potato

Global Prices And Political Boundaries

The “dollar-related drop in import prices is one of the things weighing on U.S. consumer prices, and one of the reasons inflation is running well below the Fed’s 2% target.”  This has led some to believe that the Fed will wait to see a turnaround in the dollar or, perhaps, stable import prices before raising rates.  “That won’t happen right away.  This is because purchases overseas are often contracted in dollars months ahead of time, so much of the dollar’s rally this year has yet to register in import prices.  The dollar’s effect on the prices consumers pay takes longer to show up, as much as a year….So even if recent signs that the dollar is leveling off hold, the pressure that its recent strength is exerting on prices will still very much be in evidence at the start of the summer.”  Meanwhile, “U.S. import prices fell in March as rising petroleum costs were offset by declining prices for other goods…Import prices dropped 0.3 percent last month after a downwardly revised 0.2 percent gain in February.”  Also, “China’s consumer price index maintained a sluggish year-on-year pace of 1.4 per cent in March, the same rate as in February, according to the government’s official figures…The producer price index, often regarded as a leading indicator for consumer prices, has been mired in deflation thanks to sliding domestic demand and chronic overcapacity…Producer prices deflated for a 37th consecutive month in March, falling 4.6 per cent, versus a 4.8 per cent fall in February…’The current bout of goods deflation in China and South Korea is the longest in postwar East Asia outside of Japan in the 1990s.”  Meanwhile, the Treasury Department says “South Korean authorities appear to have intervened in December and January to keep their currency from appreciating…South Korea’s trade surplus with the U.S. totaled $14 billion in the second half of 2014, larger than the $9.6 billion surplus from the same period a year ago.”

 

Great Hope News For All Economies

“When it comes to stocks, America is the big loser this year.  The S&P 500 is up just 1.6 percent through Thursday’s close, making it the worst among major market indexes for 2015…In Europe, the U.K.’s FTSE 100 is up 6 percent, France’s CAC 40 has climbed 22 percent, Germany’s DAX is up 24 percent and Russia’s RTS is up 27 percent.”  James Mackintosh says “these are weird indices which mix companies from across borders traded in different currencies…four of the five biggest contributors to the Stoxx 600’s rise this year have been from outside the eurozone, in Switzerland or Denmark.  Another two of the top 10 contributors are British, Glaxo and BP.  All have been helped by the plunging euro, as they are not traded in euros.”  Meanwhile, “Hong Kong is set to overtake Japan as the world’s third-largest stock market…Japan is poised to drop to No. 4 even as the nation’s shares almost double under Prime Minister Shinzo Abe…’the Japanese market is actually rising on hopes that monetary easing will help us escape deflation.  And if Chinese stocks are rallying on expectations the government will prop up the economy, that’s great news for all economies.’”

 

Hot Potatoes

Goldman Sachs says “passive ETFs aren’t being used passively by buy-and-hold investors.”  “One lingering knock against ETFs is that — in spite of their potential benefits of low cost, tax efficiency and diversification — their widespread use is turning ordinary long-term investors [into] fast-trading, global-macro focused buy-and-sell junkies.”  Furthermore, “the prevalence of ETFs seems to be influencing price moves…Correlations between stocks and sectors [have] been increasing since the 2008 financial crisis.”  Meanwhile, annualized turnover on the New York Stock Exchange “is down to 63% from a high of 110% in 2010;” however, “including trades on all marketplaces, the annual turnover rate in U.S. stocks is running at 307%…And that figure doesn’t include [ETFs], which get flung around like hot potatoes.  According to John Bogle, founder of the Vanguard Group, the 20 largest ETFs were traded last year at an average turnover rate of 1,244%.”

 

WM: 8-10% Average Return Is A Decent Goal That You Won’t Ever Actually See

 

What: Scott Stringer Thinks Scott Stringer May Have Misled Some Folks

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