October 03, 2013

October 03, 2013

German Elections Endorse Merkel’s Slow, Steady Approach to Eurozone Recovery (And So Do the Markets)

Germans went to the polls and handed a resounding victory to Angela Merkel and her ruling CDU party.  Analysts and commentators took this as a decisive vote in support of the European project and of Merkel’s judicious, go-slow approach to the financial crisis — doing what’s necessary to defend the Euro, but defending the interests of the German people every step of the way.  Merkel and her government’s ministers can rightly claim some of the credit for Europe’s tentative emergence from recession.  Now she needs to put together a coalition government in time to make sure that significant bank oversight regulations move forward as planned, and to make sure Europe’s economy continues to show improvement.

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Japan Goes Hunting For Energy

Japanese political and public reactions to the Fukushima disaster have likely shuttered much of Japan’s nuclear generation capacity for the foreseeable future.  With the Yen falling in value thanks to Prime Minister Abe’s inflationary attempts to jumpstart the economy, Japan is left scrambling for increasingly expensive fossil fuel imports — especially liquefied natural gas.  Japanese companies are in a race to make deals in Canada, and they hope an abundance of Canadian shale gas will find its way to Japan via new LNG terminals and other infrastructure in which they’re making heavy capital investment.  Japan is also allying with other Asian LNG importers to secure better contract terms from trading partners.

Corporate America Embraces Free Online Courses

Massive open online courses (MOOCs) are poised to break into the mainstream of education and vocational training, with new initiatives from MOOC stalwarts Coursera, Udacity, and EdX bringing together educational heavyweights and corporate sponsors with deep pockets.  These backers will lend weight to new, low-cost credentials that will allow learners to secure economically useful skills without having to enroll in a formal program.  Corporate sponsors hope that by curating open courses, they will help ensure the availability of more well-prepared job applicants.  

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Interest Rates — A Great Indicator of U.S. Market Tops

Guild Investment Management, Inc. has constantly studied interest-rate movements over the past 40 years, and used this analysis successfully to identify market tops and to avoid market meltdowns in 1973, 1987, 2000 and others.  We analyze two indicative interest-rate behaviors.  One is when short-term rates drive bond yields below the dividend returns of the stock of high-capitalization companies.  But since rates are being artificially suppressed by the Fed’s QE programs, we can’t rely on this indicator as we used to.  So we watch carefully to see signs that the yield curve — the relation between short- and longer-term interest rates — is moving towards inversion, with short-term rates rising faster than longer-term rates.  For now, we still see very low short-term rates and a steepening yield curve, which leads us to a bullish opinion about U.S. stocks.

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