Miami Vice? Foreign inflows support US housing market

During my recent visit to Miami, I saw that real estate was moving and prices were rising. It seems like only yesterday I was hearing about a 20-year overhang of condominiums and houses. Was I dreaming?

We all know markets work in cycles, but this is ridiculous. How could the biggest bubble burst of recent history i.e., the crash of 2008-2009, be over already and the Miami real estate market be off and running again?

Argentina controls won’t stop capital flight

It’s fall in Buenos Aires. As much as I travel, it is still a shock when I cross the equator and arrive in another season. It is also still a shock when I arrive in a city capital where government protesters fill key squares in the city opposing government economic policies.

Argentina has experienced a difficult decade. May 25 marked the tenth anniversary of Néstor Kirchner’s inauguration as president of the country. His wife Cristina took over in 2007 and was re-elected in 2011. Now, a year and a half into her second term, inflation is climbing about 25% per year, and Argentines, fearing an official devaluation of the currency, are selling their pesos for dollars at half the official value on the black market that has emerged.

Checking the dashboard: A look at margin borrowing in the stock market

The use of margin debt to buy stocks is on the rise, and it is causing some market watchers to worry that the US stock market rally may be poised to come to an abrupt halt.

A high level of margin debt is seen as an indication of investor optimism about the stock market, but it is also seen as a sign that investors are becoming more speculative. Margin borrowing, like any kind of leverage, can magnify the returns on stocks when the market is rising. Investors typically borrow about 50% against the value of stock to be purchased. So it is not hard to imagine that, like all other kinds of leverage, margin borrowing will also magnify the losses of the inevitable market downswings.

Living in a material world

We’ve heard about this trend for years. People in the most populous countries on earth are entering the middle class at a rate unseen in the history of the world. Companies are scrambling to capture the business of this mass of new consumers.

As people rise to the middle class, the changes in their behavior patterns closely mirror those experienced by Europeans and Americans as wealth spread in the wake of the industrial age. What is different about this phenomenon is the sheer number of people involved and the speed with which it is taking place. While the rise of the middle class in the United Kingdom and United States occurred over long stretches of time, in emerging markets the creation of large pools (tens of millions) of middle class spenders is now happening in just a few years.

Worker productivity boosting US profit margins

US earnings season is in full swing for the first quarter of the year, and the results seem to confirm a slow patch, at the very least, or a decay in the robustness of the business cycle at worst. The rise in first-quarter earnings has been weak. And, if we remove large US banks from the equation, we see a decelerating trend.

But what is interesting is that margins are about 100% higher than their 50-year average. The increase is the result of competitive unit labor costs, the lower cost of capital and greater asset turnover. If we look at how much and how efficiently Americans are working, we will get a better idea of how companies, but not labor markets, have been the beneficiaries of this business cycle.

Looking beyond the dividend yield

Price performance and valuations in the US stock market have become more varied. Correlations have broken down. It is notable that defensive stocks, such as stocks in the consumer staples, health care, telecom and electric utilities sectors have moved ahead this year. Some key companies in these industries and sectors have outperformed the general market, and their valuations now seem high compared with other sectors of the market.