Gibt es neue wirtschaftliche und / oder politische Rahmenbedingungen, die zu beachten sind?
Wie werden sich die einzelnen Anlagekategorien verhalten?
Was kann oder sollte der einzelne tun?
Zu diesen aktuellen Fragen hat der Autor kürzlich einen Vortrag in Köln gehalten, der jetzt auf
“Asmus Puhl Finance Resources“ nachgelesen werden kann!
Viel Vergnügen!
Only a few days until Christmas and the end of 2009!
This is traditionally the time for predictions! Predictions about how the financial markets will fare in 2010!
As this blog openly states it is unable to predict the short or medium term moves of the market (and we think no one really can…..) perhaps one element of the coming years becomes very clear:
Rising long term interest rates!
In the aftermath of the financial crisis and the following recession, consumers started to wind down their debt. Private companies were doing the same.
But the governments of the Western world did the exact opposite: They run public deficits up to 10-12% and accumulated debt in an unprecedented way.
After Dubai Greece was the first sovereign debtor which ability to pay current obligations has been questioned. Two rating agency already downgraded the public debt of Greece below the A-level.
This general mistrust in sovereign debt will very likely increase in 2010 and beyond and will – in Europe – put more question marks behind the European monetary union.
As financial markets are recognizing that current interest levels are not compensating enough for the rising risk of public debt, it is not difficult to predict that long term interest rates will rise in 2010.
This must not be bad for the stock market as general wisdom suggests. The world economy continues to improve, earnings will improve too and real assets are becoming more and more “fashionable” (…another move away from „paper money”…).
But please do not expect returns like this year against a rising interest szenario!
The same applies for gold and other precious metals. If the move away from paper money continues gold will likely continue its longterm upward trajectory, after a little pause for profit taking and even against rising interest rates.
A Happy and Prosperous New Year to all our readers!
See you in 2010!
Fitch downgraded the public debt of Greece, a member of the Euro to BBB+
Moody’s and S&P both have a negative outlook for this country.
If the numbers are correct (and this is not always certain in Greece) the public deficit ballooned to 12%, far above the 3% threshold the Maastricht treaty normally allows. Public debt reaches 120% of GDP.
Yesterday Moody’s lowered its outlook for Spain’s national debt. If informations are correct Portugal is not in a much better situation.
These countries face a serious problem: They cannot devaluate their currency in order to help their economy because they are members of the Euro. This could mean sluggish economy with rising public interest payments as creditors are willing to lend only with higher risk premiums.
For the first time a sovereign debt crisis within the monetary union could be on the horizon.
So far my fears expressed in my previous post begin to become reality!
The Euro weakened against the dollar for the first time after weeks.
Gold currently passes a correction after the huge runup this year but it will be interesting to watch where it will be heading in 2010:
Once again: Will gold rise only when the dollar is weakening or will it rise also when the dollar remains relatively strong?
If the second alternative prevails this could very well be a strong indicator of the beginning distrust in paper currencies Alan Greenspan mentioned earlier this year …. a distrust in all paper currencies, not only the dollar!
We would then be only at the beginning of a multiyear gold bull market!
A lot of market participants are bullish for gold these days.
But what about gold’s „little sister” silver?
Mother Earth contains about 15 times as much silver than gold and the historical prices for gold and silver reflected this ratio most of the time.
And how are prices today?
One oz. of gold this Friday morning stands at $ 1045, but one oz. of silver only costs $ 17.75
(watch for precious metal quotes on “Kitco.com” )
So today you can buy 59 oz. of silver for the price of one oz. of gold!
This is an enormous disconnect from the historical price ratio!
What do you think?
Will this gap close? Does this mean the beginning of a huge silver rally?
After the Fed meeting of yesterday Gold is a little down at $ 1014 /ounce in today’s morning trade. The dollar stands at 1.4770 against the Euro.
So will Gold continue to move higher?
Ok, a short term setback is always possible. Gold is rather volatile and attracts a lot of short term traders and hedge funds.
But as I pointed out, watch for the strategic moves of the Asian countries and the Oil producing Arab countries!
Will they continue to move away from the US-$ as their dominant currency reserve and diversify? Gold is clearly one of their options.
Don’t forget that the US and the other Western countries lost a lot of credibility during the financial crisis. Asia looks at this as a Western crisis.
The level of Western indebtness worries Asia where neither the countries nor the banks or consumers are leveraged as their Western counterparts.
A good indicator could be the declarations of China and other Asian countries at the G-20 summit in Pittsburgh.
They already ask for more voting rights for Asian countries within the IMF. And definitely this will not be their last move.
Recently the last „bear” of the big gold mines, Barrick Gold (NYSE: ABX), threw in the towel and annouced a huge $ 5.6 billion charge in Q3 2009 in order to eliminate their fixed price gold contracts, reflecting an „increasing positive outlook on the gold price”.
Stay tuned!
The gold price is flirting with the $ 1000 threshold for some days now. This move comes after the price of the precious metal has been hovering around for 18 months.
So is a breakout imminent? Indeed some technical factors may suggest this move.
But this blog does not favor technical analysis so we will not discuss this.
Normally bullish market mood indicates that all positive factors are already priced in and every market participant is already positioned. So the expected move will not happen because there is no new demand coming to the market.
Could it be different this time?
If you seek an answer watch out how big sovereign market participants behave:
These market participants make big longterm strategic moves. They are not positioning themselves for the short term.
The US are running a budget deficit of 13% of GDP. The big Western European countries are at an average of 7%. The financial crisis has been accomodated essentially by throwing money at the problems. This money is still floating around.
Their are first signs that the Fed and other central banks are disposed to tolerate a higher inflation rate than they actually admit. An inflation rate of 0 to 2% seems to be a thing of the past once the economy picks up.
So will the central banks be credible when they have to start to raise interest rates again?
Perhaps you should watch out for more bullish signs of the gold market in the coming weeks and months!
Our guest author, economist John Gault, recently discussed
“Stepping back: where the Global Economic Crisis is headed”
at a Geneva Conference about “Cross-border and offshore banking”.
You can find this very interesting article now on our in-depth analysis web site.
Enjoy!
Also Markel came out with its Q2 2009 Earnings Report yesterday:
http://phx.corporate-ir.net/phoenix.zhtml?c=104364&p=irol-newsArticle&ID=1317391&highlight=
They reported book value of $ 239.68 per common share at June 30, 2009, up 8% from $ 222.20 at december31, 2008.
The combined ratio in Q2 2009 was 99% compared to 95% in Q2 2008.
Today August 06, 2009, they will host their conference call. If you like to listen, here is the link:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=104364&eventID=2358584
Enjoy!
Colfax reported Q2 and Half Year 2009 results on August 4th!
Here is the link:
http://finance.yahoo.com/news/Colfax-Reports-Second-Quarter-prnews-2007607197.html?x=0&.v=1
We will discuss these results later on this blog.
But how to value Markel’s stock?
To value an insurance company is not an easy task. Insurance companies depend a lot of management’s quality:
Are they able to price adequately policies?
How exact are their loss estimates and their loss reserves?
Insurance companies are not such a leveraged risky business model as banks as we all had to learn in 2008 and 2009 but nevertheless management mistakes can wipe out the float or the company whole together.
Net earnings and their multiples are not very meaningful when you value an insurance company:
Earnings can be great if the company does not reserve properly for eventual future losses. When later losses hit the company, it has to record big losses or even becomes an endangered species.
So how to mesure the value of its float?
Markel measures itself by „book value/share”, its stockholder’s equity divided by the number of outstanding shares.
Let’s have a look at the price-to-book value ratio.
In normal times the stock market values a good insurer at 2 times book value. More can be a too rich valuation and less can hint at problems. Or a difficult market like today temporarely undervalues the true value of insurance companies.
Markel’s book value/share at the end of the first quarter 2009 was $ 222.14
It’s share price at present sits at $ 280 at present.
So if we simply assume the book value did not change until today, we get a price to book value ratio of 1.3.
Markel’s manegement is excellent. Markel views its shareholders as business partners. There has never been a significant stock dilution in the history of this company.
Growth in book value averages 10-15% over the long term
1.3 times book value/share to me seems an interesting price for an outstanding company like Markel Corp.
What do you think?