Current-Account Deficits Rise in Some BRICs

Montreal, Canada Though still small compared to bulging deficits in the industrialized economies, some BRICs (Brazil, Russia, India and China) have started to amass current-account deficits. India and Brazil have now entered current-account deficit territory this year on the heels of rapid economic growth and rising demand for imported goods. Though the trend among some BRICs and emerging markets is to stave off rising trade deficits, the negative balances are small and too insignificant to adversely affect the primary trend in long-term secular growth for the asset class. Both China and Russia, however, are still comfortably harboring trade surpluses. The Reserve Bank of India recently warned that volatile capital flows “threatened to increase pressure on the country’s balance of payments,” which is now the widest current-account deficit among large emerging economies. At 2.9% of GDP, the current-account is still small compared to the overall size of the Indian economy; but it’s a reminder that even the BRICs are vulnerable to deficits – a natural consequence of strong economic growth and resultant demand.

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Current-Account Deficits Rise in Some BRICs

Is Something Bad Coming?

Frankly, I do not know.  I do not make big, grand predictions.  I am loathe to make such prognostications.  But I have been wondering if something bad is soon coming in the market. Everyone is biased by their own portfolio, including me. You must understand that my positioning may be affecting my state of mind.  Thus, this is my personal portfolio: Massively short semiconductors through put options on the SMH Long some small banks The banks are hedged out by a position in a financial services leveraged ETF Lots of cash That’s it. Here is what is bothering me. The economy is decelerating .  There are anecdotes that the economy is doing okay – I am seeing more cars out on the road and fast food restaurants advertising for workers.  However, the data over the past month has not been good.  One proprietary indicator I look at, which called both the deep recession and the recovery, is now showing outright albeit mild contraction. The politics are deflationary. On Intrade, the odds of the GOP winning back the House is 77%, the highest yet.  A Congress focused on deficit reduction and spending cuts may be good over the long-term, but it is deflationary in the short-term. And deflation is bad for stocks.

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Is Something Bad Coming?

Loonie Heading back Down to Earth

Montreal, Canada Canada has been red-hot. Foreign direct investment, international purchases of securities, a soaring real estate market and a commodity export boom have all provided a solid hedge against global financial turmoil since 2008. And the envy of the world, her banks withstood the bear market of the credit crisis with only limited losses on bank balance sheets. Combined with a strong currency, the loonie, foreign investors have lunged into Canadian assets over the past two years as the country is increasingly viewed as a safe-haven amid global uncertainty. The loonie has gained a cumulative 35% since hitting a low more than seven years ago. Americans have especially clamored to Canada, buying real estate, opening bank accounts and dumping U.S. dollars for the loonie as Obama’s economic agenda drives nervous money out of the country.

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Loonie Heading back Down to Earth

Canadian Housing Bubble, er "Market" Update

In our never-ending quest to profit from the works of others, we here at Running of the Bulls present to you two papers on the Canadian housing market, which is a bubble, or kinda bubble-like, at least in some places. First off is an update from Alexandre Pestov (HT ZeroHedge ) who updated his original paper we highlighted a few months ago .  An abridged version follows. Canadian home prices in May 2010 (Exhibit 1.1) were up 13.6 percent from a year earlier, according to the Teranet – National Bank National Composite House Price Index™. The 12-month gain was strongly influenced by Vancouver, up 17.1 percent, and Toronto, up 16.0 percent. In the other four markets surveyed, the 12-month rise ranged from 5.6 percent in Halifax to 11.4 percent in Ottawa. In Calgary it was 7.8 percent and in Montreal 8.5 percent. During the 10-year span between May 2000 and May 2010, housing prices increased 96 percent nationwide, 118 percent in Calgary, 116 percent in Montreal, 69 percent in Toronto and 126 percent in Vancouver. Doubling of housing prices over the 10-year period coincided with the all-time highs in nominal terms in the three major cities except Calgary where prices remain 8.6 percent below their stratospheric highs set in August 2007

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Canadian Housing Bubble, er "Market" Update

Pair-Trading Gains Appeal in 2010

Montreal, Canada With global stock markets increasingly in a downtrend and possibly poised to decline even further, I’ve begun to initiate pair-trades in my Commodity Trend Alert VIP service. Stocks might tank from current levels but several stocks are worth buying even amid high volatility because prices have come crashing down. On Tuesday, I’ll initiate a long trade in distressed alternative energy and short one of the largest coal producers; if I’m right on both accounts, I should earn a profit. If I’m only half right, I’ll protect my downside and possibly make a few bucks. I’m drawn to smashed-out wind producers at these low price levels after a spate of bad news clobbered the industry again recently. Alternative energy stocks are more than 50% below their highs three years ago and, in some cases, down more than 70%.

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Pair-Trading Gains Appeal in 2010

Correction, Big Advance and then a Crash

Montreal, Canada Forecasting global markets is probably one of the hardest professions. Some think it’s a total waste of time. Predicting what lies ahead is almost impossible yet many analysts and pundits are paid hefty sums to forecast the future. Only one economist, Nouriel Roubini, accurately called the credit crisis three years ago; everyone else had no idea it was coming – myself included. It’s no wonder we all look for some sort of salvation. We all have a view. You might agree or disagree with my macroeconomic analysis and that’s alright with me; at the very least, I’m hoping it’ll serve to stimulate your investment strategy and hopefully, yield profitable results

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Correction, Big Advance and then a Crash

Japan Wins Bear Market Booby-Prize

Montreal, Canada Japan continues to draw the world’s biggest booby-prize when it comes to consistently disappointing investors since markets peaked more than 20 years ago. Heading into this morning’s trade, the Tokyo Nikkei has declined more than 20% from its 12-month high and, at the same time, Japanese government bonds are surging in value. The yen, among the strongest currencies in the world this year – continues to power ahead. The yen is up 10% in 2010 against the dollar and up more than 23% versus the EUR. A strong yen is bearish for Japanese exporters as they lose market share to dollar-linked or semi-pegged regional currencies in Asia like the Chinese yuan; it’s no wonder the Nikkei is spiraling out of control. Deflation is accelerating in Japan despite waves of printing and stimulus over the past decade and beyond. Indeed, Japan is what could happen – or perhaps what’s already inflicting – the United States as the Fed loses control of the economy and its battle against deflation. The wave of economic news since May has increasingly grown negative with housing, employment and manufacturing trends all declining sharply

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Japan Wins Bear Market Booby-Prize

How to Make Paper.li and Flipboard Rock

In the last few weeks two companies have released services that enable you to take tweets and turn them into a newspaper or magazine format: Paper.li and Flipboard . Alltop is a great source of information for both Paper.li and Flipboard newspapers. If you’d like to learn how to do this for Paper.li, click here, and for Flipboard, click here .

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How to Make Paper.li and Flipboard Rock

Credit Spreads Tighten as Investors Chase Yield

Montreal, Canada Bond fund inflows continue to hit records this year as investors lunge after yield. And credit spreads are still in the process of tightening – possibly setting investors up for a brutal bear market when interest rates eventually rise. Driven in part by the collapse of most risk-based assets starting three years ago, investors’ mindset has changed as asset allocation psychology shifts into defensive mode. But as I’ve detailed here over the last several weeks, fund-flows point to a bubble brewing in fixed-income markets as investors are typically late to most parties in the financial markets. Bulging fixed-income fund flows signal danger ahead the same way booming fund flows back in the late 1990s signaled an equity bubble in high-tech stocks. Meanwhile, values are becoming scarce in the credit markets. Spreads, or the difference between benchmark ten-year Treasury bonds and speculative credits, have compressed markedly over the last eighteen months.

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Credit Spreads Tighten as Investors Chase Yield

Gold on the Rise

– Dugald Malcolm, Montreal, Canada Since July 28th, gold has had a remarkable run. In the last 18 days of trading, gold has closed higher for 15 of them. This impressive rally comes after an 8.6% pullback by the yellow metal. The pullback brought the price of gold down from its June 21st all time high of $1,265.00 an ounce to $1,155.90 on July 28th. The pullback got many investors nervous, wondering if the ‘bubble’ had finally burst for gold’s exceptional bull market that has been in effect since 2001. The accelerated short-term upward trend line was being threatened and, like so many times before when gold makes any sort of a pullback, the inevitable cries of “the sky is falling” start to be heard from journalists, talking heads and bloggers alike. As you can see by the chart below, however, gold’s bull market remains very much intact: In taking a closer look at the pullback, we can see that a classic technical pattern took place in the form of a Falling Wedge.

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Gold on the Rise

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