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Pending
home sales turning………The rise in March pending homes sales is another
indication the economy is improving following its winter-induced slowdown.
Housing has also been impacted by higher mortgage rates and low inventory.
What’s the point? We think the slowdown
in the U.S. housing market has probably bottomed and we expect housing sales
and building activity should accelerate along with the overall economy. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140428&id=17543650
·
Asian
Exports Slowing…….Wall Street Journal this morning offers an interesting
analysis of export volumes out of Asian countries such as China, Japan, Korea
and Taiwan. These volumes have slowed significantly over the past several
years. The reasons? Sluggish global economic recovery, rising wages in these
countries resulting in rising production costs.
What’s the point? This trend has
implications for secular growth for export-dependent Asian countries and
further supports our concerns over growth in emerging market economies. We see
the U.S. as fairly insulated from this due to the size and diversity of its
economy and note that U.S. is experiencing a resurgence in domestic
manufacturing. (no link)
·
Capital
arbitrage rolls on……Barron’s magazine this weekend ran an interesting
analysis of capital arbitrage that is still having significant impact on
financial markets. What is this “arbitrage”? Low interest rates of the past
several years have provided corporations and investors a low cost source of
funding to make acquisitions, share buybacks and dividend increases; it is
using debt to enhance shareholder returns (ROI).
What’s the point? Corporations believe they can achieve a
better return for shareholders through capital arbitrage than through capital
spending. We note that a similar “capital arbitrage” process occurred in the
1978-1985 period, which laid the foundation for a major secular bull market
that began in 1982. We believe the similarities of today vs. 1978-85 are
important and have positive implications for the stock market going forward. (no
link)
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