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Things You May Have Missed

Posted by Larry Doyle on April 7, 2009 10:08 AM |

The stream of data and market moving news is non-stop. I found these items of interest and look to share them with you as I believe they provide interesting insights and perspectives from around the world. I beg your indulgence if some of these items are not news to you, but if they are I hope they help you “navigate the economic landscape.”

1. Australia’s central bank cut its overnight lending rate to 3%, the lowest level in 49 years. While that rate is one of the highest rates in the developed world, it was widely expected to be left unchanged.  Australia has had one of the strongest economies in the world. This cut is an indication the Australian central bank believes their economy is slipping into a recession.

2. Japan’s exports are reported to be down 40% versus a year ago. Additionally, Japan’s industrial production is reported to be down 30+% during the same time period. These economic figures are significantly weaker than most other developed economies. As a frame of reference, most other developed economies’ industrial production is down 10-15%. Clearly, Japan is so dependent on exports and it is now paying the price of not having more fully diversified its economic foundation.

3. Gold is now trading near $880/oz. A month ago this precious metal was trading slightly above $1000/oz. Why is gold down recently? Coming out of the G-20, there are expectations that the IMF may sell some gold reserves to raise funds for low-income countries. I commented the other day that gold is not perfectly correlated with inflation due to changing fundamentals and technical variables in the gold market. This development with the IMF is a perfect case in point of my assertion.

4. 1st quarter earnings for the S&P 500 are expected to be released starting this afternoon with Alcoa. At the beginning of this quarter, analysts projected 1st quarter earnings would be down 12.5% versus a year ago. Those analysts now expect earnings to be down close to 37%. I have seen these analysts play this oversell/underdeliver game with earnings forever. In regard to earnings, let’s make sure to listen for guidance about earnings for the balance of the year. Many companies have moved to a posture of making no comment on future earnings.

5. Can somebody please explain to me why the rating agencies (Moody’s, S&P, Fitch) are in line to receive $400 million dollars in government assistance via the TALF (Term Asset-Backed Lending Facility)? With deal volume down considerably, the revenues at these firms are also down considerably. Big deal. That’s business. Why is the government once again rewarding failure?

6. I have some good news and I have some bad news.

The good news: AIG, our proverbial red-headed stepchild, is receiving interest from potential buyers of its asset management division. The initial indications of interest are in the $400-800 million range.

The bad news: those bid levels are a full 60% below the expected bid levels. What does that say about the valuations for other asset managers?

7. In thinking back on the G-20, was this summit truly anything more than a political rally at which each politician rode in on a white horse, declared victory, and then rode right back out of town? For a more substantive analysis of the Brave New Financial World, I provide a more piercing perspective of the global financial landscape written by one of our Thought Leaders, Kenneth Rogoff.

Please share your own thoughts on any of these items or whatever else is on your mind!!


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