Saturday, July 28, 2012

Brazil's Economy

Brazil is the leading economic power in South America it has a vast workforce and natural resources such as gold and petroleum.  Brazil is the largest country in South America in July its population was reported to be 205,716,890 according to the World Factbook.  According to the World Bank Brazil's GDP was worth 2476.6 billion dollars in 2011 that makes up about 3.37% of the world economy.  The Brazilian Real currently trades at 2.0221 per U.S. dollar, in the last 30 days the USD/BRL has depreciated about 2.8% in July 2011 the currency was trading at about 1.58. 

In 2007-08 Brazil experienced strong growth and its debt was given investment grade status.  It is no surprise that the 2008 global recession did not spare Brazil, it entered a recession due to a slow global demand for its commodities.  Brazil came back strong and was one of the first markets to recover delivering a GDP growth rate of 7.5% in 2010.  Rising inflation and the global economic slowdown in 2011 brought down Brazil's GDP growth rate to 2.7%, the first quarter of 2012 saw even lower growth.  Brazil's inflation rate is currently 4.92% and interest rates reached a record low of 8% in July 2012.  The country's high interest rates in a world of low interest rates make it attractive for investment. Brazil's 10yr government bond is yielding 12.55% interest.  In 2011 Brazil became the world's seventh largest economy in terms of GDP making it an important player, the title was previously held by the United Kingdom.  The unemployment rate was reported to be 5.8% in June 2012.

The Bovespa Brazil's Sao Paulo Stock Exchange Index has rallied 3900 points in the last 30 days.  It closed at 56,553.12 on Friday one of the top performers for the day was OGX Petroleo e Gas Participacoes SA which is an oil and gas production company.

Although some investors have placed their faith in the Brazilian economy it has been slowing down a bit some of the fault can be pinned on a weaker demand for the country's goods.  On Friday the President of the South American country Dilma Rousseff stated the government will look to stimulate the economy by investing more in infrastructure.  Although the global economy is slowing she sees the economic growth in Brazil accelerating in the coming months.  Economists believe the country's growth will remain below 2% for 2012.




Wednesday, July 18, 2012

Food Prices To Rise

Corn Futures prices have been trending upward these last few months but have picked up even more steam in June-July closing today at $7.8425 a bushel.  Soybeans and Oats have also increased in price and closed higher today.  The Midwest drought has cleaned out crops in fields and can be expected to cause food prices to increase later this year and into 2013.  Oil prices have also spiked and if they continue this way they will only add to expensive food prices throughout the year. Some investors believe this will jump start inflation along with QE3 if it is injected this year or the following.  During the early 1980's we had a double dip recession which was followed by some heavy inflation.  Investors ran for their lives while they could and took refuge in real estate before their dollars could be eaten alive.  Whether we endure heavy inflation or not we can still prepare ahead of time by keeping some money in liquid form and looking for other safe havens such as gold and stocks.

Tuesday, July 17, 2012

Taking Care Of Your Credit Card Debt

In this economic environment where interest rates are at 0.25% no one should have to pay 24.9% APR on credit card debt specially since interest rates will stay low until 2014.  As a consumer and a financially responsible individual you should be concerned at the amount of debt you hold and at what rate you repay that loan.  When reducing debt your first step should be to put your plan of repayment on a piece of paper so you will stick to it.  Your second step should be to call your credit card company to negotiate a lower APR by stating that you want to pay off your debt quickly.  If a credit card company has you at a high interest rate while you have good credit you should not be holding any debt on that card. 

If you cannot get your current credit card company to lower rates shop around to see if you can strategically transfer your balance.  Try not to apply for too many credit cards as this will lower your credit score.  Even if you transfer the balance to only one credit card issuer this will result in a small drop on your credit score but it can be worth it if it frees up some of your credit, the small drop will disappear within 6 months.  Remember the less available credit you use the higher your credit score will be.

If you have an outstanding balance of $10,000 at a current APR of 24% you should look to transfer that balance at a zero introductory rate for 15-18 months and a lower rate after the introductory rate expires. The national average APR on new card offers is currently 14.91%.  Read the fine print, these offers might have ways of hurting those suffering from less than optimal credit scores.  Credit card issuers can change the terms after the introductory rate has expired.  Watch out for balance transfer fees they are usually 3% and they may not be capped.  If you have excellent credit take advantage of the limited time offer some banks are promoting: zero balance transfer fees.

A credit card balance transfer should be used strategically and not often, this can hurt your credit score and it may affect the way lenders see you.  It should be used to get rid of old debt at a lower rate and not to give you room to breathe as you continue to purchase recklessly.  I would only recommend a balance transfer for those trying to eliminate debt within the introductory zero rate time frame and not to add any other purchases within that time period.  Credit card issuers know that the odds are against the debt holder and that most likely they will continue to make purchases on this new card. They also know that the debt holder will have a hard time repaying their balance in full within the zero introductory time period.  If you know you have a problem get free help and counseling before you consider transfer balances or consolidating. 

Thursday, July 12, 2012

It's OK To Stay On The Sideline For Now

The market sentiment has been weak these last few days.  With that said traders should have taken profits or shorted the market during the end of June; I know I did.  Since the Recession began the Dow has had a hard time hitting 13,000 and when it does it faces some tough resistance.  Slow growth data from major players around the globe was a good hint to sell when the Dow came close to hitting the13,000 mark once again at the beginning of the month, it was surprising it got so close given the global economic state we are in.

Too many uncertainties and bad news are reason enough for investors to take a moment to plan their next move.  Taking a look from the outside gives an investor a relaxed point of view.  Investors have to digest the possibility of another U.S. credit downgrade, double dip recession and possibly a lost decade.  Some believe we never really came out of the recession.  Most of Europe is sporting interest rates below 2.00% and other major countries have been cutting their rates.  It appears they are preparing for a tough financial environment.  Investors may just watch what the market will do next in terms of U.S. data and stimulus as well as the presidential elections.  If the market drops it may be a good opportunity to start picking up high dividend yielding stocks - interest rates are so low it has become hard to get decent returns.  With 10 yr treasuries (^TNX) yielding 1.48 an investor is better off in cash waiting to get in on a good stock.

Entering or exiting the market at the right time is essential for profit making.  The market may seem cheap to some investors out there but given the data and the way the world is positioned I would reconsider.  The market can move violently on fear, the official announcement of a U.S. double dip recession won't be pretty people have had it with daily news about the euro crisis and the high unemployment in the U.S. it has been 5 years since the recession started and 3 years since it ended. 

Real estate has not been improving at a quick enough pace, for the 1st quarter of 2012 property sales were showing signs of either no improvement or very slow progress.  According to Jones Lang LaSalle 2012 review "Vacancy levels continue to drop nationally in trophy and Class A properties in 2011; yet, with the exception of markets spurred by technology, energy and healthcare demands, they have a way to go before witnessing the lows of 2006," said John Sikaitis, Director of U.S. Office Research.

An investor should not be entering trades in haste, cash is good right now if anything the dollar is worth more now with currencies depreciating to the almighty dollar.  On the other hand a strong dollar can hurt U.S. companies, waiting for earnings reports to give us a clearer picture is a good way to sit it out until  the environment gets a little more safe to take positions.  The market seems to be signaling more news on the bearish side at any moment we could get a summer crash just like 2011 and as it is said it is best to buy stock when there is still blood on the street.  I don't feel that confident buying just yet as the global data could send us into a bear market even after another round of stimulus.  The Fed did not state it will implement Q3.  But as Nouriel Roubini states in his Bloomberg TV interview the Fed may already be out of effective cures to aid our hurting economy. 

At this point it is about strategically entering the market and analyzing world data to get a good buy or sell.  Although most data signals trouble not all the news out is bad, initial claims for state unemployment benefits in the United States have dropped to a four year low.

Wednesday, July 4, 2012

How Healthy Is The Indian Economy Today?

As traders wait on the Fed to add more stimulus to the U.S. economy it is important to see how the rest of the world is performing.  From recent data on manufacturing it is obvious that growth has been slowing down worldwide.  Despite the rally we have seen the last few days on the hope of stimulus the fact of the matter is the world is hurting, global risk has reached Asia with lower orders from the rest of the world.  In 2010 India recovered from the global recession due to their growth exceeding 8% year after year.  Since 1997 India has been growing above 7% according to the World Factbook.  According to a report by the World Bank India's GDP was worth 1729.01 billion dollars in 2010 or 2.79% of the world economy. 

In 2011 India's economic growth started to slow the rupee has depreciated close to 25% over the past year currently trading at 54.53 USD/INR.  Despite the crisis in the euro zone the rupee has also slipped against the euro about 10% in the past year currently trading at 68.32 EUR/INR.  In the first quarter of 2012 India's GDP growth rate expanded 5.3%.  Let us not forget the high inflation rate in the country inching its way up to 7.55% in May and interest rates hovering at 8% make for a troubling economy.  India still faces widespread poverty and inadequate access to higher education although they do have a large English speaking population who are major exporters of information technology services.  Non agricultural jobs are still a concern in the Asian country their unemployment rate stands at 9.40%. 

The SENSEX 30 a major stock market index in India closed at 17,462.81 it has rallied 1461 points in the last month.  One of the top performers for the day was Sterlite Industries India Ltd which manufactures electrical wires as well as zinc and lead products.  You can find Mukesh Ambani as one of the 38 Indian billionaires on Forbes he makes the list at number 19 compared to other world billionaires, he is the richest man in India. 

It seems the Indian boom that lasted for more than a decade is coming to a halt and some worry about a lost decade.  Morgan Stanley has lowered its forecast for India's economic growth for 2012 and 2013.