A 10-Step Program for India's Economy - Here is the opening for this excellent column by Jim O'Neill for Bloomberg:
It's fashionable to say the era of strong emerging-market growth is over. As the U.S. recovers, the global cost of capital will rise, holding back investment; against this background, avoiding the next crisis is the best that most emerging economies can do. If you take this view, Indiamight seem a perfect example, with its widening current account deficit, heavy public borrowing, persistent inflation and weak currency.
I don't think so. As a general matter, emerging-market gloom is overdone. India, in particular, could teach the pessimists a lesson.
Last week, I made a quick visit to see the chief minister of Gujarat, Narendra Modi. He'd asked me to give a presentation on how India could realize its still-enormous potential. I went through points I'd first discussed in a paper I co-wrote with Tushar Poddar in 2008: Ten Things for India to Achieve its 2050 Potential. It's striking to me that, five years later, our recommendations don't need revising. (They do need elaborating, and I'll get into more detail in an updated study and further columns. Modi and I are planning a conference of experts before the end of this year.)
I'll state no opinion on Modi's chances of becoming prime minister after next year's general election -- it has been announced that he'll lead the opposition Bharatiya Janata Party's campaign. He's a controversial figure. Detractors call him a sectarian extremist. I will say this: He's good on economics, and that's one of the things India desperately needs in a leader.
My view - I could not agree more with Jim O'Neill's concluding sentence in the paragraph immediately above. Veteran subscribers will be familiar with Fullermoney's stock market adage: " Governance is Everything". And when we say this, we are mostly referring to economic governance.
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Email of the day (1) - On men over 40:
"Concerning your comment on, "Men Over 40 Should Think Twice Before Taking Part In Triathlons", I could not agree more with this statement. Being medically qualified myself [albeit on the veterinary side]. I have long been sceptical about the benefits of pushing oneself to the absolute limits in middle age. "As regards statins my experience was similar to your own. In my mid sixties I went for a routine medical check up with my GP in the UK. I was informed I was slightly high on my blood pressure and LDL cholesterol. As a result I was put on blood pressure medication, also a statin on the basis of doctor knows best. I struggled on for about 5 years during which time I was undoubtedly having muscular side effects from statins and had blacked out more than once as a result of a sudden fall in blood pressure, this event most frequently taking place while on a long haul flight.! "About 2 years ago as a result of reading an article by a professor of surgery here in South Africa in which he was expressing his own misgivings on the use of statins. I decided to come off the lot and just take a low dose aspirin cardio. For me, it was the right decision as I feel so much better. I would rather take the risk of feeling well now and maybe having my lifespan shortened by a year or two. I should add, like you I eat healthily and my exercise now consists of converting a small area of African bush into something resembling a garden! I also feel that genetics plays an important part in all this. What may appear to be a high reading for one may not be for another. "One more important point. Very little R&D is currently underway by the major drug companies in developing a new generation of antibiotics at a time when some very dangerous drug resistant bacteria are appearing, MRSA and TB to mention two. Who can blame them when a clinician can be prescribing all manor of drugs to an increasing market of elderly patients who may be on them for twenty years rather than twenty days! One can see where the profit lies. "I must look into Ezetrol which you mentioned. I had not heard of it before."
My comment - Thank you for this informative email.
I am certainly not pretending to have any medical expertise but I have talked to enough friends, including subscribers, some of whom are also doctors, about statins to know that some people can tolerate them much more than others. They include my older brother who has been on them for longer than I have, and feels that he has no adverse side effects.
However, there are two things about them which I think everyone who is prescribed statins should be aware of. Plenty of doctors have described them as 'very heavy medicines', so I would have a look at side effects reported for statins and any other prescribed medicines on the www. A number of these are produced by the medical profession. Alternatively, postpone reading about side effects when prescribed medications, unless you are quite certain that they may be causing you problems. Additionally, plenty of doctors who prescribe statins and other medicines also receive payments from their manufacturers. This does concern me. I share your view that, you "would rather take the risk of feeling well now and maybe having [your] lifespan shortened by a year or two." However, in my case the side effects of statins were cumulative and increasingly onerous. With hindsight, I should have stopped taking them after the first clear signs of problems which commenced very quickly.
May you continue to enjoy life, including your garden.
Lost Decade for Bonds Looms With Growing Return for Equities - Here is a brief section of this interesting article from Bloomberg:
With consumer confidence approaching a six-year high, housing starts increasing to 2008 levels and corporate profits double what they were five years ago, investors withdrew $9.1 billion from fixed-income mutual funds and exchange-traded funds in the week ended June 5, the second-highest total in more than 20 years, according to Denver-based Lipper.
JPMorgan Chase & Co., the most-active underwriter of corporate bonds since 2007, earlier this month joined Plc, Corp., and Goldman Sachs Group Inc. in recommending stocks over most bonds as equity returns outpace company debt by the most since at least 1997.
The Merrill Lynch U.S. Corporate & High Yield Index's 2.6 percent loss this year compares with a 12.8 percent gain for the S&P 500 Index (SPX), including reinvested dividends. Treasuries have lost 2.8 percent, according to the Bloomberg U.S. Treasury Bond Index (BUSY).
My view - We can expect plenty of volatility over the next few months from both bonds and stock markets, as investors react to changing expectations regarding quantitative easing (QE), US and also global economic data, and momentum moves in both fixed interest and equity sectors.
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Email of the day (2) - On Bond bulls:
"I know its conventional wisdom to be bearish US bonds, but it might be worthwhile to ponder an alternative opinion from a successful manager. Hoisington Management has been consistently bullish long US governments for more than a decade, and sees no reason to alter course despite the recent backup. Their latest piece is worth reading."
My comment - Thanks for this topical email and the report.
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My personal portfolio: A hedge position partially closed -
Details and charts are in the Subscriber's Area.
Email of the day (3) - On high blood pressure:
"Thank you so much for your CHOLESTEROL drug suggestion, which I'll give a try. Is there anyone in the Collective, who knows of some natural remedies for HIGH BLOOD PRESSURE?"
My comment - You are welcome and good luck with it. I also assume that you heart specialist will know of other non statin cholesterol lowering drugs. You may wish to read about them before you take them.
On high blood pressure, which many of us experience from time to time, I suspect you know the lifestyle controls, such as maintaining a healthy weight and diet, not to mention therapeutic activities such as spending time with friends and family, cultural enjoyments, exercising, or anything else that relaxes you.
Email of the day (4) - On the Champion's Trophy final:
"Forgive me David just could not resist this opportunity to gloat.
"Well done Dhoni - giving the ball to Ishant, who had given away maximum runs till then, was something no Captain would have done, nay, dared. It is this quality of showing faith in others, when they themselves have lost faith, is true leadership: when India won Ishant was the first to jump into Dhoni's arms!"
My comment - You are entitled to your "gloat". England won the toss, had the home side advantage and also favourable weather conditions. India was also the only undefeated side in the competition.
Watching at the time, I thought England lost the game when the normally reliable Jonathan Trott presumably had a lapse of concentration and dropped what looked like an easy catch provided by Virat Kohil, who then promptly hit a massive six over square leg and was India's highest run scorer during the match.
However, I will be more than consoled if England retain the Ashes against Australia in this glorious summer of sport. In cricket, I prefer the subtle and eccentric drama of test matches. Meanwhile, I am also enjoying the extraordinary talents of Israel Folau and George North in the British and Irish Lion's tour of Australia.
Additional commentary by Eoin Treacy
Email of the day � on companies with reliable dividend policies:
� Thank you for the update on S&P Dividend Aristocrats. These are blue chip aristocrats limited to major indices. Readers might be interested to know that there are other Aristocrats and even junior ones with potentially higher growth rates. The Dividend Champions (25 years or more of dividend growth) is a list that is not limited to the S&P 500. A current monthly view of the Dividend Champion (with relevant fundamental data) is maintained by XXX.
� The Dividend Achievers are liquid US stocks that have raised their dividends 10 years or more. There are a few Dividend Achievers indices maintained by Nasdaq ( http://ir.nasdaqomx.com/releasedetail.cfm?releaseid=737248 ). These include an International Dividend Achievers list , a UK Dividend Achievers and a Canada list. There are also some ETF's: (eg Vanguard's VIG for the US and Powershares PID for International). I could not find the full list and do not have all the related ETFs, but the Collective may know. It may be useful to table these lists on Fullermoney, and the ETFs in the Chart Library. If time is at all available it may be useful if Fullermoney could host all the lists including Autonomies in the Chart Library. I for one would really appreciate that. Thank you for continued super service, especially the big picture outlook... �
"Oops, in the message I just sent you I should have also said that the DRiP Resource also maintains (in Excel spreadsheet) the Dividend Contenders and Dividend Challengers. Dividend Contenders include US companies that have had annual dividends raised 10-24 years in a row, and Dividend Challengers for US companies doing the same for 5-9 years. There are no liquidity requirements for these Achievers."
My comment � Thank you for your kind words and especially these informative emails contributed in the spirit of Empowerment Through Knowledge which I'm sure will be welcomed by the Collective. As you point out, the S&P dividend aristocrat indices are somewhat restrictive which has both positive and negative aspects. On the one hand it is useful to have a list of large liquid shares from which to choose potential investments. However, at the margin, these indices also omit companies that may not have been in existence long enough to qualify and yet have solid records of dividend increases. They also omit companies that do not have sufficient average daily volume but are nonetheless liquid. In the normal business cycle, a company may maintain its dividend without increasing it on consecutive years. It would still be attractive from the perspective of a yield investor but would not qualify as a dividend aristocrat.
All of the indices mentioned above have now been added to the Chart Library where possible.
The lists you provided are extensive and will take time to add to my Favourites list. I will endeavour to do this over the next week or two. There are some clear standouts from the spreadsheet posted on Drip investing:
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Newcrest writedown heralds pain for rival gold miners � This article by David Stringer & Liezel Hill for Mineweb may be of interest to subscribers. Here is a section:
Gold companies that spent $195 billion on acquisitions in a decade-long price boom are at risk of taking writedowns like Newcrest's. Producers of the metal face more stresses with brokers from Goldman Sachs Group Inc. to Inc. cutting price forecasts as bullion heads for its first annual drop since 2000.
� We would expect that there would be several, if not many companies, who would also in the next reporting period be coming to a list of impairments, � Michael Elliott, sector leader for Ernst & Young LLP's global mining practice, said in a phone interview from Sydney. � It's just a question of timing, and who had the largest exposures. �
My view � Gold miners spent much of the last decade ploughing profits into mine expansion in order to boost production amid declining ore grades and on the assumption that higher prices would justify such aggressive expansion. In the process, hedge books were eliminated in order to provide greater leverage to metal prices. However, the benefits of hedging production must be starting to look attractive once more following the deterioration in gold prices.
This section contines in the Subscriber's Area.
China May Fine-Tune Policy as Cash Squeeze Threatens Growth � This article from Bloomberg may be of interest to subscribers. Here is a section:
The People's Bank of China said the nation should � appropriately fine-tune � its policies, according to a statement yesterday that summarized the monetary policy committee's second-quarter meeting in Beijing. It was the first time since September that the panel, led by Governor Zhou Xiaochuan, has used the � fine-tune � phrase. The comments were released following an easing of the cash crunch on June 21 after a gauge of interbank funding availability rose to the highest since at least 2003. Slowing growth in the world's second-largest economy, a crackdown on illegal capital inflows and efforts to rein in shadow banking have contributed to increased borrowing costs. � You could see this as one very modest sign that perhaps the People's Bank of China doesn't want to scare the markets and market players too much, � Louis Kuijs, chief China economist at Group Plc in Hong Kong, said by phone today.
My view � The PBOC has been leaning on the financial sector in an effort to force banks to bring off balance sheet liabilities into the public arena where they would have to be accounted for. The problem with such a policy in a country where the government has a large shareholding is that much of the credit that has been extended has gone to state owned enterprises that have a less than stellar record of paying back their debts. Some clarity on just how large the bad loans issue is and leniency in monetary policy will be required to ease the situation.
This section continues in the Subscriber's Area. Email of the day � on Euro swap rates:
� I'm struggling to find the Euro Swap rates from the Chart Library. In case they are not there yet, could You please add: 2, 5 and 10 year swap rates. I believe the Bloomberg tickers are EUSA2, EUSA5 and EUSA10, respectively. � As always, thanks for a great service. Especially the audios are daily must! �
My comment � Thank you for your kind words and these requests which have been added to the Chart Library. A general pattern of base formation completion is evident right across fixed income yields and Euro Swap rates are no exception. Clear downward dynamics are required to check potential for further expansion.
Email of day � on additions to the Chart Library:
� May I request you to kindly add Hargreaves Lansdown Multi-Manager Special Situations Trust Accumulation Units to our library? Thanks and regards � And
� Appreciate if you could add the following health care market instruments to the Chart Library On the NYSE: IRY, BME, GRX, RYH, XLV On SEHK: 3057, 801 �
My comment � Thank you for these suggestions which have been added to the Chart Library.