by | May 22, 2014 · 1:56 pm

Inflation and interest rate

What a rally in Asia today! Japan`s Nikkei is up +2,11% to 14,338. Hang Seng is up +0,51% and ASX 200 is up +1,02%. It was a great rally in the U.S yesterday too. The Dow was up +0,97%, S&P 500 +0,81% and Nasdaq +0,85%. Great!

Why this rally now? The investors like the good news from China. The China manufacturing data is good, and that will have a positive impact on Europe. The message from the Fed minutes is also good. They say that there will be no rate increase soon.

Asian stocks rose to set for the biggest gain in three months, after minutes showed Federal Reserve policy makers see muted risk of inflation from continued U.S stimulus. Fed`s policy makers said continued stimulus to push unemployment lower doesn`t risk sparking an undesirable jump in the inflation rate.

money2

Policy makers are watching progress toward their goal of full employment as they consider the timing of the first interest-rate increase since 2006. The Fed has said the benchmark rate will stay low for a «considerabe time». They ended its bond-purchase program that set to wind down by late this year.

The Fed have earlier said that they will keep the interest rate low at least as long as the jobless rate is below 6,5% and the outlook for inflation didn`t exceed 2,5%. Is that really possible? Let`s take a look at Japan. They have printed more money than U.S.

Japan`s inflation peaked out in the middle of the 70`s, but the real problems started in 1989. Japan`s Nikkei Index hit its all time high on December 29, 1989, during the peak of the Japanese asset price bubble. It reached an intra-day high of 38,957 before closing at 38,915,87.

700px-Nikkei_225(1970-).svg

(Picture: Japan`s Nikkei Index)

The bubble burst, and the Nikkei stock index plummeted and lost nearly all these gains, closing at 7,054,98 on March 10, 2009. That is 81,9% below its peak twenty years earlier. The unemployment rate increased, but stopped at 5%. Now, Japan`s unemployment is down to 3,6% (April, 2014).

Unemployment_Rate_of_Japan_1953-2009

(Picture: Unemployment rate in Japan 1953 – 2009)

 

Japan`s inflation rate is stable, and that is strange. Normally when you print a lot of money, inflation rate are increasing and it becomes extremely difficult to reduce it. If you look at the Japan`s inflation rate, it is stable.

The inflation rate in Japan was recorded at 1,60% in March of 2014. It had an all time high of 25% in February of 1976, and a record low of -2,52% in October of 2009. Japan`s inflation rate is in black on the picture below:

japan-inflation-cpi and US inflation compared

(Picture: Japan and U.S inflation rate – compared)

 

The most important categories in the CPI (Consumer Price Index) are Food (25% of total weight). Housing (21%), Transport and communications accounts for 14%. Culture and recreation (11,5%), Fuel, light and water charges for 7%. Medical care (4,3%), clothes and footwear (4%), Furniture and household utensils, Education and Miscellaneous goods and services account for the remaining.

Central banks around the world will try to sustain an inflation rate of 2 – 3%. The purchasing power is falling if the prices of goods and services is rising. Central banks attempt to stop severe inflation, along with severe deflation. They will keep the excessive growth of prices to a minimum. Inflation plays a large role in the Fed`s decisions regarding interest rates.

So far so good!

 

Reports today:

08:30 a.m EST unemployment Claims
09:45 a.m EST Flash manufacturing PMI
10:00 a.m EST Existing Home Sales

 

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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by | May 21, 2014 · 1:57 pm

Tesla vs Fisker

Fisker Automotive Inc is an American automaker based in Anaheim, California. They released their first product which is Fisker Karma. That`s one of the world`s first production plug-in hybrid electic vehicles.

Fisker logo

It debuted in 2008, but production was suspended in November 2012 due to financial difficulties, with about 2,450 Karmas built since 2011. Fisker stopped production in the summer 2012, and was seeking new investment.

Matter were further complicated by the bankruptcy of its battery supplier A123 Systems. The production stopped for over five months and co-founder and CEO Henrik Fisker resigned. One of the investors in Fisher was Leonardo de Caprio, and he lost everything.

Fisker eventually declared bankruptcy in November 2013, and in February 2014 the company was bought by Chinese auto-parts conglomerate Wanxiang Group. Price; US$24,75 million, supported by the Official Creditors committee in the case.

fisker-karma-7

Wanxiang Group owns A 123 Systems (now known as B456). Fisker`s former battery supplier, and Fisker argues that Wanxiang`s conduct was partly responsible for Fisker`s business failure. As part of its bid, Wanziang proposes to restart production of the Karma.

Wanxiang received court approval on February 18 this year, to buy the assets of Fisker after a three-day auction against Hybrid with a bid of US$149,2 million, with bidding starting at US$55 million, significantly larger than the previous US$24,75 million bid.

Wanxiang claimed that it could restart production, estimating that it would sell more than 1,000 Fisker Karma cars in the first 18 months in the US and 500 in Europe. Fisker Karma is a plug-in hybrid luxury sports sedan produced by Fisker Automotive and manufactured at Valmet Automotive in Finland.

The aluminium frame was engineered by Fisker and was supplied by Norsk Hydro from Norway. The 20,1 kWh (72,36 MJ) lithium-ion rechargeable battery in each car came from A123 Systems in Watertown, Massachusetts.

By the end of 2012 Fisker claimed 1,800 cars had been delivered. They have established 45 dealerships in the US and three in Canada. They have built 2,000 vehicles and has partnered with five importers: GP Supercars (Merano, Italy), Nellemann (Copenhagen, Denmark), the Emil Frey Group (Zurich, Switzerland), BD Otomotive (Istandbul, Turkey) and Al-Futtaim Group (Middle East and North Africa).

In April 14, 2008, Tesla Motors filed a lawsuit against Fisker Automotive, alleging they stole Tesla`s tehnology and are using it to develop their own hybrid car, the Fisker Karma. Tesla`s suit claims that the design work done for the Model S by Fisker Coachbuild was substandard, and that Fisker diverted its best ideas to the Karma.

In early 2009 the suit was settled in Fisker`s favor and Tesla was ordered to pay Fisker more than US$1.1 million in legal fees. Fisker looks very similar to the Tesla cars, and if Fisker start to produce electric cars now, it will take many year to be finish and launch the new car.

So far, Tesla is absolutely the best car I have driven. It`s also one of the coolest. Tesla must expect to see competitors on the market but so far Tesla is the leader, and it will take some time for others to produce the cars and start to sell them.
Reports today:

10:00 a.m EST FOMC Member Dudley speaks
10:30 a.m EST Crude Oil Inventories
11:30 a.m EST Fed Chair Yellen speaks
01:30 a.m EST FOMC Member Kocherlakota speaks
02:00 a.m EST FOMC Meeting Minutes

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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by | May 20, 2014 · 2:01 pm

Mobile ad opportunity

Vodafone`s (VOD) FY EBITDA dropped 5,4%. Their revenue also slipped 1,9% to £43,6 billion. Net profit attributable to shareholders soared to £59,25 billion from £413 million in 2013, boosted by the sale of their 45% stake in Verizone Wireless for $130 billion.

Vodafone logo

Organic service revenue declined 3,8% in Q4. Adjusted operating profit dropped 37% to £7,67 billion, mainly due to a much lower contribution from Verizone Wireless before it was sold. Vodafone expects FY 2015 EBITDA to drop to £11,5 billion.

CEO Vittorio Colao say Vodafone`s emerging markets businesses have performed strongly. In Europe, the company continues to face competitive. Vodafone declared a final dividend of 7,47 pence a share, giving total dividends of 11 pence, up 8%.

Vodafone is the world`s second-largest mobile network operator and the Pan-European FTSEurofirst 300 Indes slipped today as Vodafone fell 4% after reporting huge impairment costs. Vodafone was the biggest faller on the FTSEurofirst 300 today.

The underlying profit continuing to move in the wrong direction and it seems to be very expensive to be in this competitive markets. AT&T bought Direct-TV to diversify and continue to grow its business.

100px-AT&T_logo.svg

This makes AT&T strong, and Verizone, Sprint and T-Mobile should watch out, as AT&T has more leverage right now. Direct TV`s coverage map can reach 99% of households. Their mentions that cost savings will exceed $1,6 billion.

AT&T now have the ability to price itself lower than other competitors. AT&T`s CEO belive the deal will go through regulators in light of recent trends in telecom and communications. AT&T bought out Direct TV for $95 per share ($48,5 billion).

It`s probably better to be on the other side. Facebook are earning money on their direct ad mobile advertising. Now, Yahoo have the ability to do the same as Facebook. Yahoo is down -16,2% so far in 2014.

y_mobile

The Alibaba IPO can give Yahoo a huge opportunity as they have a potential in Yahoo`s mobile advertising. They can acquire mobile advertising firms like Millennial Media or AOL. This is what made Facebook a big growth company.

Yahoo have Yahoo Weather, Yahoo Finance and Tumblr. They have about 360 million global users and this amount of users can make Yahoo grow with a new mobile ad platform. Yahoo have the ability to buy Millennial Media cheap.

Anyway; Yahoo`s stake in Alibaba will give them a lot of cash, and you all know that Cash is King! Money is just a piece of paper. It ain`t worth something. Just the thing you can buy with the cash. So what is money? It`s just tools, and you need the tools to reach your goals.

Yahoo have a huge opportunity during the Alibaba IPO, and they can be a great growth company if they are doing the right things now. Yahoo have been on the market for a long time, and money will not be the biggest problem for them now. They need a great idea. Mobile ads can be one of them.

Read my article about Ymobile on March 28, 2014.

Reports today:
08:30 a.m EST FOMC Member Plosser speaks
08:30 a.m EST FOMC Member Dudley speaks

 
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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by | May 19, 2014 · 2:18 pm

Consolidation since March

It was a good day for U.S stocks on friday. The Dow up +0,27%, S&P 500 +0,37% and Nasdaq +0,52%. Japan`s Nikkei is down today -0,64%, while Hang Seng is almost flat -0,04%. Copper is up +0,75% today, while Silver advance +1,14%. Gold is up +0,61%,Crude Oil (brent) is up +0,33%.

European stocks are in a red territory so far today. Stoxx 50 -0,57%, FTSE 100 -0,32%, CAC 40 -0,17% and DAX is down -0,35% so far today. Investors are waiting for the next Governing Council meeting on June 5 in Frankfurt.

It is expected that ECB (European Central Bank) will ease policy. The reason why this is expected is mostly because of what`s been saying in May 8 meeting. Draghi said that policy makers are «dissatisfied» with the inflation outlook and «confortable with acting next time».

Some speculate that it will cut the benchmark rate by 10 basis points to 0,15%, and the deposit rate, which is at zero. Denmark ended its experiment with negative rates last month. ECB`s inflation goal is just under 2%, but the inflation is below 1%.

The inflation has been below 1% since october and the Euro is strong. The currency has risen more than 7% against the dollar since early July 2013. The Euro climbed as high as $1,3993 on May 8, right after Draghi spoke. EUR is now trading at $1,3719.

Take a look at S&P 500 Large Cap Index.

SPX 19.05.2014

Many bulls and bears are frustrated. They are both waiting for the index to move, but the SPX have been in a consolidation for many weeks and months now. It all started in Mars this year. Investors are not waiting for consolidation, but rather correction. That`s why they are frustrated. The SPX is flirting with 50MA, which is at 1867,88.

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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by | May 16, 2014 · 2:00 pm

World`s biggest election

 

The world`s largest democracy has a new leader and his name is Narendra Modi. India`s opposition leader Narendra Modi is on course to become prime minister in India, as his party heads for a majority in the national elections.

India

India is a country in South Asia and is the seventh-largest country by area, the second-most populous country with over 1.2 billion people. It shares land borders with Pakistan to the west, China, Nepal and Bhutan to the north-east, and Burma and Bangladesh to the east.

 

The Indian economy is the world`s tenth-largest by nominal GDP and third-largest by purchasing power parity (PPP). Following market-based economic reforms in 1991, India became one of the fastes-growing major economies; it is considered a newly industrialised country.

 

India continue to face the challenges of poverty, corruption, malnutrition, inadequate public healthcare and terrorism. It has the third-largest standing army in the world and ranks eight in military expenditure among nations.

 

Jawaharlal Nehru became India`s first prime minister in 1947. Mahatma Gandhi led the independence movement. Economic liberalisation, which was begun in the 1990`s has created a large urban middle class, which transformed India into one of the world`s fastet-growing economies.

 

This is the longest election in the country`s history. The Indian general election of 2014 was held to constitute the 16th Lok Sabha in nine phases, from 7 April to 12 May 2014. The electoral population in 2014 election was 814,5 million and this is the largest election in the world ever.

 

Parties were expected to spend US$5 billion in the election, and this is three times the amount spent in the previous election in 2009, and is the world`s second highest after the US$7 billion spent on the 2012 presidental election.

 

Modi fought an impressive campaign, focused mostly on the right issues. He successfully cast the election as a referendum on who could better deliver jobs, government services and economic growth: himself or Rahul Gandhi, the ruling Congress party`s heir apparent.

 

Modi is not the first candidate to cruise to victory on hope and hype. He will probably not be the first to see disappointment set in fast. Investors expecting miracles are in for a letdown, because India`s political system is bound to intervene.

 

Modi should move to phase out petroleum subsidies. He should give states and local governments much greater flexibility in regulating labor markets, land and sales. Economic competition among the states should be more in focus because this is the best way to push the national economy forward.

 

I personally see India as an attractive investment destination, and this country has overtaken China as an investment opportunity. Great Indian sectors are automotive, technology and consumer products. India is playing a big role in the gold market.

 

Reports today:

 

08:30 a.m EST Building Permits

08:30 a.m EST Housing Starts

09:55 a.m EST Prelim UoM Consumer Sentiment

09:55 a.m EST Prelim UoM Inflation Expectations

 

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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