BIGCAPITAL's Blog

March 29, 2011

Japanese reconstruction may boost GDP growth

Japanese reconstruction may boost GDP growth

Experts suggest the massive Japanese earthquake may push up the country’s gross domestic product (GDP) as a result of the reconstruction efforts but Japanese equities and insurers are likely to suffer.

A report from Citi expects reconstruction demand will materialise in the second half (H2) of 2011, eventually pushing up GDP.

“We estimate the net impact on GDP growth in 2011 at +0.2% to 0.3% points,” said Citi.

This supposition was supported by rating’s agency Moody’s.

“Reconstruction spending will likely prove to be a very effective and justifiable fiscal stimulus. Such expenditure will likely offset the economic impact from immediate losses in production and demand,” it said.

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That is why Warren Buffett said Japan represents a buy opporunity: Pace of reconstruction in stunning

That is why Warren Buffett said Japan represents a buy opporunity: Pace of reconstruction in stunning

Tsunami came and left giant gaps on Japan well constructued roads. That was the story of the Tsunami and the earthquake of March 11.

But then came the power of the Japanese people as they reconstructed what the quake had taken away. The astonishing speed of reconstruction is being used to highlight the nation’s ability to get back on its feet. Work began on March 17 and six days later the cratered section of the Great Kanto Highway in Naka was as good as new. It was ready to re-open to traffic last night.

Warren Buffett: Japan Disaster Presents A ‘Buying Opportunity’

Filed under: Uncategorized — bigcapital @ 3:12 am
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Warren Buffett: Japan Disaster Presents A ‘Buying Opportunity’

in South Korea (MarketCall.net) – Billionaire investor Warren Buffett believes Japan’s devastating earthquake is the kind of extraordinary event that creates a buying opportunity for shares in Japanese companies.

Japan, the world’s third-largest economy, has been battling to bring an overheating nuclear plant under control after it was battered by the March 11 earthquake and tsunami that rattled global markets and prompted massive intervention in currency markets by the Group of Seven industrial nations.

‘It will take some time to rebuild, but it will not change the economic future of Japan,’ Buffett said on Monday on a visit to a South Korean factory run by a company owned by one of his funds. ‘If I owned Japanese stocks, I would certainly not be selling them.

‘Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don’t think Japan will be an exception,’ said the 80-year-old investor, dubbed the ‘Sage of Omaha’ for his successful long-term investment strategy.

Buffett heads Berkshire Hathaway Inc, which has substantial insurance and utility investments globally.

Japan’s Nikkei share average rose 2.7 percent on Friday, buoyed by the G7 support, but still ended the week down around 10 percent, with some $350 billion wiped off share values — the market’s biggest weekly slide since the global financial crisis in 2008. Japanese markets were closed on Monday.

Buffett said Berkshire Hathaway, which at the year-end was sitting on $38 billion of cash equivalent and last week bought U.S. specialty chemicals maker Lubrizol for $9 billion, was looking for more large-scale acquisitions anywhere in the world.

In his annual letter to Berkshire Hathaway shareholders last month, Buffett had said he was looking for more acquisitions.

‘The United States is most likely where we will do something,’ he said at a ground-breaking ceremony for a South Korean factory run by a unit of an Israeli firm owned by his investment vehicle.

Buffett will have yet more money to invest after Goldman Sachs buys back $5 billion of its preferred stock from Berkshire Hathaway, which the fund bought at the height of the global financial crisis.

EYE ON KOREA

Buffett, ranked the world’s third-richest man by Forbes this year, said he was also looking to buy entire businesses and large-cap shares in South Korea — where Berkshire is already a leading shareholder in steelmaker POSCO.

He said geopolitical risks associated with North Korea had not curbed his interest in South Korea, Asia’s fourth-largest economy. Berkshire also owns a stake in Chinese car and battery maker BYD.

Buffett did not disclose any holdings in Japan on Monday, and Berkshire Hathaway’s annual report did not show any major investments there. He had been due to visit Japan later this week, but canceled due to the earthquake.

Unlike many foreign fund managers, Buffett, who arrived in the southeastern city of Daegu on Sunday by private jet, won plaudits from ordinary South Koreans.

Sporting gray sweat pants and running shoes, Buffett was greeted by signs reading ‘Mr Buffett: Daegu Loves You.’

Many in this country of nearly 50 million people have bad memories of the 1998 Asian financial crisis when a deal with the International Monetary Fund bailed out the country but at the cost of tens of thousands of jobs.

Some U.S. hedge funds have been branded ‘vultures’ for buying South Korean assets on the cheap in the wake of that crisis.

‘It’s a once in a life-time opportunity. I’m honored to meet such a respected businessman,’ said Seo Hyun-joo, a housewife wearing Korean traditional dress.

Buffett later meets South Korean President Lee Myung-bak in Seoul and heads to India on Tuesday to launch his firm’s insurance selling portal.

Source: http://marketcall.net/

March 10, 2011

3 Months From Now, US Fed Will Stop Buying

Filed under: Uncategorized — bigcapital @ 5:43 pm
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3 Months from now, US Fed Will Stop Buying.

Thursday, March 10, 2011 — http://marketpin.blogspot.com

== US Fed bond buys to finish, greenback and global stocks on radar ==

Fed’s Fisher warns could vote to stop bond buying

WASHINGTON (Reuters) – A senior U.S. Federal Reserve official warned on Monday that he would vote to scale back or stop the central bank’s $600 billion bond-buying program if it proves to be “demonstrably counterproductive.”

Dallas Federal Reserve Bank President Richard Fisher, who has repeatedly said he would not support any more bond buying after the program ends in June, said he was doubtful the purchases were doing much good.

“I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it,” Fisher said in remarks prepared for delivery to an Institute of International Bankers’ conference in Washington.

“The liquidity tanks are full, if not brimming over. The Fed has done its job,” he said.

The Fed launched its bond buying program in November to help an economic recovery that was struggling with high unemployment after the worst recession since the 1930s.

But since then, the economy has shown signs of strengthening with the jobless rate falling to a nearly two-year low of 8.9 percent in February.

Fed officials are due to meet March 15 to discuss the bond purchase program. In January, Fisher voted with the rest of the central bank’s policy-setting Federal Open Market Committee to continue it.

In comments to the bankers’ conference, Fisher said he did not feel that further monetary accommodation would help put more Americans back to work.

“It might well retard job creation, should it give rise to inflationary expectations,” he said, adding that perhaps the Fed’s policy has compromised the central bank by implying it is “a pliant accomplice to Congress’ and the executive branch’s fiscal misfeasance.”

== How About U.S dollar ? ==

Stretching out Treasury purchases past the end of June while reducing the monthly amount would help bond dealers adjust to the Fed’s withdrawal from the market, said Lou Crandall, chief US economist at Wrightson ICAP in Jersey City, N.J

NEW YORK – The Federal Reserve’s $US600 billion bond purchase program will be completed as planned, top Fed officials signalled, though they saw heightened economic uncertainty from unrest in the Middle East.

US central bank officials from Atlanta, Chicago and Dallas said they were keeping an eye on the risk higher oil prices could feed through into broader inflation, as well as their potential to hurt growth.

Atlanta Fed President Dennis Lockhart said he would not rule out more bond buys if the recovery dwindles. Dallas Fed President Richard Fisher said he would vote to end the program early if higher oil prices fed into broader inflation.

The program, announced in November to bolster a fragile economic recovery, is due to end in June. Since it began there have been signs the recovery is picking up steam.

Mr Lockhart, a policy centrist, said he was more concerned about the risk to growth from the oil price rise. He said he would be “very cautious” about increasing the size of the purchase program.

“Given the emergence of new risks, however, I prefer a posture of flexibility,” Mr Lockhart said.

He expected overall price pressures to remain subdued and warned it is too early to “declare a jobs recovery as firmly established”.

Mr Fisher, an inflation hawk, said he “fully expected” the $US600 billion program to “run its course.”

Mr Fisher told an international bankers’ conference he would vote to curtail or stop the program, however, if it proves to be “demonstrably counterproductive.”

The Fed meets on March 15 for its policy-setting meeting, at which it is expected to reaffirm its purchase plan. Fisher is a voter on monetary policy this year, Mr Lockhart is not.

In a CNBC interview, Chicago Fed Bank President Charles Evans said the Fed was closely watching rising oil prices, adding that they were “obviously” a headwind for growth.

Revolutions beginning in Tunisia and Egypt have spread to other countries in the region, including Libya and Bahrain. This has pushed the price of oil above $US100 a barrel, complicating the Fed’s objective of stimulating economic growth while keeping prices under control.

That said, Mr Evans pointed to the improving job market and said he expected economic growth of four per cent this year and next. He called the size of the purchase program “good”.

“I continue to think the hurdle is pretty high for altering our currently announced” program, Mr Evans, seen as a monetary policy dove and one of the most outspoken proponents for quantitative easing, said. Mr Evans does not have a vote on monetary policy this year.

Mr Fisher said the question will be whether the oil price rise is sustained.

“It is really a question of how that works its way through,” he said. “We have already seen very high gasoline prices. That’s one of the ways that it most affects the consumer.”

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