Daily Investment Interpretations

October 26, 2010


2010-10-26 (Tuesday Night):    The markets marked time today: Confidence gains ground.  The NASDAQ Composite ascended 6.44 points (0.26%) to 2,497.29  The Dow minced 5.41 points (0.05%) to close at 11,169.46, and the S&P 500 was basically unchanged, creeping up 0.02 points (0.0%) to end at 1,185.64. Oil was basically unchanged at $82.36 a barrel, as was Gold at $1,340. For some reason, the VIX jumped 0.37 to 20.22.
    Russia most corrupt among global powers, study says; US ranking also worsens  "Russia slid from 146th place to 154th, out of 178 countries, and into a tie with Tajikistan, Papua New Guinea and several African nations. There is, she said, a "catastrophic gap" between civil society and "state sabotage." Corruption is everywhere - in hospitals and in schools, in utilities and courts, and especially in the ranks of the traffic police - but she said Russia is falling ever more deeply down the international list because of a sense of immunity in the higher levels of government."
    US slips to historic low in global corruption index  "Somalia was judged the most corrupt country, followed by Myanmar and Afghanistan at joint second-worst and then by Iraq, in the Berlin-based watchdog.
The United States fell to 22nd from 19th last year, with its CPI score dropping to 7.1 from 7.5 in the 178-nation index, which is based on independent surveys on corruption. This was the lowest score awarded to the United States in the index's 15-year history and also the first time it had fallen out of the top 20. In the Americas, this put the United States behind Canada in sixth place, Barbados at 17th and Chile in 21st place." Denmark, New Zealand and Singapore took 1st, 2nd, and 3rd place as the least corrupt.
    Uptrend meets major resistance: Ashbaugh  
    A bubble-free Wall Street isn’t pretty  David Weidner explains that Wall Street banks need bubbles to generate huge profits, and at the moment, with professional investors playing against each other, Wall Street banks haven't been able to work the confidence games they played in the past. "There were a lot of contributing factors, but the biggest was the phony creation of wealth: overvalued tech companies that created paper fortunes and mortgage securitization that did much of the same." This reduction in profits and revenues hasn't reduced executive compensation, though. "In any other industry, something would have to give. Pay would have to come down as revenues fall and profits fall further. But Wall Street isn’t any other industry; it’s essentially a compensation machine.
    "Despite the more modest results across the industry this year, bonus pools point toward record compensation of $144 billion, a 4% increase from last year. A Wall Street Journal survey found that bonuses were rising at a faster pace than revenue. See WSJ report on 2010 bonus increases."
    Stiglitz wants more fiscal spending, not 'QE'  
    Tracking America’s economic decline  "During the past 10 dismal years of American decline, few sights have been more pathetic than that of a succession of U.S. Treasury secretaries traveling to foreign cities, cap in hand, to beg the Chinese to stop being so mean to our economy. China spends billions to drive down the price of its currency, the yuan. How far is China undervaluing its currency? Just ask the International Monetary Fund. According to its data, the true value of the yuan in real purchasing-power terms is almost exactly double its official exchange rate. That makes its exports cheaper than ours, putting our factories out of business and generating jobs over there. It also makes our products more expensive in China, with a similar effect. For a decade, since China joined the World Trade Organization, we have met this policy with economic appeasement. We took the Chinese money and used it to drive down interest rates, boosting the housing market. That worked out well.
    "The official unemployment rate is 9.6%; the underemployment rate is about 17%. The real picture is even worse than that. One middle-aged man in four lacks a full-time job, and one in five lacks any work at all. Ten years ago, 24.6 million Americans had goods-producing jobs, most of them in manufacturing — and these were good jobs, paying good wages and benefits. Despite the rise of Japan, South Korea and elsewhere, we pretty much held our own; the number hadn’t changed much. Since then, that has collapsed by 6.5 million. Look at Michigan, look at downtown Detroit, look at Ohio, look at Pennsylvania. These were once among the richest and most productive places on earth. They’ve been flattened, lives and communities destroyed. And the devil, of course, makes work for idle hands. Contrary to what you have heard, it’s not because jobs making things have somehow been made obsolete, like the jobs of those making buggy whips. During the past 10 years, the world economy has doubled in size. The world is consuming more goods than ever before. But most of the goods are made in China. Just look at the label on any product you own. It will come as a surprise to anyone under 30 that not long ago most things said “Made in U.S.A.” It was the best-known phrase on the planet. 
    "Look at some simple numbers. Today there are 14.8 million official unemployed. (The true, unofficial numbers are of course much higher.) If we just had those 6.5 million jobs back, the number would only be 8.2 million. That alone would be enough to cut the unemployment rate from 9.6% to 5.3%. No kidding: Just having back the manufacturing jobs that we’ve lost — even ignoring any growth — would cut the official unemployment rate to 5.3%.

    Asia’s view of crisis different from West’s  This is an interesting article. In it, Andrew Sheng, the chief advisor to the China Banking Regulatory Commission and former Chairman of the Hong Kong Securities and Futures Commission, describes the differences between Asian and Western mindsets. The Asians are more pragmatic and less interested in theory. He writes, "But the relative decline of the West, even if that is true, does not mean necessarily the rise of the East. The East is still far too backward in areas of science and technology, development, military might and even social institutions, to contemplate true competition."