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Friday, September 12, 2014

Blockbuster Retail Sales on a better than expected report and strong revisions to the prior month. The grave concern about the demise of the consumer has been greatly exaggerated. Let’s look at this in a little more detail. Retail Sales, that was initially reported to have had no growth in July, was revised up to a healthy 0.3 percent and on top of the August Retail Sales that doubled the newly revised July pace rising 0.6 percent. Auto sales were the big driver in August, apparently parents want their kids in nice and safe cars going back to school, rising nearly ten percent compared to one year ago. Meanwhile the bond yields are moving up fast on rising economic growth with the ten year yield breaking 2.60 percent in today’s action. Please see Voya Global Perspectives Consumer as "Game Changer" and Retail Sales on page 13.

Thursday, September 11, 2014

Please take a moment to remember and honor those lost on 9-11 and the men and women in our military who continue to protect our country.

Thursday, September 11, 2014

There are plenty of reasons to sell, none the least being the war drums beating in Washington and the comeback of my favorite movie "Braveheart", where the Scots finally look to be in striking distance of taking it to the English after a mere 350 years or so. However, investors would be better served focusing on the astounding fundamentals. For example, in the U.S. these fundamentals include record GDP, record corporate earnings, record retail sales, and lower prices at the pump. Please see the latest monthly for a more in depth look at risks and opportunities.

Also, in case you missed Doug's appearance on Opening Bell with Maria Bartiromo, watch it here:
FoxBusiness Opening Bell with Maria Bartiromo, Sept. 10, 2014.

Thursday, September 11, 2014

Wall Street Journal reports today that “Fed to Hit Biggest U.S. Banks With Tougher Capital Surcharge, Extra Padding in Case of a Financial Crisis Would Surpass That Required by International Regulators” and is based on prepared testimony from Fed Governor Daniel Tarullo for today’s Senate Banking Committee hearing. This goes beyond the Basel III, a global regulatory standard on bank capital adequacy among other requirements. This arguably is the most transparent way to protect taxpayers by building a cushion against losses while banks will complain that it puts them at a competitive disadvantage to global banks. Well, if every few years banks need a bailout maybe more shareholder capital will prevent government bailouts. Let’s look at a few: Continental Illinois National Bank & Trust in 1984; Savings & Loan bailout in 1989; and almost every mega bank in the U.S. in 2008’s Great Financial Crisis. Meanwhile, Financial Times reports that “Dubai unveils vision for mega-hub” and adds “Dubai plans to invest $32 billion in a desert project to create what should be one of the world’s largest airline mega-hubs.” It looks like the emerging markets are becoming the center of global growth and a welcome respite from developed countries’ tired drama of recovery. Please see Voya Global Perspectives page 4 "World Economy – GDP"for Emerging Markets increasing share of the global pie.

Thursday, September 11, 2014

The UK economy has bucked the Eurozone trend and has shown signs of strengthening, even prompting investor anticipation of a potential rate hike from the Bank of England. That’s the good news. The fly in the ointment though is the latest polls showing support appears to be growing for Scotland’s separation from England in the independence referendum scheduled on Sept. 18th. This is rattling investors and has sent the British pound tumbling to its lowest level in 10 months. Scottish independence could have dramatic economic implications especially in the financial sector because the two countries would have to decide how to divide national debt, taxes, mortgages and the entire banking infrastructure. Due to all of the uncertainty surrounding this issue, a yes vote will roil markets and we will see a rise in volatility at least in the short term. Expect to see Europe dominate the spotlight for the next couple weeks whether it is Ukraine, Scotland or the ECB. Remember, broad global diversification is the way to navigate these uncertain waters. Please see the latest Global Perspectives Monthly Commentary.

Thursday, September 11, 2014

Mario Draghi, ECB president, took bold action today on cutting rates and launching QE. It was the power of ten with ten basis points cut from its main refinancing rate to 0.05 percent, its marginal lending facility to 0.30 percent and its deposit rate to -0.20 percent. That’s not all though because he announced his much anticipated but little expected launch of QE, ABS purchase program and covered bond purchase program, to be started almost immediately in October. European and U.S. markets applauded the news and once again U.S. markets hit new highs confounding the bears on Wall Street. Please see "Monetary Policy Outlook" for the ECB’s balance sheet on page 46 of Voya Global Perspectives Book.

Wednesday, September 3, 2014

The European Central Bank (ECB) has the markets on pins and needles, with the Euro falling to a new one year low against the U.S. dollar. “To be, or not to be, that is the question”, no not Hamlet, we are of course talking about whether or not the ECB will undertake a form of quantitative easing (QE) at tomorrow’s ECB governing council meeting in Frankfurt, Germany. There is built in expectation of at least an announcement of QE in addition to a further increase in already announced monetary stimulus. The fear is that the market gets nothing which is a low probability but could be ugly for the markets tomorrow. The other side is that ECB Chair Mario Draghi does “whatever it takes” and astounds the market for an explosive rally. Likely, it will be somewhere in the middle of the road, but better to act sooner with conviction to get the Eurozone economy out of its deflationary funk. Markets are flat while waiting on slightly under consensus July U.S. Factory Orders. Please see page 52 of the Voya Global Perspectives book,"Major Currencies" for the Euro/USD.

Tuesday, September 2, 2014

Today’s Wall Street Journal headline "Strategists Brace for a Swoon, Money Managers Point to Historical September Decline; 'A Little Worried'", is a "buy" signal if I ever heard one but of course we advocate buying a broadly diversified global portfolio. September, apparently, is the only month that shows an average decline in the past 20, 50 and 100 years. Well, let’s look at the past 3 years for the S&P 500. In 2013 it was up 3.2 percent, in 2012 it was up 3.1 percent but in 2011 after the first ever U.S. credit downgrade it was down -7 percent. However, be careful because in October 2011, the very next month, it was up a whopping 10.9 percent. Currently, the U.S economy is beating expectations on a cross-section of data and this week we expect a further surprise in this Friday’s nonfarm payroll report to 300k versus consensus of 220k on recent strength (lower than expected) in initial unemployment claims. Meanwhile, today’s ISM Manufacturing report surged to 59 percent, the highest since March 2011 with component "new orders" jumping to 66.7 percent. Please see ISM Manufacturing on page 9 of Voya Global Perspectives book and Initial Unemployment claims on page 59.

Friday, August 29, 2014

On this Labor Day holiday prices for gasoline will be the cheapest in four years. This will help consumer spending in the all important back to school sales season. Energy prices are not only an economic driver but also a potential strategic weapon and we continue to see this play out in Russia and Ukraine. Germany is placing big bets on renewable energy as reported in the Wall Street Journal on Wednesday. They are phasing out nuclear and fossil fuels and hoping to rely on renewable sources for 40-45 percent of their energy needs by 2025. However, the enormous cost of this is hurting their manufacturing competitiveness. Already energy prices in Germany are twice what they are in the U.S. Global Perspectives warned about the perils of narrowing energy sources our 2012 Whitepaper "A Global Perspective on Tectonic Shifts in Energy and the Current Bull Market:"

Energy Troubles Brewing in Developed Countries Any country that fails to diversify its power sources sets itself up for foreseeable social and economic calamities. Recent reports that exemplify our concerns include:

  • German Chancellor Angela Merkel ordered half of her country’s nuclear plants shut down, pledging to replace them with renewable energy sources over the next decade. Read the Whitepaper.
Thursday, August 28, 2014

The U.S. GDP report hits naysayers much like Roger Federer’s miracle return hit his opponent in the derrière at the U.S. Open. GDP 2nd quarter astounded the market with a positive revision to 4.2 percent and the 1st quarter revised up significantly to -2.1 percent. On top of this report unemployment claims once again were below 300k. The market is down partially because of reports of Russian troops invading the Ukraine but we think the bigger driver is the Fed looking behind the curve on strong economic data. They will be compelled to move up their timetable on raising rates along with their pace of increase. See Voya Global Perspectives view on unwinding the zero interest-rate policy in the August monthly. Also, see Federer’s Shot in the Back.


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