Stock Preacher

The conventional wisdom is that retail investors, and not institutions, have powered the market’s rally off the March 2009 lows. Not so, says Charles Biderman, CEO of TimTabs Investment Research. The firm tracks the flow of money in and out of mutual funds. Since the start of May, he says, “U.S. equity funds have taken in a modest US$7.1B” despite improved performance. Instead, retail investors are plowing money into bond funds. Moreover, Biderman says that individuals did capitulate in the heat of the crisis, having been burned twice in the last ten years. The retail investor is not in the market yet, but history tells us that they will be, Biderman expects them to come in to the market in 2010.

Popularity: 3% [?]

US President Barack Obama warned credit-card issuers they will face new regulations and scrutiny to keep consumers from being hit by “unfair” rate increases and abusive fees and penalties. Obama said he told 13 executives from the industry, including representatives from Charlotte, North Carolina-based Bank of America Corp. and New York-based American Express Co. that while credit cards are an important source of finance for families and small businesses, consumers too often must negotiate confusing terms that end up costing them more money than they expected. “The days of any time, any reason rate hikes and late fee traps have to end,” Obama said after meeting with the executives yesterday at the White House. “No more fine print, no more confusing terms and conditions.” Card issuers are under fire for policies that impose large late fees and boost interest rates on delinquent customers amid higher unemployment and a recession. The Federal Reserve already has issued new rules, due to take effect in 2010. Lawmakers in the US House and Senate also are considering legislation to provide more consumer protections. American Bankers Association President Ed Yingling, who was among those at the meeting, said afterward that Obama was “very clear” about his desire to make disclosures easier to understand and about the practices he wants ended.

Popularity: 5% [?]

Officials says Obama set to lift US restrictions on family travel and remittances to Cuba. The Obama administration intends to allow Americans to visit relatives in Cuba and send money back to their families on the communist island nation, senior U.S. officials last Saturday.

President Barack Obama plans to announce the policy change before the Summit of the Americas April 17-19 in Trinidad and Tobago, according to the officials, who spoke on condition of anonymity because the announcement had not been made. Although some restrictions have been eased temporarily in legislation Obama signed last month, lifting the bans would meet a pledge he made during the presidential campaign and could signal a new openness with Cuba.”The intent is to try to test the waters and see if we can get Cuba to move in another direction,” one official said. “One way of getting the regime to open up may be to let people travel, increase exchanges and get money flowing to the island.” There are growing calls in the US Congress to repeal restrictions on Cuba.

Popularity: 4% [?]

The S&P 500, since sinking to a 12- year low of 676.53 on March 9 surged 25% as banks from Citigroup Inc. to JP Morgan Chase said they made money in the first two months of 2009 and Treasury Secretary Timothy Geithner announced plans to finance as much as US$1T in purchases of distressed assets from financial firms.

“No matter how you feel about the stimulus package, some of it is going to stick and the economy should stabilize in the second or third quarter,” said Bruce Bittles the Nashville- based chief investment strategist at Robert W. Baird & Co.“If that’s going to happen, the market will sniff it out.”

Popularity: 5% [?]

With at announcement Fed Chairman Ben Bernanke is signaling that he clearly understands the severity of the US economic situation and is willing to take “all” necessary action as he lives up to his nickname “Helicopter Ben.” In last week’s Federal Open Market Committee Meeting, the Fed announced that it would spend another US$1.1T to purchase debt securities, specifically Treasury notes, in open market operations. This is an extremely aggressive attempt to re-inflate the economy, and it should encourage bank lending, and the closest thing to running the US money printing press full on and throwing money out of helicopters…The consensus is that US Fed’s action will provide a necessary “kick” to the US economy and stock markets in the short term. Remember, take what the market gives.

The Big Q is that the long term effects from this action may cause even more problems. Steve Forbes once said: “If printing money alone can create wealth, then poverty stricken Zimbabwe (a country plagued by hyperinflation) would be the richest country in the world.” So in the short run, Bernanke’s actions will help stimulate the economy and the stock market, but the long-term picture isn’t bright.

Popularity: 4% [?]

US investors are decamping foreign ventures and bringing their US$s home, entrusting them to the supposed bedrock safety of United States government bonds, and China continues to buy huge quantities of the USA’s debt. These actions are lifting the value of the US$, and providing the Obama administration with a crucial infusion of financing as it directs trillions of US$s toward rescuing banks and stimulating the economy, enabling the government to pay for these efforts without raising interest rates. The movement of this money back to the United States appears to be exacerbating the financial crisis world wide. A US$ invested by foreign central banks and investors in US government bonds is a US$ that is not available to Eastern European countries desperately seeking to refinance debt, also, it is a US$ that cannot reach Africa, where many countries are struggling with the loss of aid and foreign investment.

Popularity: 7% [?]