Sunday, November 13, 2011

Review of Barron's, Dated 14 November

As I entered 7-11 yesterday, I again wondered what Barron’s would offer up this weekend.  When I saw the 100 Yuan note (China’s currency) that was the illustration for the Cover Story, I just went and bought the edition without even looking more.

“Enter the Yuan” (by Kopin Tan) makes the case that China’s yuan (renmimbi) will become a reserve currency by the end of the decade.  I quote the author:

“In recent years, China has stepped up an ambitious plan to increase the circulation of the yuan outside the mainland and persuade trading partners to use it to invoice or settle transactions.”

China’s currency is not a reserve currency now because it is tightly controlled and not freely convertible.

Companies like McDonalds and Caterpillar have issued debt in yuan.  Countries like Brazil and Russia already have deal worked out with China to use each other’s currencies.  One nice thing about having a reserve currency is that Chinese importers and exporters would then not have to run foreign exchange risk.  This resonated with me as our company in Peru a few years ago worked with a Japanese exporter who wanted to be paid in Japanese Yen (or more accurately, we would place our order and then when it was ready we would wire over enough dollars to cover the amount in yen).

There are pressures within China to open up the yuan as well as pressures to not do so.  But, it looks like China will indeed push slowly to turn their currency into a reserve one, as that will help with their long term goals of increasing its middle class and consumption as well as give the country more buying power (and so help slow down inflation).  The ones resisting this are the exporters, who would then find the higher level of the yuan to be an unwelcome cost push.

People who follow China might want to read this article.

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Alan Abelson returns this weekend with a term I had never heard of: “Cognitive Fog”.  The latest victim of cognitive fog is none other than Texas Governor Rick Perry who had his brain freeze there in the latest Republican debate.  Cognitive fog seems to have visited Jon Corzine as well, who apparently cannot remember what happened to the $600 million in MF Global’s customer money.

Abelson then goes on to write about Europe.  It’s bad what’s going on there, to sum it up.  He writes of his conversation with David Rosenberg (a name familiar to Zero Hedge readers).  The biggest take-way: France is the next domino…

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I have noticed something about Barron’s (hey, I am not the sharpest knife in the drawer. OK?), in that they provide a story on two or three companies each edition.  Most of them are bullish articles.

Sandra Ward writes on hi-tech glass maker Corning (ticker GLW) in her article “A Glass Act on the Cheap”.

Vito J. Racanelli writes “It’s Time to Ring Up Vodafone”, making a bullish case on Vodafone (VOD) vs. other wireless carriers.

Miriam Gottfried writes up “Darden Offers Investors a Tasty Treat”, mentioning that Darden (DRI) is renovating the company and offers a 3.6% dividend yield.

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“D.C. Current” column writer Jim McTague writes about a tax too toxic even for Obama!  The Europeans (Merkel and Sarkozy among them) want to levy a financial transactions tax, to raise money and discourage wanton speculation.

There are many reasons why such a tax would not work.  One of them is that it would have to applied everywhere, or else traders would seek out the Zurichs and Dubais of the world to avoid it.  Well known Harvard economist Kenneth Rogoff (co-author of the excellent book This Time Is Different) says it would be a bad idea as well.

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Thomas Donlan disappointed me with his Editorial Commentary re the supercommittee.  Just let the cuts happen, or let it burn…

He writes a piece (better) on the bond vigilantes knocking on the gates of Rome.  Yes, Italy has caught the contagion from Greece.

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Now from the Market Section:

“Asian Trader” writer this week writes positively about HTC, the Taiwanese cell phone maker is now number three (behind only Apple and Samsung) in the cell phone sphere.  I know for a fact that HTC has worked with Google on the Android operating systems for cellphones.  I even have a friend who dumped his Apple iPhone for and Android phone, he likes Android better.

I always look at “Commodities Corner”, this week Shane Romig writes a piece on beef, mainly about Argentine beef.  Argentina’s totally incompetent government for a few years gas been hurting beef production (limiting exports, price controls, etc.) to pacify urban beef consumers in the cities.  That seems to be changing, maybe Argentina will be back as a major player in the beef market worldwide.  They used to be the No. 4 beef exporter, currently they barely make it into the top 10.

My money comments (Market Laboratory – Indicators):

Total Fed holdings: down a tiny bit
Monetary Base: down a tiny bit
M1 Money Supply: up a tiny bit
M2 Money Supply: up a very tiny bit

The Peruvian Sol: up the tiniest bit vs. the US$

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Finally, there is a small Special Section on ETFs.  I just glanced through it, there are plenty of ETFs out there that I already know about, so I chose not to use my time plowing through the Special Section on the ETFs.

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Verdict on the weekend’s Barron’s: you make the call!

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