Category: Financial Market

Stock Market Review Week ended May 18: First stress of the year 2012

Posted by WFG – May 20, 2012

All stock markets performed poorly this week. The S&P500, Nasdaq and Dow where down all of the last five days! The Asia stock market was down Friday with the Japan market almost 3% lower.

It is very unusual that the markets are lower everyday on higher volume. Although volume is higher it is not out of tolerance and therefore not indicating any extraordinary stress on the markets at this time….also have started to see put assignments, but only on a deep ITM WM37 within expiry tolerance.

WE NEED TO ESTABLISH A FLOOR…Expect weakness into the start of next week and then a rally to month end….THE SHORTS WILL COVER ON ANTICIPATION OF A RELIEF RALLY

What’s Behind Recent Market Behaviours

Posted by Winflow – July 13, 2011

This quarter has been particularly volatile until markets made a recent sharp turn. In the last few days of the second quarter, according to the New York Times, the S&P index was only down 0.4 per cent.

Why has the market been so volatile?

There have been a number of dips in the market this quarter due to the following factors:

  • Deteriorating credit conditions in Europe.
  • Greece just narrowly avoiding default.
  • The Chinese economy has shown signs of cooling off.
  • Oil above $100 per barrel.
  • Unrest in the Middle East and North Africa.
    Read the rest of this article

China’s Uncertain Future

Posted by Winflow – July 13, 2011

Is China going to be the next largest economy in the world?

At this point it is difficult to tell. If they can increase their standard of living, based on population numbers, they should be able to grow to the largest economy. There are number of challenges that China must face in order to stimulate continued economic growth. These challenges include:

  • Changing demographics. A large aging population in China will soon reach retirement, which means China will have to pay out unprecedented healthcare and pension costs.
  • A labour force that is becoming more expensive. With an expensive labour force, outsourcing manufacturing and production duties to China is becoming less attractive. Neighbouring countries like Thailand have a more cost-efficient labour force and countries like Japan are more efficient and have a  reputation for higher-quality products.
  • With no rule of law, ample corruption and a lot of red tape to get through, making reforms to continue economic growth is extremely complex.
    Read the rest of this article

Some interesting charts and figures on US economy

Posted by winflowfinancial – June 21, 2011

I have just come across the following figures and charts which are quite interesting. These by no means represent our own opinions, but they provide some different ways of looking at the economy.

First on the employment rate, Boston Properties CEO Mort Zuckerman said that

“The Great American Job Machine is breaking down, and roadside assistance is not on the horizon.”

His reasoning is that the positive job numbers reported in recent months are not plausible because there are more part-time jobs added than full time jobs which means the total working capacity did not increase as much. Hiring, in general, has not increased.

And Zuckerman is not alone. New York Times’ Paul Krugman posted a employment-population ratio chart on his blog yesterday, that showed

What you see isn’t a recovering economy that may be stumbling; you see an economy that has stopped its free fall, but hasn’t really been recovering at all.

The May existing home sales data released today were also disappointing. Some blamed on the more restrictive lending policies that forced on the banks.

“Although low mortgage interest rates are welcome, they are less meaningful compared to the tightness of loan underwriting standards,” noted Lawrence Yun, NAR chief economist.

And that brings our attention to this chart on the debt level of US household, made by Richard Koo. According to this graph, US home owners will have to suffer at least 8 more years before a healthy mortgage market is restored.

 

Treasury auctions, Bill Gross and the boiling frogs

Posted by winflowfinancial – June 15, 2011

The Fed is not only reluctant to take away the stimulus it thrown out to the market during QEII, it once again purchased government treasury bonds to further expand the monetary supply. As stated on FRBNY, the Fed bought $4.7B of t-bills today.

As the stock market shows uncertainties recently, treasury auctions showed better results, both 30-year and 10-year treasury bonds were well sold during the auctions last week.

PIMCO’s Bill Gross, who was famous for being bearish in government bonds recently, made some intersting comments. He metaphorically said the fate of today’s investors in bond are like frogs in slowly boiling water, who do not realize the danger until being cooked.

Much like gradually turning up the temperature on poor froggy’s kettle of water, monetary policy in developed countries has been lowering the temperature and absolute level of yields for the past 2½ years post Lehman Brothers. Teeter-totter yields down, teeter-totter prices up, and froggy’s total return euphoria at present seems to know no bounds. But once the potential for even lower interest rates is minimized by the zero floor, our future frog-legged entrée is left with a rather uncomfortable feeling. He’s resting inertly in this caldron as prices near the boiling point with the Fed, the Chinese and the banks all buying up whatever Treasury bonds are offered. Everything appears well. But
bond investors with a survival instinct (being one and the same as our cooking frog) should reflect on that old teeter-totter metaphor and realize that prices near the boiling point automatically imply yields near subzero.

That said, are US government bonds a good investment today?

Dodd Frank: legislation, implementation and current situation

Posted by winflowfinancial – June 15, 2011

The full title of Dodd Frank is “Dodd-Frank Wall Street Reform and Consumer Protection Act”. It was passed and signed by President Obama on July 21, 2010. The purpose of this act is to advocate strict regulations in the financial market, thus to create a solid foundation for the modern economy. The specific goals of the act is to end further bailouts to “too big to fail” companies and prevent future financial crisis from happening.

The key points are:

  • Consumer Protections with Authority and Independence
  • Ends Too Big to Fail Bailouts
  • Advance Warning System
  • Transparency & Accountability for Exotic Instruments
  • Executive Compensation and Corporate Governance
  • Protects Investors
  • Enforces Regulations on the Books

The implementation has so far been controversal. The Fed were reluctant to release the name of banks who received help during the financial crisis. More problems on Dodd-Frank were reported in a Financial Times article in March. As it said:

it fails to capture the degree of global interconnectedness of recent decades  which has not been substantially altered by the crisis of 2008. The act may  create the largest regulatory-induced market distortion since America’s  ill-fated imposition of wage and price controls in 1971.

Last week it was reported that the new act has not been implemented in many aspects:

Ten months since President Barack Obama signed Dodd-Frank into law, regulators have missed all 26 deadlines supposed to be met by April.  According to ProPublica’s Jesse Eisinger and Jake Bernstein, “Dodd-Frank requires 387 different rules from 20 different regulatory agencies. The Byzantine, tedious rulemaking process has occasionally pitted regulator against regulator and proved a bonanza for lobbyists.”

And as a result, as reported yesterday, rules that were about to commence in July have to be postponed to a later date.

 

 

Allied World agrees to buy Transatlantic

Posted by Winflow – June 13, 2011

Allied World Assurance Co Holdings has agreed to buy Transatlantic Holdings for US$3.2-billion in US stock. Other details on the deal include:

  • The combined companies will operate under the name TransAllied Group Holdings and will offer isurance and re-insurance products.
  • Transatlantic shareholders will own 58 percent of the company and Allied World will own the rest.
  • The new board will consist of six Transatlantic seats and five Allied World seats.
  • The combined company will have a total capital of US$8.5-billion, invested assets worth US$21-billion and a total shareholder’s equity of nearly US$7-billion.
  • New York – based Transatlantic will relocate to Switzerland where tax law is more favourable.
  • The CEO of Transatlantic will retire when the deal closes and the CEO of Allied will take over.
  • AIG used to own majority stake in Transatlantic until it was forced to sell to repay bailout money to the government.

For the complete details, read this Business News Network article. For more news on business, read:

For your small business needs, contact the Winflow Financial Group. Our consultants will provide personalized advice for your small business.

TSX down for second week

Posted by Winflow – June 13, 2011

The TSX composite index looks like it may be heading closer to correction territory as it enters its second losing week. Though it isn’t struggling with a six-week long losing streak like the S&P 500, the data is looking grim. Details include:

For more details on today’s market performance, read this Globe and Mail article. For last week’s news on the market see:

For your small business needs, contact the Winflow Financial Group.

Maple launches bid for TMX

Posted by Winflow – June 13, 2011

It appears everyone wants to get a piece of the TMX Group. The Maple Group Acquisition Corp. urged TMX shareholders to vote against a previous offer from the London Stock Exchange (LSE). Other details include:

  • The official bid included the possibility of more cash upfront.
  • Maple’s initial condition that TMX is to combine with Alpha Trading System and TDS Ltd. may be taken off the table.
  • The TMX board rejected a bid from Maple last month.
  • If the LSE offer is accepted, Maple Group’s will be off the table.
  • Maple plans to pay $48 dollars for 70 percent of TMX shares.
  • Unaffiliated shareholders will get 40 percent of Maple shares in exchange for their remaining TMX stock.
  • Members of the Maple Group who hold equity ownership in Alpha, plan to combine operations with TMX.
  • Maple’s new board of directors would include existing TMX board members and reps from Maple.

To learn more about Maple’s hostile offer, read this Financial Post article.

For your small business needs, contact the Winflow Financial Group. Our trained consultants can provide you with personalized advice for your small business. We can be reached at 1.800.956.6897 or at info@winflowfinancial.com.

Oil Prices to Rise During Second-Half of 2011

Posted by Winflow – June 10, 2011

The Organization of Petroleum Exporting Countries (OPEC) announced that a high demand for crude oil, coupled with little growth from other suppliers, would drive up prices in the second-half of the year. Other details include:

  • This news comes shortly after OPEC refused to raise production to meet increasing demands.
  • Saudi Arabia plans to boost oil production to 10-million barrels per day.
  • Crude oil prices fell today.
  • West Texas Intermediate shares fell by US$2.75.
  • North Sea Brent shares fell by US$1.40.
  • A report from OPEC forecasts that the demand for crude oil will rise to 2.5-million barrels per day. Non-OPEC suppliers provide around 200 000 barrels per day.
  • There is doubt surrounding Saudi Arabia’s ability to meet their goal of producing 10-million barrels per day.
  • Iranian and Venezuelan price hawks believe there is excess crude oil in industrialized nations.
  • Consumption from growing economies is what will lead to the heightened crude demand.

For the full details, read this Globe and Mail article.

For more business news, see below:

For your business needs, contact the Winflow Financial Group. Our trained consultants can help your business through the economic downturn. We can be reached at 1.800.956.6897.