Opinion

John Wasik

Gold still not the best inflation fighter

Jul 16, 2013 07:59 UTC

CHICAGO, July 16 (Reuters) – As U.S. interest rates have
risen, owning gold has been a loser’s game for anyone is trying
to hedge against inflation.

Gold isn’t a smart inflation hedge, but many people have
been using it that way because they think they have few
alternatives.

A low-inflation rate has been punishing to gold investors
for the past three months, and the Consumer Price Index has been
running well under 2 percent this year. As evidence, the leading
gold bullion vehicle, the SPDR Gold Trust ETF, has lost
nearly a quarter of its value over the past year as investors
continue to sell out of their positions. It was down 23 percent
year to date through July 12.

Stocks of gold-mining companies, which can get bruised even
more than spot metal prices, have fared worse. The Market
Vectors Gold Miners ETF, which holds leading mining
companies such as Barrick Gold Corp and Newmont Mining
Corp lost nearly half of its value year to date, off 47
percent.

To be fair, gold prices have rebounded in recent weeks. Gold
reached a near three-week high after Fed Chairman Ben Bernanke
hinted that a highly accommodative policy was needed for the
foreseeable future. But, at around $1,285 per ounce on Monday,
gold is no where near it’s high of $1,889 in 2011.

Column: European stocks beckon as EU turns around

Jul 9, 2013 14:08 UTC

CHICAGO (Reuters) – Buried in a recent avalanche of anxiety over the Federal Reserve and U.S. bond and stock selloffs was continuing good news about European growth.

With euro zone growth expected to return in the second half of this year, buying opportunities abound after the recent global stock retreat, according to Standard & Poor’s Capital IQ analyst Robert Quinn. He expects “fragile growth” by the end of this year as businesses start spending again.

The Continent is still a long way from safe-harbor territory, but its recovery may be on course. A reliable growth gauge known as the Markit’s Flash Euro Zone Composite Purchasing Managers’ Index rose this month to its highest level since March 2012, topping forecasts. In addition, the United States and the European Union on Monday began talks on a free-trade agreement that could boost American and E.U. gross domestic product by $100 billion annually.

European stocks beckon as EU turns around

Jul 9, 2013 11:59 UTC

CHICAGO, July 9 (Reuters) – Buried in a recent avalanche of
anxiety over the Federal Reserve and U.S. bond and stock
selloffs was continuing good news about European growth.

With euro zone growth expected to return in the second half
of this year, buying opportunities abound after the recent
global stock retreat, according to Standard & Poor’s Capital IQ
analyst Robert Quinn. He expects “fragile growth” by the end of
this year as businesses start spending again.

The Continent is still a long way from safe-harbor
territory, but its recovery may be on course. A reliable growth
gauge known as the Markit’s Flash Euro Zone Composite Purchasing
Managers’ Index rose this month to its highest level since March
2012, topping forecasts. In addition, the United States and the
European Union on Monday began talks on a free-trade agreement
that could boost American and E.U. gross domestic product by
$100 billion annually.

Column: Why higher interest rates are bullish for U.S. home sales

Jul 2, 2013 12:15 UTC

CHICAGO (Reuters) – If you’re weary of watching the stock and bond market get dyspepsia over the Federal Reserve’s possible pullback of its easy money policy, turn your gaze to the U.S. home market. Rising interest rates could be a catalyst to boost sales and prices.

In January, the average 30-year mortgage rate, as tracked by Freddie Mac, was 3.34 percent. In the most recent survey, the rate jumped to 4.46 percent, up more than half a percentage point from the week before.

While that is still a bargain by historical standards – the benchmark rate averaged about 8 percent in 2000 – the summer buying season combined with the possible end of the Fed’s easing policy will move millions of buyers into the home market.

Why higher interest rates are bullish for U.S. home sales

Jul 2, 2013 12:00 UTC

CHICAGO, July 2 (Reuters) – If you’re weary of watching the
stock and bond market get dyspepsia over the Federal Reserve’s
possible pullback of its easy money policy, turn your gaze to
the U.S. home market. Rising interest rates could be a catalyst
to boost sales and prices.

In January, the average 30-year mortgage rate, as tracked by
Freddie Mac, was 3.34 percent. In the most recent survey, the
rate jumped to 4.46 percent, up more than half a percentage
point from the week before.

While that is still a bargain by historical standards – the
benchmark rate averaged about 8 percent in 2000 – the summer
buying season combined with the possible end of the Fed’s easing
policy will move millions of buyers into the home market.

Column: Bond moves to make as U.S. Fed fires warning shot on rates

Jun 25, 2013 12:10 UTC

CHICAGO (Reuters) – Now that the U.S. Federal Reserve has announced it might wind down its stimulus program, and as rates rise, it’s critical to adjust your portfolio.

Bond prices fell as yields rose to a near two-year high on Monday. The U.S. Treasury sell-off was sparked Fed Chairman Ben Bernanke’s comments the central bank might begin scaling back purchases of Treasury and mortgage securities later this year.

The impact of rising interest rates, which depress bond prices, are measured directly through duration. Duration measures a bond portfolio’s sensitivity to rates. For each one-percentage point uptick in rates, the duration gauge shows you how much money you can lose in principal. Generally, the longer the duration, the greater the chance you’ll lose money.

Bond moves to make as U.S. Fed fires warning shot on rates

Jun 25, 2013 11:59 UTC

CHICAGO, June 25 (Reuters) – Now that the U.S. Federal
Reserve has announced it might wind down its stimulus program,
and as rates rise, it’s critical to adjust your portfolio.

Bond prices fell as yields rose to a near two-year high on
Monday. The U.S. Treasury sell-off was sparked Fed Chairman Ben
Bernanke’s comments the central bank might begin scaling back
purchases of Treasury and mortgage securities later this year.

The impact of rising interest rates, which depress bond
prices, are measured directly through duration. Duration
measures a bond portfolio’s sensitivity to rates. For each
one-percentage point uptick in rates, the duration gauge shows
you how much money you can lose in principal. Generally, the
longer the duration, the greater the chance you’ll lose money.

Finding value when the market misbehaves

Jun 18, 2013 12:01 UTC

CHICAGO (Reuters) – Traders are nervous as Wall Street waits for the Federal Reserve to reveal its next quantitative easing move. Last week marked the third week out of the last four in which major indexes turned negative.

What if you ignored the market’s mood, though? Would it make a difference?

If you can find managers focused on buying and holding the best stocks – no matter how the rest of the market is behaving – you might reap higher gains over time.

Is your stock strategy working?

Jun 11, 2013 16:34 UTC

CHICAGO (Reuters) – For Eugene Fama, the University of Chicago professor and father of modern finance, the key to investing is relatively simple – stay in a low-cost, diversified portfolio to capture virtually all market returns with a mix that’s right for the amount of risk you can stomach.

Yet few people really believe that will work – they don’t like staying still – so they chase active managers or pick stocks themselves, usually buying and selling at the wrong times. They deceive themselves into thinking that they can outwit the smartest managers in the world and their costs won’t sink them.

With the stock market flattening out and perhaps taking a breather from its first-half surge, it’s worth taking a look at Fama’s basic tenets to avoid such bad behavior. (I recently had the chance to speak to him during a conference at the university sponsored by Loring Ward, an investment manager based in San Jose, California.)

Column: Housing rebound boosts timber stocks

Jun 3, 2013 20:42 UTC

CHICAGO (Reuters) – If a tree falls in the forest, can you make a little money? As the U.S. housing rebound continues, you can watch the value of your real estate rise. In addition you can reap gains from resource companies that own and process timber.

Since most U.S. homes are still framed with wood, timber becomes a more valuable commodity as new construction booms. Home prices gained the most in seven years in March, according to a recent S&P Case-Shiller housing index report. Housing starts in April rose 16 percent over the previous month with new building permits up 14 percent, according to the U.S. Census Bureau.

North American sawmills are running at the fastest pace in six years, up nearly 7 percent over last year, according to CIBC World Markets, a Canada-based investment bank. Growth in China is also contributing to the rebound. More than 60 percent of log exports from the Pacific Northwest head to the People’s Republic.

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