Archive for the ‘Uncategorized’ Category

Swatch to buy Harry Winston

Monday, January 14th, 2013

Swatch has agreed to buy the watch and jewelry brand from Harry Winston Diamonds for $750 million and assuming $250 million of debt.

Shares of both companies were up about 4% on the news.

Swatch to buy Harry Winston
Source: AP, via Yahoo

Dell to Go to Private Equity Firm?

Monday, January 14th, 2013

Bloomberg is reporting that Dell is in talks with private equity firms TPG Capital and Silver Lake regarding a buyout of the $21 Billion computer manufacturer.

It’s a risky proposition, but shares surged 13% on the news, so if no buyout announcement happens this week, expect a hard landing.

Weaker Yen to Improve Japan’s Economic Outlook

Monday, January 14th, 2013

The Abe administration in Japan has aggressively decreased the value of the Yen, thus sparking an economic debate over the final outcome of such policies.

We feel that devaluation is the best thing to do for Japan, since its debt is denominated in yen, it is not in the position of, say, Greece or Spain, who have no control over the value of the Euro.

Further, a weaker currency will help Japanese exporters, which have been hurt by increased competition from neighboring China, Korea and Southeastern Asian exporters.

Bernanke: No Inflation for QE3

Monday, January 14th, 2013

The Fed Chairman is claiming that QE3 will not lead to significant inflation.

“I don’t believe significant inflation is going to be the result of any of this,” Bernanke said in a speech at the University of Michigan.

We see a 70% chance that the makeup of the CPI is revised within the next 24 months to ensure the accuracy of the Chairman’s words, even as prices rise and the value of the dollar falls.

Source: Marketwatch

2013 Outlook Part 3: Commodities

Monday, January 14th, 2013

We see a 40% chance of a recession beginning in 2013, and if that happens, industrial commodities will be hit hard. In the event that the US is able to avoid a recession, we see largely flat performance for most commodities, excluding oil and gold.

We expect to see oil continue to trade in range, $85-105, unless a geopolitical event constrains supplies. If war n earnest breaks out in Israel or Iran we could see prices as high as double that. If there is relative peace, but a global recession breaks out, oil could fall below $75.

We expect gold to remain strong as an alternative investment and for the purposes of capital preservation, as it acts as an insurance policy against negative currency events.

2013 Outlook Part 2: Fixed Income

Monday, January 14th, 2013

The fed is aware that raising interest rates could quickly drop the economy back into recession, and with unemployment still hovering dangerously close to 10%, he;s not about top make that mistake.

We expect interest rates to hold and, thus, bonds to advance throughout 2013 in the name of capital preservation in a volatile time for commodities and stocks.

2013 Outlook, Part 1: Stocks

Monday, January 14th, 2013

We expect the markets to react negatively to the reduction in quantitative easing by the Fed. We feel, in fact, that much of the success and resilience that stocks have shown over the past three years have been due to these programs.

Further, the fiscal cliff deal that will return capital gains rates to pre-Bush levels will have a negative effect on all long-term assets, including stocks.

When we roll our magic dice and shake the magic eight ball, both come up with -3.2% for the S&P 500 for 2013.

Google Tax Structure Uses Offshore Havens

Monday, November 1st, 2010

A recent Bloomberg article details Google’s corporate structure, which moves revenues to subsidiaries in low-tax countries such as Ireland, Bermuda, and the Netherlands, with the result of reducing corporate taxes in those countries that are their largest markets: the United States and United Kingdom.

Google’s not alone, of course. Both Facebook and Microsift use similar tax structures, and a US Treasury measure to tax monies moved between international subsidiaries was halted by what we’ve come to know as the “political process”:

Treasury officials, who estimated the policy change would raise $86.5 billion in new revenue over the next decade, dropped it after Congress and Treasury were lobbied by companies, including manufacturing and media conglomerate General Electric Co., health-product maker Johnson & Johnson and coffee giant Starbucks Corp., according to federal disclosures compiled by the non-profit Center for Responsive Politics.

The report by Bloomberg is worth a read.

More Austerity for Europe

Monday, November 1st, 2010

Following similar measures in Greece and Iceland, Portugal’s leadership has approved its largest spending cuts since the 1970s. Economists have comented that it will likely “hurt growth” of the country’s economy, which hasn’t been a growth powerhouse to begin with:

The spending cuts, the biggest since the 1970s, may hurt Portugal’s economic growth, which has averaged less than 1 percent a year in the past decade. That trails the 1.3 percent pace for the whole euro region.

This will almost certainly lead the country into a lengthy recession until the reforms “bear fruit,” according to economists.

QE2 May be Contagious

Monday, November 1st, 2010

Bloomberg is reporting that so-called “QE2″ may be contagious this week, as Central Banks engage in a race to the bottom for their respective currencies:

fallout from the Fed could cause Bank of Japan Governor Masaaki Shirakawa to do more for his economy and Bank of England Governor Mervyn King to leave the door open to more aid. Even as European Central Bank President Jean-Claude Trichet holds the line against inflation, he may eventually change course if the euro surges, while emerging markets are already acting to restrain currencies.

This bodes well for nominal asset prices in the short term: stocks, commodities, metals… But the long term inflation repercussions could wipe out real gains in the process. Pricing in these rounds of “Quantitative Easing” is not for retail investors.