Will China Dump U.S. Debt?

As the U.S. teeters closer to the brink of debt default, the political stalemate is being watched closely by its biggest foreign creditor, China. At last count, Beijing owned almost $1.2 trillion of U.S. Treasury debt.

By Bob DeMarco
All American Investor

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Fundamentals Dividend Growth Investment Strategy 730

The DJIA (12143) finished this week about 15.7% above Fair Value (10493) while the S&P closed (1292) basically at Fair Value (1296).

By Steve Cook
All American Investor

Equity (S&P) prices, at least as defined by our Valuation Model, have come back to Fair Value propelled by economic/political uncertainty created by a self serving western, statist political class.

Much of that is already in our Models and, hence, I view this decline as a Buying opportunity. Nevertheless, I would like to see a bit more resolution to the fiscal difficulties both here and in Europe before jumping in feet first.

Balance on Current Account, NIPA's (graph, 729)

By Bob DeMarco
All American Investor

The estimation of national income was initiated during the early 1930s, when the lack of comprehensive economic data frustrated the efforts of Presi­ dents Hoover and Roosevelt to design policies to combat the Great Depression. In response to this need, the Department of Commerce commissioned Simon Kuznets of the National Bureau of Economic Research (NBER) to develop estimates of national income.

Pro­fessor Kuznets headed a small group within the Bureau of Foreign and Domestic Commerce’s Division of Eco­nomic Research. Professor Kuznets coordinated the work of researchers at the NBER in New York and his staff at Commerce. The estimates were presented in a report to the Senate in 1934, National Income, 1929–32.

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U.S. Data Points Markets Down for Third Straight Month

Amplify’d from www.wallstreetjournal.com

Data Points: U.S. Markets

Dow Industrials, down 271.10 points this month, or 2.18% to 12143.24.

Fell for the third month in a row. Worst down month since August 2010. This week it is down 537.92 points, or 4.24%. Largest weekly percent drop since the week ended July 2, 2010 when it fell 4.51%. Today, it fell 96.87 points, or 0.79%. Today’s top contributors to the Dow’s movement and their point contribution: IBM (0.38), T (0.00), CSCO (-0.30), UTX (-0.61), BAC (-0.61). Today’s laggards and their point contribution: XOM (-12.64), HPQ (-8.10), CVX (-7.64), DD (-6.66), CAT (-6.43).

Gross Domestic Product: Second Quarter 2011 (Advance Estimate)

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.

EMPLOYMENT COST INDEX - JUNE 2011

Compensation costs for civilian workers increased 0.7 percent

All American Investor

Compensation costs for civilian workers increased 0.7 percent, seasonally adjusted, for the3-month period ending June 2011, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.4 percent, and benefits (which make up the remaining 30 percent of compensation) increased 1.3 percent.

Around the Horn Early AM

By Bob DeMarco
All American Investor

The Centrist Cop-Out http://nyti.ms/ofbnS6

A VC: Two Kickstarter Projects You Should Know About http://bit.ly/oXTCfP

Looking To Sink Their Teeth Into Some Tasty Northwest Startups, Google Takes A Bite Of PIE http://tcrn.ch/qL1OzP

Apple Now Has More Cash Than The U.S. Government

By Bob DeMarco
All American Investor

Here's something to keep in mind as you follow this evening's congressional debate over the debt ceiling.

The Outlook for the Economy and Monetary Policy

By John C. Williams, President and CEO, Federal Reserve Bank of San Francisco

Amplify’d from www.frbsf.org

The Outlook for the Economy and Monetary Policy

My subject today is the outlook for the economy. We are now two full years into the economic recovery, yet progress on restoring the economy from the damage caused by the financial crisis and ensuing Great Recession remains discouragingly slow. The news from the jobs front has been particularly disappointing, with the unemployment rate—currently 9.2 percent—stubbornly high. This afternoon, I’ll give my perspective on why economic growth has been so modest and offer my outlook for the future, which anticipates some improvement during the second half of this year and next year. I’ll also talk about inflation, which has seesawed in recent months. Finally, I’ll explain what the Federal Reserve is doing to promote maximum employment and price stability. As usual, my remarks represent my own views and not necessarily those of my Federal Reserve colleagues.

Company Highlights Donaldson Company (DCI)

Donaldson Company (DCI) manufactures filtration systems and replacements parts including air and liquid filters, exhaust and emission control product, in-plant air cleaning systems,air purification systems, intake systems and specialized filters.

By Steve Cook
All American Investor


Company Highlights

The company has grown profits and dividends at a 12-14% pace over the last 10 years earning a 18-20% return on equity. As with most industrial equipment suppliers 2009 was a tough years.

However, the company has returned to its above average rate of earnings growth as a result of:

(1) across the board increase in demand for its equipment at the global economy
rebounds,

(2) an expanded distribution network improving its service capability,

(3) expansion into emerging markets,

(4) the introduction of new products through technological innovation,

(5) improved productivity coming from a comprehensive cost rationalization
program.

The major negative for DCI is rising commodity costs.

AllAmerInvest, Twitter, 7-28

By Bob DeMarco
All American Investor

Nokia’s Ovi Store Serving Over 7 Million Downloads A Day | TechCrunch

In Uncertain Times, Stick With the Best: JP Morgan - Seeking Alpha http://bit.ly/ozcK4i

4 Dividend Stocks With Liquidity Growth and Strong Sources of Profitability - Seeking Alpha http://bit.ly/qqUeVx

RealClearPolitics - Centrism Twists Debt Ceiling Debate http://bit.ly/qn6H5h

Morning Links: Downgrading the Downgrade - MarketBeat - WSJ http://on.wsj.com/p1Ayx9

Who Is In Worse Shape – the United States or Europe?

Amplify’d from baselinescenario.com

Who Is In Worse Shape – the United States or Europe?

If economic performance is in part a beauty pageant, as John Maynard Keynes suggested, both the U.S. and Europe seem to be competing hard this summer for last place.  If anything, based on the latest flow of news coverage, Europe might seem to be experiencing something of a resurgence – last week the eurozone agreed on a big deal involving mutual support and limiting the fallout from Greece’s debt problems.  In contrast, the U.S. this week seems to be completely mired in a political stalemate that becomes more complex and confused at every turn.

CBOE Gold Miners ETF Volatility Index (Chart)

All American Investor

Source(s): Chicago Board Options Exchange
Release: CBOE Market Statistics

EAV_BLOG_VER:74542d19fb9a8c24
EAV_BLOG_VER:74542d19fb9a8c24

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Original content Bob DeMarco, All American Investor

Manufacturers' New Orders: Durable Goods, ’ Shipments, Inventories (Chart, 7-27)

All American Investor

New orders for manufactured durable goods in June decreased $4.0 billion or 2.1 percent to $192.0 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 1.9 percent May increase. Excluding transportation, new orders increased 0.1 percent. Excluding defense, new orders decreased 1.8 percent.

Transportation equipment, also down two of the last three months, had the largest decrease, $4.2 billion or 8.5 percent to $45.4 billion. This was due to nondefense aircraft and parts which decreased $2.8 billion.

Company Highlights C.H. Robinson Worldwide

C.H. Robinson Worldwide (CHRW) is one of the largest third party logistics companies in North America, providing non asset based multimodal, logistic solutions and fresh produce sourcing.

By Steve Cook
All American Investor

CHRW has grown profits and earnings at a 25%+ pace over the last five years earning a 30%+ return on equity.

30-Year Conventional Mortgage Rate (Chart, 7-26)

Last Reading 4.52 percent versus 4.50 percent a month ago.

6.80 percent five years ago.

Contract interest rates on commitments for fixed-rate first mortgages. Source: Primary Mortgage Market Survey data provided by Freddie Mac.

All American Investor

Vehicle Miles Driven And the Ongoing Economic Contraction

Amplify’d from advisorperspectives.com

The Depart of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends (PDF format), data through May. The lead observation is that travel on all roads and streets declined by -1.9% (-5.0 billion vehicle miles) for May 2011 as compared with May 2010.

Here is a chart that illustrates this data series from its inception in 1970. I'm plotting the "Moving 12-Month Total on ALL Roads," as the DOT terms it. See Figure 1 in the PDF report, which charts the data from 1986. My start date is 1971 because I'm encorporating all the available data from the DOT spreadsheets (see link).

Kicking the Can Yet Again

John Mauldin did a great job on the EU sovereign debt arithmetic -- Steve

Amplify’d from advisorperspectives.com

My friends at GaveKal point out that this is “… the sixth time in 18 months European leaders have announced a definitive solution to the Euro crisis. Should this version of the final bailout be taken any more seriously than the first and second solutions to the Greek crisis in May and September 2010 or the Irish bailout of December 2010 or the Portuguese rescue package of March 2011 or the breakthrough vote in the Greek parliament of last month? The supposedly good news for markets was that the -21% haircuts to be imposed on Greek creditors (as estimated by banker groups) were less than half those suggested a few days ago.”

A 21% haircut is a bad joke. If you assume that Greece can afford to spend 10% of their revenues just to pay the interest, which is what they will need to be able to do to get out of their crisis, then the haircuts look more like 75-80%. Sean Egan, the most credible credit analyst in the country, estimated this week that the eventual haircuts on the Greek debt will be 90%. Read more at advisorperspectives.com

See this Amp at http://amplify.com/u/a19mvy

Sanofi-Aventis (SNY)

Sanofi-Aventis (SNY) has made good though erratic progress of its March 2009 low, quickly surpassing the down trend off its January 2008 high (red line) and the November 2008 trading high (green line).

By Steve Cook
All American Investor

The stock is in a long term trading range the straight blue line is its upper boundary. Intermediate term, the stock is in an up trend (purple lines).

The wiggly blue line is on balance volume. The High Yield Portfolio owns a 2/3rds position in SNY. Shares would be Added at $20.50; the lower boundary of its Sell Half Range is $38.50. (I recognize that the current price is above $38.50 but have held off
pending developments at the company.)

The Subprime Mortgage Crisis

By Bob DeMarco
All American Investor

This comprehensive articles touches all the bases.

Includes: The rise and fall of subprime lending, The insider/outsider theory, The bubble theory, Were interest-rate resets responsible for the subprime crisis, Were prime borrowers steered into subprime mortgages, Did investors in subprime securities know what they were buying, and much more.

M2 Money Stock Up Up and Away (Chart, 722)

Current M2 (Money Supply) reading $9258.9 Billion versus $8596.1 a year ago.

By Bob DeMarco
All American Investor

M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus:
(1) savings deposits (which include money market deposit accounts, or MMDAs);
(2) small-denomination time deposits (time deposits in amounts of less than $100,000);
and (3) balances in retail money market mutual funds (MMMFs).

Seasonally adjusted M2 is computed by summing savings deposits, small-denomination time deposits, and retail MMMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

The Post-Foreclosure Experience of U.S. Households

These results suggest that, on average, foreclosure does not impose an economic burden large enough to severely reduce housing consumption.

By Bob DeMarco
All American Investor

Despite the recent flood of foreclosures on residential mortgages, little is known about what happens to borrowers and their households after their mortgage has been foreclosed.


We study the post-foreclosure experience of U.S. households using a unique dataset based on the credit reports of a large panel of individuals to from 1999 to 2010.

Although foreclosure considerably raises the probability of moving, the majority of post-foreclosure migrants do not end up in substantially less desirable neighborhoods or more crowded living conditions.


These results suggest that, on average, foreclosure does not impose an economic burden large enough to severely reduce housing consumption.

Buffett On How to End the Deficit and More (Video)

By Bob DeMarco
All American Investor