Is it over?
August 12, 2011 16:54:49 | 2 comments

We have seen extreme volatility in the market this week: the Dow Jones was down 637 points on Monday, and then was up 429 on Tuesday, down again 519 on Wednesday, up 422 on Thursday and on Friday, as I write, it is up 112 points. Although the week began with the impact of the S&P downgrade of the US rating, this was not the cause of the volatility. The downgrade added to the pessimism that was boiling since the announcement of the GDP revision: the market spent the whole first quarter believing that the GDP had grown 1.9%. The revision established that the GDP had in fact grown only 0.4% (almost 80% less than previously estimated) creating real doubts about the health of the American economy. It is interesting to observe that the normal result of a downgrade is the increase of the interest rate: more risk, more expense to borrow. However, interest rates fell even further, showing that the world still considers the USA, with all its problems, a safe haven. The mounting doubts about global economic growth and, in particular, about the American and European economies, are the cause of vola...

Read More »
Why are the markets going down?
August 09, 2011 07:42:57 | 1 comments

When the agreement for the debt ceiling was reached I wrote that there was no reason to celebrate. The agreement forced the Government to do exactly the opposite of what should be done in a weak economy: cut spending. Those- few-, who thought the stock market would go up, just because the agreement was made, were wrong. Mr. Market understood that the consequences of the agreement were bad .Right after, the US was downgraded: the S&P understood what the majority is not understanding: there is a gridlock in the American Government that precludes the Congress to take the necessary steps to address the deficit and help the economy. In the following months the Government will vote the 2012 budget and should start defining the cuts that were agreed and the perspectives are not good. The market is reacting to the fact that the economy is not doing well and the Governments- in Europe and in the USA- have no financial or political capacity to solve the problems and help the economy. That is why the markets are down.  

Read More »
Should we celebrate?
July 31, 2011 13:42:51 | 0 comments

It is Sunday morning and it is possible that within hours the debt ceiling crisis is resolved. However, I don’t think we should celebrate. The vote might come with strings attached, meaning, cuts in spending. The announcement on Friday that the GDP grew only 1.3% in the second quarter GDP should send a message to the lawmakers that, in the absence of consumer spending, we need Government spending. Unfortunately, they are going in the opposite direction which is bad news for the American economy in the long run. If a deal is reached, the stock market will go up, as if the problems were solved.  So, for an investor’s point of view in the short term, the deal in the making is good. For the American economy and the american people, in the medium and long term, is bad news.  

Read More »
What the world is telling us.
July 31, 2011 13:22:27 | 1 comments

When we invest ,we expect the assets to move logically: in the long run, according to the fundamentals and in the short run, according to the news.We that in mind, we make our decisons. Until the beginning of last week the only asset that seems to move logically was Gold, which kept rising. The stock market was volatile but the stocks were mostly going up, responding more to earnings than to the crisis in Washington. That changed this week, with the Dow Jones having his worst result and cutting 4% of investors ‘wealth. The big puzzle is still US Treasury bonds: notwithstanding the fact the treasury might run out of money and don’t pay interest, investors still  consider  Treasury bonds the safest investment on earth and as a result, the bench market 10 years notes ended the week at their lowest level since Nov 30, 2,795%. To me that shows that despite the mad men in Washington, the world still considers the United States the safest place to be.  

Read More »
Murdoch and us
July 19, 2011 12:16:29 | 1 comments

Today, James and Rupert Murdoch, along with Rebekah Brooks, will testify in the British Parliament. This is such an important case that the Prime Minister cut short a trip to Africa to go back to London and follow the developments. The phone-hacking scandal started with Prince William’s suspicions that his voice mail had been intercepted. As a consequence Clive Goodman, the journalist that used to cover the Royals went to jail and his editor on the news of the World resigned, saying he didn’t know anything. Since then, other cases have surfaced and settlements have been reached, costing News Co. a couple of millions of dollars. However, nothing can be compared to what has happened in the last month, both in terms of new revelations and loss of money: several journalists lost their jobs, the Murdoch family lost 1 billion dollars on the value of its holdings of the media empire, and Rupert Murdoch may be forced to step down from the company. To add to the mess, today, before the testimony in the Parliament, the journalist who had first denounced the hacking, Sean Hore, was found dead in his ...

Read More »
DSK again
July 01, 2011 12:46:34 | 4 comments

On my May 20th post I expressed my suspicions in regards to the Dominique Strauss Kahn case. Notwithstanding his personal history of infidelity and strong libido, it didn’t seem right that he would try to rape a cleaning lady and then go have lunch with his daughter, as if nothing has happened. What was found by the prosecution in the last week in regards to the life of the woman indicates that my suspicions where correct. After a thoroughly investigation is her credibility that is at stake now. Amongst other things, she received thousands of dollars in deposits on her account from a drug dealer. It looks like the rape accusation arose from the idea that it could benefit her in same way. Let’s wait and see. Meanwhile his personal image is damaged, he lost his job and possibly the chance of being France’s new president.  

Read More »
Still the debt ceiling
June 15, 2011 17:58:37 | 0 comments

I read the Journal because I have to but I avoid reading the opinion page at all cost. They are extremely conservative and it irritates me. Not that I am not willing to hear a different opinion, because I am. It is just that, as somebody has said, the problem with Republicans is not “that they have their own opinions, is that they have their own facts”.  Well, today there is a very well balanced article in regards to the debt ceiling question. As we know, every government has succeeded approving the increase of the debt ceiling: when there was a Republican President the democrats would vote against and vice versa. But at the end it was always increased. Now, the Republicans are blackmailing the White House and trying to link the increase on the ceiling to cuts on expenses. It seems like President Obama, again, is willing to accept the blackmail as it has been his norm. The issue and the article put that in a very good way, is that now is not the time for that kind of game. Grow up guys. Read More »

Watch out.....someone is looking.
June 03, 2011 15:30:30 | 0 comments

A few days ago I was having dinner with a friend and when I asked him if he was on Facebook he told me “no way! I keep under the radar on the internet”. When I asked him why, he told me he worried about hackers. I admit that I thought he was exaggerating but recent events had proved how dangerous the internet is. Congressman Anthony Weiner of New York, had waste down pictures posted on his Twitter account and sent to his followers. Blake Lively had her nude photographs posted on the internet and users of Gmail in China had theirs emails forwarded for other people. I myself had an episode where someone was impersonating me, on Twitter. Luckily a friend told me and after contacting Twitter that account was cancelled and no damage was made (or so I think). The truth is that social network and internet became out main tools for communication and networking and it looks like we can’t live without them. They increased our productivity and efficiency and allowed us to keep in touch with friends and the world. However, on every search we do or contact we make, we are exposing ourselves and gi...

Read More »
“The bubble is really on the other side of the world"
May 26, 2011 14:59:30 | 1 comments

That is what Jim Chanos said about China, explaining why he is short in China, and maybe not even bearish enough. The respected investor is negative on China since last October and it looks like more and more analysts are agreeing with him. As the China economic growth is based on infrastructure  projects and  government investments, it looks like there are mounting signs of overcapacity. Bloombers is starting a series called  “the ghost cities” and here is the link for the first episode.  

Read More »
Why democrats are LOL?
May 20, 2011 18:38:47 | 2 comments

Obama has been a disappointment for a lot of Americans, me included. He gives up very quickly, like he has no principles and surprisingly he has been a horrible communicator, incapable of explaining of what is going on, what is at stake, who is responsible for the deficit and so on. Not to mention that Wall Street still controls Washington. But really the worse is to be black mailed all the time. Had he said no in the lame duck season, maybe we won’t be where we are, begging the radical Republicans to raise the debt ceiling. His popularity decreased and only recovered after killing Bin Laden. But that would not be enough to guarantee reelection. On the other side, however, things are not going well. There are too many pre candidates in the Republican side and they are all very weak. Moreover, their proposal for the fiscal situation is very unfair to most Americans: leave the cut taxes for the rich untouchable and cut the benefits for seniors and low income. As a consequence, the candidates are in bad spot: if they want to win the convention and be the Republican nominated they have to defend...

Read More »