouts and other events, I wanted to find out how the foreign utility sector was performing since the March lows. The results of my research is displayed below in a simple table below.

Performance of Foreign Utilities since March lows:

[TABLE=148]

As shown in the listing above, many of the stocks are up in double digit percentages.Seven of the stocks have dividend yield of over 5% even after the rise. It must be noted that though Brazilian utilities such as CPFL Energia S.A. (CPL) pay over 7% in dividends, they can be volatile and do not follow consistent payment patterns.However utilties in the developed world such as Veolia Environnement (VE) of France, TransAlta Corp.(TAC) of Canada, National Grid plc(NGG) etc. have relatively safer yields and have great business models.