David Fuller and Eoin Treacy's Subscriber's Comment of the Day.
Friday 13th April 2012
Kuka Robots Invade China as Wage Gains Put Machines Over Workers - This is an informative article by Richard Weiss of Bloomberg on what I feel is a hugely important subject. Here is the opening:
AG (KU2), Europe's largest maker of industrial robots, is creating a regional
hub in China to tap surging sales in the world's most populous country, where
rising wages are lifting demand for automated factory gear.
There is no limit to the potential for industrial robots. If we think about it, there are very few routine jobs that that machines will not be able to do more efficiently than humans, if not now then within a few decades. If there is a cost saving involved companies and other organisations will opt for the machines, which can work 24-7, over humans.
Kuka AG, mentioned above is not yet in the Library but you can see from the Bloomberg chart that the market is not yet impressed with its earnings potential from the China project mentioned above. It does not pay a dividend. ABB Ltd is also a non yielding underperformer.
Japan's Fanuc is far more impressive being a strong relative performer despite a yield of only 0.75%. In contrast, Yaskawa Electric Corp has been largely rangebound since July 2009 although the pattern has shown some upward dynamics since the October 2011 low. It yields 1.35%.
If I were to buy any of these shares it would be Fanuc. It is not cheap at a current PER of 21, estimated 20, but it certainly has growth potential. Otherwise, companies with top engineers and which use the best industrial robots are likely to be the better performers
service has been a game changer for me, and I wholeheartedly recommend TCS to
anyone who invests.
Regarding your interesting questions, many in the Collective will know more about this than I do but I have a few thoughts. Since share price moves are a function of supply and demand, I assume that any significant reduction in supply can only make it easier for shares to rise when demand for them does increase.
Inevitably, there are significant fashion trends in the investment world and I am delighted that analysts and companies are no longer saying that "dividends are an inefficient use of capital." I always felt that was a disingenuous, self-serving mantra. However, via buybacks companies can increase earnings per share and reduce the cost of increased dividend payments. This is a timely fashion change because investors are ill-served by current government bond yields in the OECD countries, unless one is willing to accept the risk of troubled European sovereign debt. I see no need to take that risk when we can buy high-yielding equities with strong balance sheets.
Low government bond yields have reduced the risk, often expressed by analysts over the last decade or more, that aging 'baby boomers' would sell their equities to buy "safer" (sic) government bonds. While government bond yields remain low the money flow is more likely to be the other way around, in my opinion, as I have said before.
I think there have been fewer new listings in the US and Europe because it is harder for companies to obtain financing in our current environment of slower economic growth and tougher bank regulation, including higher reserve requirements.
As for the decline in stock splits, I can only guess. While these were once favoured to attract more investors and create an illusory feel good factor, they presumably increased registrar costs. Interestingly, Google announced that it would split its share yesterday. As I understand it, they will now have three categories of shares: 1) A-shares, untraded, held by the founders and which have 10 proxy votes per share; 2) B-shares that anyone can hold and which carry 1 proxy vote per share; 3) C-shares, which are new and have no proxy vote. Google's founders are ensuring that they have firm control over the company.
Lastly, I missed this email above when it came in last week and apologised to the subscriber when it was resent. He replied:
worries. One of the strengths of your service is how the degree of personalization
makes me feel as though I am a member of a very small group when that is not
exactly the case."
If you think it's appropriate, would you mind listing a few funds that you think are an interesting way of participating in the 'Autonomies' theme.
My comment - I think it is very appropriate for the longer term and I know many other subscribers share your interest.
I would welcome a fund for global Autonomies, provided its fee structure did not heavily penalise investor returns as is the case with most funds these days. My preference would be for an investment trust and I hope some like-minded institutional investment managers within the Collective launch an Autonomies fund within the not too distant future.
Meanwhile, having seen Eoin's frequent reviews of Autonomies, you can always aim to cherry pick within the sector on a timely basis. Otherwise, the closest alternative would be Dividend Aristocrat funds because a number of Autonomies qualify. However, Dividend Aristocrats will also include national and regional companies which are not Autonomies - utilities, for instance. You will find a list of Dividend Aristocrat funds in the Library - just Search under Aristo.
Note: in considering any of these funds, please conduct your own due diligence, particularly regarding costs. Most of these funds and shares are currently consolidating temporarily overextended gains relative to their 200-day MA.
"Baum is one of Russell's Favorites and is very smart and get's it. These policies are very precious metals friendly, and one of these days (you pick the day) the Market will 'Get It'"
comment - Thanks for this important
column by Caroline Baum for Bloomberg: Inflation Lurks as Stealth Tax on
Top of Form 1040. I commend it to all subscribers.
Ben Bernanke was appointed to the US Federal Reserve because he was an acknowledged expert on deflation and promised that the Fed would not allow the US to follow Japan's path of the last two decades and counting. So far so good on holding deflation at bay, and the Fed is focussing on the employment half of his dual mandate.
In the economic equivalent of the question: which came first, the chicken or the egg, we are all guessing which comes first: a self-sustaining recovery or inflation? No one knows. All we can be certain of is that Mr Bernanke will be a hero if a recovery worthy of the name comes first, and without the need for further QE steroids. In that event he will gradually raise rates to head off the inflation which is presumably in the pipeline.
If inflation comes first, and many people would correctly say that it already has in terms of most goods and services which we have to pay for, from food to education, then Mr Bernanke's achievements will be more controversial. Currently, inflation is not reflected by US government bond yields, but primarily because the Fed is the main buyer of this debt, as is the BoJ in Japan, the BoE in the UK and now the ECB via the banks which it is supporting.
Meanwhile, the Continuous Commodity Index (Old CRB) (historic, weekly & daily) remains in an overall downward trend, evidenced by the progression of lower rally highs and declining 200-day MA. It is also approaching an important low established in December. That low is significant because it was followed by the best rally since the peak nearly a year ago. The current retreat from 600 has lasted for seven weeks so CCI is somewhat overextended relative to its MA. If it were to encounter good support above its December low, and there is obviously no evidence of this as yet, it would suggest that a basing phase was underway prior to a more significant rally. Conversely, a sustained break beneath last year's low would reaffirm the medium-term downtrend.
I can think of three reasons why CCI is falling: 1) less user demand; 2) increased production of most commodities; 3) less long side speculation and more shorting. I assume it is a combination of all three. Whatever, Mr Bernanke will be pleased with the ranging downward trend because it shows that overall commodity price inflation is currently in retreat, albeit from a very high level. However, since this Index is unweighted, it does not reflect the economic headwind that crude oil prices have provided over the last year. While relieved that inflationary pressures are not worse, Mr Bernanke will be concerned by the slower GDP growth implications of CCI's retreat. It suggests that a steroid (QE) free self-sustaining economic recovery remains elusive.
(See also yesterday's item on "Some consequences of current monetary policy.")
"every day since the beginning of march gold has failed to close above its 50 ema on the daily chart. on commodities i consider the 50 ema to be the grand daddy so unless and until it closes above i personally won't be long of this metal."
My comment - Thanks for sharing your methodology. I have never met a successful trader who did not have his or her own favourite guidelines, presumably established by observation, experimentation and results.
is a daily chart of gold with a
50-day MA. It remains very much rangebound and this is likely to continue
for a while.
you know the only thing that gives me pleasure? It's to see my dividends coming
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MTA chapter on April 11th with a meet-and-greet from 5:30, buffet dinner from
6:30 and his presentation from 7pm at the Long Beach Marriott 4700 Airport Plaza
Drive, Long Beach 90815.