Category Archives: Stock market

Hyper inflation of 231,150,888,87 percent in July

Janet Yellen and the FED raised the rates and its expected to see them raise the rates at least a couple of times before the end of this year. In addition; they are planning to raise the rates three times next year. Wow. What about the inflation? Let`s take a look at Japan, Venezuela and Zimbabwe.

Nikkei reach its all-time high on December 29th 1989. The stock market plummeted and did never come back. Japan started to grow after world war II and was among the first in the world to use robots in the 70s and 80s.

Japan used robots especially in the auto and techno industry. The optimism went to be a huge euphoria og Nikkei reached 38.957.44 and ended the day at 38.915.87 on December 29th 1989. As you may know; Japan started to «print» money. But what happened to the inflation?

As you can see from the chart above, Japans inflation increased the early 90s and then it started to decline again. You can see from the chart that it went up again in the late 90`s, but not for a long time. It drops every time it goes up.

Consumer prices increased 0,4 percent YoY in January this year. Transportation cost posted the first annual gain since March of 2015 and prices went up faster for clothing and footwear and recreation and culture.

Inflation rate reached an all-time high of 24,9 percent in February of 1974 and a record low of -2,5 percent in October of 2009. It`s a different and more scary story in Venezuela.

It`s not getting better in Venezuela and it goes from bad to extremely bad right now. What in the world is going on? Venezuela has the highest inflation rate in the world right now. Economic turmoil in Venezuela has made the bolivar go straight up to heaven.

Some analysts say it could reach 2000 percent in 2017. No, I`m not kidding; 2000 percent. President Nicolàs Maduro who is elected after the death of socialist firebrand Hugo Chàvez explained the shock move by accusing US-backed «mafias» of conspiring to destabilize his country’s economy by hoarding bank notes.

Take a good look at the chart above. Consumer prices in Venezuela jumped 800 percent YoY in 2016, following a 180,9 percent rise in 2015. It is the highest inflation rate on record after the slump in oil prices led to a severe recession and food shortages.

Venezuela reached an all-time high of 800 percent in December of 2016 and a record low of 3,22 percent in February of 1973. You think 800 percent is much? Take a look at Zimbabwe.

The worst of the inflation occurred in 2008, leading to the abandonment of the currency. The peak month of hyperinflation occurred in mid-November 2008 with a rate estimated at 79,600,000% per month. That is what I call hyper-inflation.

This resulted in US$1 becoming equivalent to the staggering sum of Z$2,621,228. The rate went up 585,84 percent in 2005. 1,281,11 percent in 2006 and 66,212,3 percent in 2007. And then it exploded; Up 231,150,888,87 percent in July of 2008. Wow.

Hyper-inflation like that mean that the price can jump when you are sitting on the bus. That can be problematic for some customers but also for business owners.

Any Zimbabwean dollars acquired needed to be exchanged for foreign currency on the parallel market immediately, or the holder would suffer a significant loss of value.

For example, a mini-bus driver charged riders in Zimbabwean dollars, but different rates throughout the day. The evening commute was highest-priced. He sometimes exchanged money three times a day, not in banks but in back office rooms and parking lots.

Lack of confidence in government to practice fiscal restraint feeds on itself. In Zimbabwe, neither the issuance of banknotes of higher denominations nor proclamation of new currency regimes led holders of the currency to expect that the new money would be more stable than the old.

Remedies announced by the government never included a believable basis for monetary stability. Thus, one reason the currency continued to lose value, causing hyperinflation, is that so many people expected it to.

What about a hyper-inflation in the U.S? Is it possible? What can go wrong, and what will happen? I will write more about that later on this week.

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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All eyes on bank stocks this week

The earnings season starts off slowly this week with Alcoa reporting after the bell today. Later on this week we will see reports from many banks.

The first trading day of the year didn`t start good, and the first 10 trading days of 2016 slid 8% on S&P 500 Index. That is the worst start to any trading year over the long history on this index dating back to 1928.

In the middle of February, the stock market turned up again. Stock turned down 10,5% in a stock market correction but went straight up again, rallying 13,5% off the lows. The European market didn`t follow, and the biggest losers in Europe is the banking sector.

Sweden, Denmark, Switzerland and Germany have negative interest rate, and banks are suffering from that, which means profit margins are under pressure. So is it for the U.S banks. They are suffering too. The S&P 500 Financial Sector is one of the worst performing domestic sectors, down about 5% YTD.

 

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S&P 500 is near its 2015 peak and corporate profits will drive the stock prices and market. But is it going up or down? First quarter earnings expectations is not the best I have seen, and this will be the first time S&P 500 has had four-straight quarter of declining profitability since the Great Recession in 2008.

According to Merril Lynch, the three-month earnings revision ratio improved during March for the first time since last July. The downward momentum of profit estimates has also slowed. On the other hand; Wall Street are cutting more company earnings estimates than they are increasing.

It can be helpful to look at earnings revisions going forward rather than current quarter earnings results.

Wall Street analysts are less negative about the profit for the big U.S stocks, and this is why Dow Jones Average has been outperforming with all its multi-national blue chips. Their overseas sales are increasing because of a weaker dollar which is helpful for a bigger demand.

Three winning sectors over the past three months is industrials, materials and health care. Materials and health care has been lagging the S&P 500 last year and improving earnings can help both sectors to increase again.

The country`s largest bank JPMorgan Chase & Co will report on Wednesday. Bank of American and Wells Fargo & Co on Thursday, and Citygroup Inc on Friday. Investors will wait for reports from Morgan Stanley on Monday next week and Goldman Sachs the following day.

Banks typically earn about one-third of their annual revenue during the first three months of the year, but some of the banks (Goldman) is expected to come in with the lowest first-quarter earnings since before the financial crisis.

JPMorgan is expected to report adjusted earnings of $1,36 per share, Bank of America $0,25  per share, Wells Fargo: 99 cents per share, Citygroup: $1,11 per share, and Morgan Stanley: $0,63  per share. Goldman Sachs: 3,00 per share.

Banks have a lot of challenges.

 

sam

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Sell your shares in Zimbabwe before April 1

Chinas GDP growth were 14% a few years ago, but now the worlds second-largest economy is lowering the growth target to about 6,5% – 7% in 2016. 7% is still very good, but the economy is slowing down faster than expected.

The economic growth is slowing while China`s Central government budget deficit as a percentage of GDP is growing. The target is 3% in 2016, and China will continue to be a global economic engine. But what is the next China?

It can be Africa which is a hot commodity, but some investors are in doubt. They think it is unstable and unsafe. Some claims it is so much violence in Kenya, but the infrastructure in Kenya makes it a worthy long-term investment.

Africa

Africa is a growing economy with a huge and young population. It has so far been a daunting place to start and run a company there. Very often, it is expensive to start a new business in Africa.

Bank loans come with double-digit interest rates. The electricity grid is sub-par and diesel generators cost a fortune, but many thing are getting better according to the World Bank.

There is a lot of reform happening in Africa right now.

The World Bank publishes a parallel ranking of the countries that have pushed through the most business-friendly reforms. Five African countries are on the top-10 list, which is Kenya, Mauritania, Senegal, Benin and Uganda.

Botswana is the least corrupt country in Africa which is an important factor for entrepreneurs and their investors. This is a country that rely heavily on revenues from the diamond trade to fuel its growth.

Rwanda is an economic success story. Many years of reforms have made it much more easy to open and run a business, and it is far easier to get credit there. Only one country is better and that is Mauritius.

It has commercial links to India, China and the east coast of Africa. Mauritius is often on top of the ranking list for competitiveness and ease of doing business due to its liberal approach to regulation and taxation. What about Zimbabwe?

Zimbabwe

Zimbabwe had rough days, particularly between 2005 and 2008, were hyperinflation decimated the economy. The Central Bank issued currency with expiration dates of six months, effectively longer than the actual life of the currency.

The American dollar replaced the Zimbabwean dollar as the country`s main currency, and now Zimbabwe has started to retiring it’s almost worthless local currency in favor of the U.S dollar.

35 quadrillion Zimbabwean dollars are equal to US $1.

Monthly inflation rate hit 3,5 million percent eight years ago, and prices doubled every 25 hours. Zimbabwe has the second-worst hyperinflation in history, behind post-war Hungary.

It all started in 2000, when Mugabe changed his economic policy and implemented land reform. Mugabe granted farmland owned by white citizens to indigenous black Zimbabweans. They turned from an agriculture exporter to an importer, which resulted  in 94 percent unemployment rate and hyperinflation.

Zimbabwe is known for its mineral resources. It has the world`s second largest deposit of chrome and platinum after South Africa, and President Robert Mugabe wants to take over all diamond operations.

Zimbabwes leader since 1987, Robert Mugabe eager to nationalize Zimbabwes diamond industry, and news from Zimbabwe leaves little to be desired about the small former British colony.

He says the country`s wealth had been looted by the existing miners.

“The state will now own all the diamonds in the country. Companies that have been mining diamonds have robbed us of our wealth. That is why we have now said the state must have a monopoly,” said Mugabe in an interview with the state broadcaster earlier this month.

Foreign investor also need to hurry up and sell their shares to blacks or close before April 1st.

Companies owned by foreigners face closure unless they sell or give up 51% of their shares to black Zimbabweans by April 1, said indigenization Minister Patrick Zhuwao.

“Comply by that date or close shop, comply by that date or face the full wrath of the law,” Bloomberg quotes Zhuwao, who is also President Robert Mugabe`s nephew.

IMF asked the Mugabe administration to clarify Zimbabwe`s policy on black empowerment. Zimbabwe has agreed to major reforms including compensation for evicted white farmers.

President Mugabe is known for evicting white farmers. In 2010, the Guardian reported that Mugabe used land reforms to reward his allies rather than ordinary black Zimbabweans. The newspaper`s sources reported Mugabe and his supporters owned about 40% of the land seized from white farmers.

The white farmers received no compensations after being evicted.

«If white settlers just took the land from us without paying for it, we can, in a similar way, just take it from them without paying for it,» said Mugabe.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Donald Trump is flying high

Donald Trump is a rich man and there is no doubt that Trump has done a great job. That being said, he didn`t build his empire from zero. He is born in a rich family and went from rich to even richer.

Donald John Trump who is from Queens in New York City, is a son of real estate developer Fred Trump. He joined his father’s company in 1971 and changed the name from Elizabeth Trump & Son to «The Trump Organisation».

Donald Trump is the man behind Trump Tower, a 58-story, mixed-use skyscraper in Manhattan. He is also the man behind Trump Taj Mahal, which is a casino in Atlantic City. He is the owner of The Trump Organization which owns, operates, develops, and invests in real estate around the world.

 

trumplane

Trumps hotel and casino businesses have declared bankruptcy five times between 1991 and 2014. The reason for the first four bankruptcies were over-leveraged hotel and casino businesses in Atlanta City: Trumps Taj Mahal, Trump Plaza Hotel, Trump Hotels and Casino Resorts, and Trump Entertainment Resorts.

According to a report by Forbes in 2011, Trump said: “Ive used the laws of this country to pare debt...... Well have the company. Well throw it into a chapter. Well negotiate with the banks. Well make a fantastic deal. You know, its like on The Apprentice. Its not personal. Its just business.” He indicated that other «great entrepreneurs» do the same.

In his campaigns, Donald Trump often talks about negotiations and how to do business. Trump had problems because he had too much debt. So is it in the The United States. The U.S debt is the largest in the world right now. Nearly $20 trillion.

If Donald Trump solved the debt problems in his own companies, will it be easy for him to solve America`s debt too? People vote for him and belive he can handle the economy, taxes and create jobs better than Hillary Clinton. Simply because he is a businessman and not a politicians.

He said: «We owe $19 trillion. Boy, am I good at solving debt problems. Nobody can solve it like me.»

Debt-based growth must come to an end, and sometimes it goes terribly wrong. Not only for private persons and corporations, but also for country`s. Donald Trump had too much debt, but he negotiated and survived.

Some countries have debt greater than their entire annual economic output, which is more than 100% of their GDP. Those countries are in danger of default, just like Iceland in 2008. Japan is the worst example with 229,20% debt. Greece are in trouble with 179% debt-to-GDP.

The United States has a debt-to-GDP ratio of 102,98%. The private debt is nearly $14 trillion larger than any other single country. If the U.S defaulted on its debt, it would bring the global economy down to its knees. In comparison, the U.S debt in 1945 (end of World War II) peaked at 113%.

Ronald Reagan became the 40th president of the United States in 1980, and he declared «debt» to be one of his major campaign issues.

 

Reagan

 

In 1981 he said: «For decades, we have piled deficit upon deficit, mortgaging our future and our children`s future for the temporary convenience of the present….. You and I, as individuals, can, by borrowing, live beyond our means, but for only a limited period of time. Why, then, should we think that collectively, as a nation, we are not bound by that same limitation?»

Between 1980 and 1990, the debt more than tripled as the government borrowed money to fund military build-ups and many elaborate new policies, such as «the war on drugs.» Americans began relying more and more on credit cards and jumbo mortgages, and being «in debt» became a new way of life in America.

Debt-to-GDP rose under Ronald Reagan, when the U.S fell into a particularly nasty recession, set off by the Federal Reserve under Paul Volcker, who raised interest rates to record heights in order to defeat inflation.

The Federal Reserve left the target range for its federal funds rate unchanged at 0,25% to 0,50% for the second time during the meeting held on March 16th 2016. That`s low right.

36 year ago, on March of 1980, the interest rate reached an all time high of 20%!

Government receipts flattened thanks in part to the large, permanent tax cuts that served as one of the top accomplishments of President Ronald Reagan`s first term. Spending jumped on both defense and social programs, and deficit exploded.

 

borrow

 

President Obama talked about his visions during his election. One of his cases was Guantanamo bay. He wanted to close it, but its still open. He still have ten months left, but it seems like a Republican-led Congress will do anything to help bring Obamas 2008 campaign promise to fruition.

Many of Trumps ides sounds very expensive, and sometimes it will be difficult for him to get any support because he wont have a free pass from Congress, even if it remains under the control of the Republican party.

Trump`s immigration plans was not a popular decision and may have cost him a lot of business deals, but it might cost the Unites States much more, while Immigration is an enormous source of economic vitality.

The Census Bureau estimates the US population will grow to 397 million in 2050 with immigration, but only to 328 million with no immigration. One of the biggest challenges in the future will be demand based on accelerating retirement of the baby boomers.

Like in Europe, immigration can therefore be the solution. It`s not a crisis, but an opportunity.

Donald Trump floated the idea of running for president in 1988, 2004 and 2012, and for Governor of New York in 2006 and 2014, but did not enter those races. Trump is pro-active and there is no doubt that he wan`t to reach the top. This is a big thinker.

Despite a lot of anti-Trump ads, he is at the top of the Republican party, but betting odds for the next U.S President is pretty clear: 70 – 30 in favour of Hillary Clinton.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Very important week

Next week will be exiting. The earnings season is at the end and investors focus now will be on a flood of data coming in. It all starts on monday March 14 were the Bank of Japan will announce its policies.

Bank of Japan Gov. Haruhiko Kuroda is in a special situation. Just like ECBs Mario Draghi, he talked about his «bazooka» and said he wanted to do whatever it takes to get Japans economy back on track to a stable growth.

debt

The answer so far is negative interest rate, and they started charging commercial banks 0,1% interest on some reserves last month. That lowered the borrowing cost, but on the other hand, it made some confusion about the effects on Japan`s savers.

Haruhiko Kuroda has been called to parliament for questioning many times and more than any other central bank chief during the same period. Japanese 10-year Government Bonds traded at -0,20% for the first time in history and dropped farther into negative territory.

Negative rate is also seen in Sweden, Denmark and Switzerland. Sweden`s goal is to raise the inflation. The goal in Denmark and Switzerland is to prevent the currency to raise too much.

Negative rates can be the new normal because none of them turn this situation into a strong economic growth. So, What about America?

All eyes will be on Federal Reserve Chair Janet Yellen and the Federal Open Market Committee (FOMC). The FOMC meeting will kick off on Tuesday 15, and the Fed`s interest rate decision is the highlight on Wednesday 16, with the 2 p.m ET announcement followed by a 2,30 press conference with Fed Chair Janet Yellen.

According to Wall Street Journal`s Jon Hilsenrath who is the mouthpiece of the Fed, the central bank will hold off raising rates this month, but will leave the door open for a hike in April or June this year.

U.S Consumer prices went up 1,4% YoY in January of 2016, and the inflation rate accelerated for the fourth straight month which is very impressive. CPI for February 2016 is scheduled to be released on Wednesday 16.

The European Central Bank (ECB) followed BOJ, and increased QE by 20 billion euros per month on thursday. Not only that. They also lowered interest rates, which is an unexpectedly strong move. The ECB increased its monthly bond buying from 60 to 80 billion euros and drove commercial deposit rates from -0,30% to -0,40% and cut a main refinance rate from 0,05% to 0,00%.

As you may know, many people are very angry. Not only in Europe, but also in America. The middle class is wiped out and businessman Donald Trump knows that. He doesn`t like what he see and want to do something about it; Make America great again.

The battle for the White House continues, and next week`s Ohio and Florida primaries would give Donald Trump the knockout blow necessary to capture the GOP nomination. Anti-Trump groups are spending millions of dollar on TV ads to attack him. Is that enough to stop him? If not, it will be a short way left to the White House.

Very important week.

 

sbnews

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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