Prieur’s Readings (August 9, 2012) – Greece prints its own euros to stay afloat!

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As part of my daily routine, I publish all my reading (including snippets from other well-known commentators) in an Internet newspaper, “Investment Postcards Daily”. I publish the paper even when traveling for extended periods when blogging takes a backseat. This is therefore a sure way of staying in touch.

The paper is published additionally to the normal blog posts. Click here to read the latest edition of the paper.

The newspaper’s subscription is separate from that of the “Investment Postcards from Cape Town” blog. To ensure you receive daily alerts of the updated paper, click here and then subscribe for free by clicking on “Subscribe” (top right of newspaper, just below my photo) or by following me on twitter (click here).

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Time to take on more investment risk?

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“An improvement in the global economic outlook is the key fundamental reason to take on more risk in an investment portfolio,” said BCA Research in a recent commentary. “The U.S. payroll report was positive relative to expectations, but rather weak in absolute terms. Moreover, last week’s Fed and ECB meetings did little to lift our optimism. Several indicators continue to suggest it is too early to add to pro-cyclical currency trades.

  • For example, the global leading economic indicator is still pointing down. More importantly, with no new stimulus measures announced this week, it is difficult to see the global LEIs inflect upwards.
  • In addition, gold is a real-time monetary indicator and the peak in March 2008 correctly warned that deflation risks were escalating. Gold’s recovery in early 2009 (ahead of the bottom in equities) then accurately indicated that reflationary policies were finally gaining traction. Gold prices slipped back below $1,600/oz following this week’s Fed and ECB meetings. This suggests that major central banks are still behind the curve.  As in early 2009, a sustained rally in gold will signal that the forces of reflation are starting to win out.
  • Finally, an uptrend in Chinese stocks and an acceleration in Chinese money supply growth will be bullish signs for Chinese growth and the commodity complex.”

BCA Research concludes that “it will take further proof that the global economy is stabilizing before augmenting a pro-cyclical currency investment stance.”

 Source: BCA Research, August 7, 2012.

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Laugh out Loud: The Vixen Index (and other recession indicators)

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If there is anything that economists like better than a new way to make an old argument, I would not know what it would be. We dearly love some new method or measure – even the weird ones. Here are three additional signs that the economy is not in the greatest position – as if you had not figured that out for yourself.

First there is the Vixen Index (sometimes referred to as the Hot Waitress Index). The premise is that attractive young women have more job options in a vibrant economy as they will likely find positions in companies wishing to show off. When the job market is tight they have fewer of these options and end up working in bars and restaurants. Don’t laugh – this index was developed almost 20 years ago and tends to track employment numbers accurately.

Next up is the Lawn Index. It seems that a nice green lawn has become pretty costly in the middle of a massive drought. It can only be accomplished with significant investment in water. Restrictions on watering aside, the cost of that endeavor is getting steep and there are far more brown lawns than there were a few years ago. You really know that recession has set in when you see suburban homeowners turning their lawns over to the neighborhood ranchers for grazing cattle.

Finally there is the Allowance Index. It seems that allowances hit an all-time high in the middle of the last decade – an average of 25 dollars a week for kids under the age of 12. Now that allowance has crashed and is less than $10. One does not know whether the little darlings have lost any further subsidy, but their cash income has slipped a lot.

Source: Unknown (hat tip: Erica Davey).

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Prieur’s Readings (August 8, 2012) – subscribe to free paper

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As part of my daily routine, I publish all my reading (including snippets from other well-known commentators) in an Internet newspaper, “Investment Postcards Daily”. I publish the paper even when traveling for extended periods when blogging takes a backseat, like over the past two months. This is therefore a sure way of staying in touch.

The paper is published additionally to the normal blog posts. Click here to read the latest edition of the paper.

The newspaper’s subscription is separate from that of the “Investment Postcards from Cape Town” blog. To ensure you receive daily alerts of the updated paper, click here and then subscribe for free by clicking on “Subscribe” (top right of newspaper, just below my photo) or by following me on twitter (click here).

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

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Prieur’s Readings (August 6, 2012) – subscribe to free paper

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As part of my daily routine, I publish all my reading (including snippets from other well-known commentators) in an Internet newspaper, “Investment Postcards Daily”. I publish the paper even when traveling for extended periods when blogging takes a backseat, like over the past two months. This is therefore a sure way of staying in touch.

The paper is published additionally to the normal blog posts. Click here to read the latest edition of the paper.

The newspaper’s subscription is separate from that of the “Investment Postcards from Cape Town” blog. To ensure you receive daily alerts of the updated paper, click here and then subscribe for free by clicking on “Subscribe” (top right of newspaper, just below my photo) or by following me on twitter (click here).

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

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U.S. stock market – long-term indicators favor bulls

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I published a post yesterday on the short-term technical outlook of the U.S. benchmark S&P 500 Index, referring to conflicting indicators but stating that the rally could have more legs. When the message of the short-term charts is murky, it is often useful also to consult long-term indicators to provide some guidance.

Let’s consider, by means of example, monthly data for the S&P 500. A simple 12-month rate of change, or ROC, indicator seems to pick up the major turning points quite well. Let me say straightaway that monthly indicators are of little help when it comes to market timing, but they do come in handy for defining the primary trend. The ROC line below zero depicted bear trends quite clearly, as in 1990 (not shown), 1994, 2000 to 2003, and from 2007 to March 2009. Right now, the ROC line is “safely” in positive territory after threatening to breach the zero line in June.

The combination of a series of higher lows (i.e. rising bottoms) and positive longer-term momentum probably gives the bulls the benefit of the doubt, but needless to say I will be watching this space quite closely.

Source: StockCharts.com

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