RSS Facebook Twitter LinkedIn

Featured Advisor

Kim Butler

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX

I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

Click to see the full profile

Share |

News Analysis for the Investor - May 31, 2011

Asian stocks were down on Monday based on weak U.S. economic data, according to the Financial Times.  Positive news on the Japanese economy has spurred global stock markets upward on Tuesday and the price of oil has increased to $102/barrel due to weakening U.S. dollar.

U.S. economy was hurt by Japanese disaster more than expected

USA Today reports that the U.S. economy was burdened by the Japanese earthquake and nuclear disaster more than anticipated.  The city most burdened was Detroit due to the slowdown in receipt of auto parts.  The slower production for all manufacturers is expected to increase prices and slow consumer spending.  Durable goods orders reflected these trends by falling 3.6% in April.  Goldman lowered its GDP estimate in the second quarter to 3%.  The impact will lessen the speed of the overall U.S. recovery.

Japan disaster also increased unemployment in Japan

Japan's unemployment rate increased for the first time in six months to 4.7%, up from 4.6% in April, according to the Associated Press.  Factory output, however, is expected to increase in the next few months and improve the overall economy.

And the Japan disaster also impacted Germany

The Financial Times reports that Germany has decided to end the use of all nuclear power by 2022.  Germany currently uses nuclear power for 25% of its energy supply.  The nuclear disaster in Japan convinced Germany to cease use of this energy source and speed the development of energy from renewable sources to represent 35% of total energy.  Germany seeks to be the leader in the green energy movement.

When bad is good.....

The terrible weather and other natural disasters that have recently occurred are bad for everyone except, surprisingly, insurance companies.  While losses from the recent tornadoes are anticipated to cost insurers $13-15 billion and the Japanese earthquake to cost an additional $50 billion, insurers are not concerned.  The number of disasters that have occurred have resulted in what they identify as a "hard market".  This allows them the opportunity to increase premiums.  When premiums increase, they rarely decrease.  I guess the average investor is the real loser.

Renting becoming increasingly popular

The prior belief that home ownership is the foundation for the path to wealth is being questioned by the many Americans who are increasingly favoring renting to owning.  According to the USA Today, more than 500 mid-sized and large cities have seen an increase in the share of homes rented rather than purchased.  The number of renting households has grown 692,000/ year in the past few years while the number of individuals owning homes has decreased 201,000/year.  In 2010, 34.9% of homes were rented compared to 33.8% in 2000.

Threat to "Pipeline Crossroads of World"

According to the Wall Street Journal, Cushing, Oklahoma's role as "Pipeline Crossroads of the World" is being threatened.  Why?  Cushing houses millions of barrels of light sweet crude oil known as "West Texas Intermediate" oil.  Generally this oil has priced within $1 of other oil types.  But this market price has been varying and not tracking the general markets due to a glut being held in Cushing.  For example, on Friday, WTI oil priced $14 lower than Brent Crude oil.  Thus Cushing's prices are no longer a good proxy for the oil market.  The airlines have traditionally relied on these prices to lock in future oil purchases.  Because of these variations, the reputation for the WTI prices is sliding.