|By Brett Arends, The Wall Street Journal, 05/20/2013|
MarketMinder's View: In our view, there’s no “cognitive dissonance” between low Treasury yields and high stock prices. Yields are artificially low due to the Fed, and stocks are rising in sympathy with corporate earnings. And 12-month trailing and forward P/Es—which are far more relevant than the 10-year trailing P/E used here—remain low by historical standards, suggesting investors don’t fully appreciate how strong corporate America is.
|By Ambrose Evans-Pritchard, The Telegraph, 05/20/2013|
MarketMinder's View: We don’t see much evidence markets are “euphoric” or rising on QE alone. Much of the QE money globally is on deposit at the central banks as excess reserves, not leaking into stocks, and yield-hungry institutional investors are shifting more into higher-yielding fixed income than stocks. That said, we’d welcome an early end to QE, which is contractionary—it flattens the yield curve, which reduces banks’ incentive to lend and thus hampers economic activity.
|By Amy Schatz, The Wall Street Journal, 05/20/2013|
MarketMinder's View: It seems several states are jumping the gun and planning how to spend online sales tax revenue before Congress approves the Marketplace Fairness Act—potentially a risky maneuver, considering the bill appears unlikely to pass the House. Plus, even if it’s passed, states may get less revenue than anticipated as shoppers may gravitate away from sales-tax-charging online retailers. For more, see our 4/24/2013 cover story, “Tax Shenaniganery.”
|By Holly Ellyatt, CNBC, 05/20/2013|
MarketMinder's View: A new report shows some French households’ tax bills exceeded their annual income in 2012—which could very well be one big reason France is back in recession. In our view, lowering tax rates and allowing households to spend more money as they see fit would likely help bolster growth.
|By Steven Mufson, The Washington Post, 05/20/2013|
MarketMinder's View: After much debate, the US gave an LNG export terminal permission to send LNG to Japan. In our view, this is a win for all involved as cheaper natural gas should help Japan combat rising energy costs (post-Fukushima) and US firms can potentially reap higher profits by selling into pricier foreign markets.
|By Mark J. Perry, AEIdeas, 05/20/2013|
MarketMinder's View: Another great example of how innovation—the offspring of free markets—can help improve quality of life. In this case, advancements in 3D printing technology give amputees more options for prosthetic limbs.
|By Staff, Economist, 05/20/2013|
MarketMinder's View: China has a lot of low-hanging fruit for economic reform, and as this piece shows, progress on this front could provide a big boost. The government appears to understand longer-term economic success will require strong domestic demand, a robust private sector and more economic freedom, and officials have announced broad reform plans. Whether action follows, however, remains to be seen. Events here bear watching as Chinese leaders likely grapple with some policy give-and-take. For more, see our 4/16/2013 cover story, “Chinese Checkers.”
|By Jim Puzzanghera, Los Angeles Times, 05/20/2013|
MarketMinder's View: It seems more folks are realizing the sequester isn’t as impactful as feared—strong businesses and consumers can more than offset slower government spending. For more, see our 4/3/2013 cover story, “Seq-Watered-Down.”
|By Allan S. Roth, The Wall Street Journal, 05/20/2013|
MarketMinder's View: Whether you’re considering an annuity (the topic here) or any other investment, it’s important to do your due diligence and find out what incentive your adviser has to recommend a particular product—and read all of the prospectus’s fine print—to determine whether it’s really in your best interests.
|By Daniel Gross, The Daily Beast, 05/20/2013|
MarketMinder's View: Venezuela’s toilet paper shortage highlights the unintended consequences of government intervention in markets—specifically, price and currency controls.
|By Editorial Staff, Bloomberg, 05/17/2013|
MarketMinder's View: Actually, in our view, there’s ample data showing stocks’ recent rally isn’t a Fed bubble or otherwise driven by credit. Most of the money printed by the world’s central banks is sitting as excess bank reserves, and bank lending hasn’t meaningfully increased. Yes, margin debt has risen on an absolute level, but the ratio of margin debt to cash is well below historical levels, suggesting claims of a market rally built on fragile leverage are unfounded.
|By Alan Tonelson, Bloomberg, 05/17/2013|
MarketMinder's View: If the complex protectionist system touted here were really the solution for poor working conditions in developing-world garment factories, then why were conditions in many nations so poor during its 1974-2005 existence?
|By Ambrose Evans-Pritchard, The Telegraph, 05/17/2013|
MarketMinder's View: While a weak yen contributed to the 1997 Asian currency crisis, today’s weak yen doesn’t necessarily herald a repeat. Most of 1997’s trauma came from Asian nations defending, then discarding misaligned currency pegs. Today, these countries largely have free-floating currencies, making them less vulnerable to yen movement. For more, see our 4/23/2013 column, “Now and Yen.”
|By Staff, Der Spiegel, 05/17/2013|
MarketMinder's View: The apparent disconnect between Germany Chancellor Angela Merkel and French President François Hollande isn’t necessarily as meaningful as this piece suggests—more likely, it’s a function of temporary domestic political interests. Merkel has a re-election campaign to fight and, thus, a vested interest in not appearing too lenient with eurozone partners, while Hollande is fending off members of his cabinet who think he’s untrue to his Socialist party’s agenda. But that needn’t prevent compromise on eurozone matters when necessary.
|By Staff, EUbusiness, 05/17/2013|
MarketMinder's View: Bank stress tests are largely window-dressing—they don’t really tell you how a bank will respond to actual stress. To wit, Cyprus’s now-failed Laiki bank passed 2010 stress tests with flying colors.
|By Editorial Board, The Wall Street Journal, 05/17/2013|
MarketMinder's View: Fiscal and monetary stimulus gave Japan a boost in Q1, but sustained growth likely requires deep structural reform—and this piece highlights many of the most glaring needs. Prime Minister Shinzo Abe may have the rare political capital to pull off meaningful change, but whether he can seize the opportunity remains to be seen.
|By Fisher Investments Editorial Staff, The Street, 05/17/2013|
MarketMinder's View: Our latest for The Street, on the underappreciated health of US demand.
|By Staff, Reuters, 05/17/2013|
MarketMinder's View: While LEI’s not a perfect gauge of economic direction, a high and rising LEI is one more sign of the US’s underappreciated economic strength.
|By Jeremy Warner, The Telegraph, 05/17/2013|
MarketMinder's View: “As this week’s dismal GDP figures demonstrate, Europe desperately needs some kind of deregulatory growth agenda, and yet it seems determined only on the reverse. To be pushing ahead with a stifling and invasive initiative at a time of deepening recession fair takes the breath away.” On the bright side, though, many in Europe have seemingly started realizing this, and the financial transactions tax looks increasingly likely to get watered down or scrapped altogether.
|By Staff, Jiji Press, 05/17/2013|
MarketMinder's View: Though both nations would likely be better off if Japan scrapped the beef tariff altogether, reducing it from 38% to 30% could help them get past one of the remaining sticking points in their free-trade negotiations.
|By Steve Goreham, The Washington Times, 05/17/2013|
MarketMinder's View: Here’s an interesting look at the economic inefficiencies of solar energy. In our view, if an industry can’t profit without massive taxpayer subsidies, its time likely hasn’t come yet—markets, not governments, will tell us when solar’s the way to go.
|By Howard Schneider, The Washington Post, 05/17/2013|
MarketMinder's View: Removing Bangladesh’s preferential market access may seem like an obvious policy response to deplorable working conditions in the nation’s garment factories, but as this piece highlights, it’s not necessarily the best solution. It could very well whack Bangladeshi workers without inciting the government to tackle the corruption enabling overcrowded, shoddily constructed factories.
|By Staff, Central News Agency, 05/17/2013|
MarketMinder's View: Absent official diplomatic relations with most of the world, these economic cooperation agreements are about as close to free trade as Taiwan can get with anyone other than China. Taiwan’s progressing on several such pacts, which should promote trade growth both on the island and throughout Asia.
Market Wrap-Up, Mon 20 May 2013
Below is a market summary (as of market close Monday, 05/20/2013):
Global Equities: MSCI World (+0.4%)
US Equities: S&P 500 (-0.1%)
UK Equities: FTSE 100 (GBP) (+0.5%)
Best Country: Japan (+1.9%)
Worst Country: United States (-0.1%)
Best Sector: Energy (+0.9%)
Worst Sector: Health Care (-0.2%)
Bond Yields: 10-year US Treasurys rose 0.01 to 1.97%.