Tag Archives: Steve Forbes

Articles of Interest

China’s Central Bank Holding Americans Hostage

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By Floyd Brown

Red China flag SC Chinas Central Bank Holding Americans Hostage

I travel around the world to uncover stories that impact Capitol Hill. Often, the most important stories need an outsider’s perspective to understand them. This week, I spoke at conference called FreedomFest 2013. This conference included some of the greatest strategic thinkers in the world, and several had chilling comments about China.

Jim Rogers, Steve Forbes, Alex Green, Mark Skousen, Joseph Farah, and Bert Dohmen are just a few of the thinkers who shared their insights about investments and governance in a world of increasing risk. I deeply value the opinions of the unique minds attending FreedomFest. And this year, an important trend has emerged. This trend is influencing events that will impact your life and your investments…

The collected voices share a great fear about what lies directly ahead for China. China’s central bank responded aggressively to the financial crisis of 2008. It responded with liquidity and easy money. And this flood of easy money has helped produce an incredible array of malinvestment. (Austrian School economists developed the concept of malinvestment to explain the consequences of a central bank providing too much monetary stimulus.)

As applied to China, the story goes something like this…

Big Trouble in… Big China

Governments and firms were required to keep the economy growing at all costs, which led them to poorly allocate the excess funds. This flood of artificially cheap money paid for projects that require huge debt service payments, but provide little economic value.

For example, highways and bridges to nowhere were built. High rise apartment buildings remain vacant, and entire cities are ghost towns waiting for businesses and inhabitants to show up. One of the most colorful descriptions I heard was of the Guangzhou South Train Station. This colossus of a station is eerily vacant. Imagine going into Grand Central Station, and not a soul is in sight…

What’s more, China’s Vice Finance Minister, Zhu Guangyao, admitted this month that local government debt levels are unknown. Official figures haven’t been released since 2010 and are likely much greater than the forecast 10.7 trillion yuan ($1.7 trillion).

Estimates of China’s local government debts range from Standard Chartered Bank’s 15% of GDP at the end of 2012, to Credit Suisse Bank’s 36%. The debt rating agency Fitch forecasts that the figure is 25% of GDP, so it downgraded China’s sovereign debt rating in April.

Collapse on the Horizon

Now that the stimulus of 2008 has worn off, the economy is in worse shape than before. China is currently dealing with an overhang of excess debt, along with too much factory inventory and housing capacity. These excess supplies have become dead weight. Therefore, China is again scrambling to stir up growth, and officials will be forced to order more stimulus. The big concern now is that the excess debt will cause a full-scale economic collapse.

The clearest sign of distress in China can be seen via the inverted yield curve. An inverted yield curve happens when short-term interest rates become higher than long-term interest rates. This means that there’s a structural problem …read more

Source: FULL ARTICLE at Western Journalism

News, Politics, Government

Steve Forbes: Why Gold Plunged

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By Steve Forbes, Forbes Staff

Ben Bernanke has pulled off a neat trick that could well give us the worst of all worlds: a brief commodity deflation, future inflation and a stagnant economy. It will earn him a prominent place in the central bank’s Hall of Infamy. Usually central bankers earn opprobium from history the old-fashioned way, by debasing the currencies under their care. But Bernanke has added a new twist.

From: http://www.forbes.com/sites/steveforbes/2013/04/16/steve-forbes-why-gold-plunged/

Articles of Interest

Video: Forbes Wants National Conversation On DHS Massive Ammo Buy

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By Daniel Noe

Personally, I think this is a national conversation that should have been held a long time ago…

Related posts:

  1. ‘Gun Violence’: The ‘National Conversation’ We Won’t Have Gabrielle Giffords, the “surprise witness” at the January 30 Senate…
  2. NOPAT) by 9% compounded annually since 1998. Its return on invested capital (ROIC) has increased every year since 2002. McDonald’s current share price of ~$94.60 gives it a price to economic book value ratio of 0.9, which means the market is currently predicting a permanent 10% decline in NOPAT for MCD. Such a large decline seems unlikely for a company that has not experienced even a minor decline in NOPAT for a decade. American International Group (AIG) is one of my least favorite stocks held by large-cap value ETFs and mutual funds and earns my very dangerous rating. AIG has an ROIC of only 1%, while its weighted average cost of capital (WACC) is 10%, meaning it would need to grow ROIC by over ten times its current level to earn positive economic earnings. Instead ROIC is declining, driven by a 75% decrease in NOPATlast year. In fact, AIG has not earned positive economic earnings since before 1998. AIG’s current share price of ~$38.20 means the market is expecting 20% growth in NOPAT compounded annually over the next 10 years. This expectation seems overly optimistic for a company with a declining NOPAT and no track record of economic profitability. The large-cap value style ranks second out of the twelve fund styles as detailed in my Style Rankings for ETFs and Mutual Funds report. Special Offer: Daily stock picks from Forbes Dividend Investor are up 12.6% vs. 8.0% for identically timed buys of the S&P 500 index from July 11, 2012 through February 14. Average yield on buys is 5.8%. Click here for a membership offer from Steve Forbes. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. The number of holdings varies widely (from 22 to 1426), which creates drastically different investment implications and ratings. The best ETFs and mutual funds allocate more value to attractive-or-better-rated stocks than the worst, which allocate too much value to neutral-or-worse-rated stocks. WisdomTree Dividend ex-Financials Fund (DTN) is my top-rated large-cap value ETF and FundVantage Trust: EIC Value Fund (EICIX) is my top-rated large-cap value mutual fund. Both earn my attractive rating. PowerShares RAFI Fundamental Pure Large Value Portfolio (PXLV) is my worst-rated large-cap value ETF and Ivy Funds: Ivy Value Fund (IYVBX) is my worst-rated large-cap value mutual fund. Both earn my dangerous rating. Note that 417 out of the 1723 stocks (over 44% of the assets) in the style get an attractive-or-better rating. However, only six out of 39 large-cap value ETFs (less than 29% of total net assets) and 15 out of 728 large-cap value mutual funds (less than 2% of total net assets) get an attractive-or-better rating. It almost seems as if mutual fund managers are trying to avoid the good stocks. Only six ETFs and 15 mutual funds in the large-cap value style allocate enough value to attractive-or-better-rated stocks to earn an attractive …read more
    Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

CBOE Pays Fat Dividend, Stock Tagging New Highs

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By Zacks.com, Contributor CBOE Holdings (CBOE) has been gaining traction with an annual dividend yield of 3.9% and a long-term growth rate of 12.5%, making this options and futures leader a promising pick for investors seeking both growth and income. This Zacks Rank #2 (Buy) declared a special dividend of 75 cents on December 11, which led to a 52-week high. CBOE is the leading options exchange in the U.S., which offers equity, index and ETF options. It also provides proprietary products such as S&P 500 options, along with options and futures products on the CBOE Volatility Index. With a market cap of  $2.9 billion, the company competes with CME Group (CME) and IntercontinentalExchange (ICE), among others. CBOE has been paying regular dividends since 2008. In 2012, the annual dividend payout was raised to $1.29 per share from 20 cents in 2010, reflecting an increase at an annual compound growth rate of 154% since 2010. The strong cash flows generated by the company along with the absence of debt have resulted in a sturdy balance sheet and abundant free cash. While the company recently paid a special dividend, it last hiked its dividend by 25% to 15 cents in July 2012. CBOE also deploys its excess capital through share buybacks from time to time. On Nov. 1, CBOE reported operating earnings per share of 43 cents in the third quarter of 2012, which exceeded the Zacks Consensus Estimate by 13.2% but fell short of year-ago earnings. Over the last four quarters, CBOE has generated an average earnings surprise of 6.6%. Operating net income declined 15.7% year-over-year to $37.7 million. However, reported net income increased to $45.8 million or 52 cents per share from $41.3 million or 45 cents in the year-ago period. Results mirrored lower operating expenses and steady revenue per contract, partially offset by the impact of the ongoing market volatility. Subsequently, total operating revenues declined 11% year-over-year to $128.3 million, while operating expenses declined 2% to $67.5 million. Nevertheless, management reaffirmed its guidance for 2012. The company’s diverse product line, market share gains and disciplined financial management should allow it to continue delivering strong results, especially once the low industry-wide trading activity rebounds to its historical highs. The Zacks Consensus Estimate for 2012 is currently pegged at $1.66, which is up 1.2% in the last 30 days as 9 of 14 estimates moved higher. This implies year-over-year growth of 5.6%. The Zacks Consensus Estimate for 2013 is $1.87, representing a year-over-year increase of 12.7%. Special Offer: What you don’t own is just as important as what investments you do own. Top investing experts named names when it comes to securities to avoid in the year ahead. Get the results in this free downloadable report, 24 Widely-Held Investments You Should Sell Now. Shares of CBOE currently trade at the 12-month forward earnings of 17.5x, a 12% premium to the peer group average of 15.6x. The premium valuation is justified given its strong fundamentals. ROE stands at 56.9%, compared with the peer group average of 16.2%. CBOE has been continuously outperforming the NASDAQ since last year, and has also been outperforming its 200 days moving averages since the end of December. The stock has gained 28.5% over the past year, compared with NASDAQ’s return of 12.6%. Special Offer: On January 29th, join Steve Forbes, income investing expert Richard Lehmann and growth superstar Jim Oberweis for a one-hour exclusive Webcast, The Forbes Investor Playbook: How to Safely Grow Your Wealth in 2013. Seats are limited—sign up now!
Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

AAII Sentiment: Bullish Sentiment Reaches Two-Year High

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By Charles Rotblut, Contributor Bullish sentiment rose to its highest level in two years, while bearish sentiment fell to its lowest level in about a year in the latest AAII Sentiment Survey. Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 8.4 percentage points to 52.3%. The last time optimism was this high was January 13, 2011. This is also the eighth time in nine weeks that bullish sentiment is above its historical average of 39%. Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, plunged 5.3 percentage points to 23.4%. This is a seven-week low. It also puts neutral sentiment below its historical average of 30.5% for the 15th consecutive week and the 17th time in 19 weeks. Bearish sentiment, expectations that stock prices will fall over the next six months, fell 3.1 percentage points to 24.3%. This is the lowest level of pessimism registered by our survey since February 9, 2012. It is also the sixth time in seven weeks that bearish sentiment is below its historical average of 30.5%. Bullish sentiment is at an unusual, but not extraordinarily, high level. In statistical terms, optimism is more than one standard deviation above the historical average. A good start by stocks to the New Year, action by Congress to avert the fiscal cliff and raise the debt ceiling (at least temporarily), continued economic growth, better-than-forecast fourth-quarter earnings and seasonality are all contributing to individual investors’ optimistic moods. Bullish sentiment can be seen in the performance of the Direxion Daily S&P 500 Bull 3X ETF (SPXL), which is up 31.2% over the two-years and 43.8% for the last 12 months. Special Offer: On January 29, join Steve Forbes, income investing expert Richard Lehmann and growth superstar Jim Oberweis for an exclusive Webcast, The Forbes Investor Playbook: How to Safely Grow Your  Wealth in 2013. Seats are limited—sign up now! This week’s special question asked AAII members what economic trends they are currently watching. Responses varied widely and several members listed more than one trend. U.S. fiscal policy, and the political fight over it, was named by the largest number of members. Employment data and housing data tied for second of the most mentioned data. These indicators were followed by interest rates and the direction of stock prices, which tied for third place. This week’s AAII Sentiment Survey results:
Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

AAII Survey: Revised Dividend Tax Rates Don't Change Investor's Short-Term Outlook

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By Charles Rotblut, Contributor Even with a small decline in optimism, more than 40% of individual investors describe themselves as bullish in the latest AAII Sentiment Survey. Bullish sentiment, expectations that stock prices will rise over the next six months, declined 2.5 percentage points to 43.9%. This is the seventh time in eight weeks that optimism has been above 40%. The historical average is 39%. Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 2.1 percentage points to 28.7%. This is a four-week high. Even with the improvement, neutral sentiment remained below its historical average of 30.5% for the 14th consecutive week and the 16th time in 18 weeks. Bearish sentiment, expectations that stock prices will fall over the next six months, edged up 0.4 percentage points to 27.3%. This is the first time since August 2012 that pessimism is below 30% on consecutive weeks. This is also the fifth time in six weeks week that bearish sentiment is below its historical average of 30.5%. Sentiment about the short-term direction of stock prices shifted last November and we continue to see many individual investors express optimism. There is not one single event which caused this shift, but rather a combination of higher stock prices, monetary stimulus, continued economic growth and seasonality. It is important to note, however, that bullish and bearish sentiment remain well within their typical historical ranges. Thus, while individual investors are comparatively more optimistic, it would be a mistake to describe them as exuberant. Special Offer: On January 29th, join Steve Forbes, income investing expert Richard Lehmann and growth superstar Jim Oberweis for a one-hour exclusive Webcast, The Forbes Investor Playbook: How to Safely Grow Your  Wealth in 2013. Seats are limited—sign up now! This week’s special question asked AAII members how the revised capital gains and dividend tax rates are impacting their short-term outlook. The overwhelming majority of respondents said the new legislation had no impact. Many respondents said they were below the top tax bracket, held their investments mostly in tax-deferred accounts or were long-term investors. Here is a sampling of the responses:
Source: FULL ARTICLE at Forbes Latest