Capital Ideas Newsletters


It’s a Crim – e – a

March/April 2014

There is no “Disputin” that Vladimir has run rings around President Obama.

Whatever the outcome is, there is little doubt that America has been diminished in the eyes of its allies and its foes.

As Janet Yellin takes the reins at the Fed, it is clear that short-term interest rates are going nowhere fast. It also seems apparent to us that with a falling Chinese Yuan coupled with depreciation of the Russian Ruble (which is turning to rubble), the U.S. Dollar should enjoy a good run against those currencies. China’s economic ascent these last few years has been impressive. The current challenge is the evolution from being a savings-oriented economy to one driven by consumption and borrowing. In fact, last week I attended a Hudson Institute luncheon where a major topic of discussion was the surge in privately-held Chinese debt. If China’s population continues this trend, count on U.S. retailers to continue to exploit this opportunity as many of them already have.

Dog Gone It! Americans spent over $50 billion on their pets last year. That is a lot of “tender” vittles.

The U.S. comprises just 5% of the world’s population; however, 25% of the world’s criminals are incarcerated in our prisons. What is wrong with this picture? We need to re-examine mandatory sentencing guidelines and create a system that we can afford and that works to deter rather than punish crime.

Unbeknownst to most, Obama’s new credit agency, the Consumer Financial Protection Bureau (CFPB), is pressuring banks to make loans to people who cannot afford them. The CFPB will not allow reporters or private citizens into meetings with its paid advisors who include former ACORN activist lawyers who make money suing banks, and even a member of the Democratic National Committee. New mortgage rules require no minimum credit scores or down payments and even count government assistance as income for low income borrowers! Talk about creating a problem. Shades of 2007/2008?

Barron’s magazine reported that corporations are sitting with cash equal to 91 weeks of net earnings – that is a lot of fuel for stock buybacks, dividends or capital expenditures.

Investors seem to like the fact that the market has been climbing – the mood is optimistic but nervous. January was rough, February saw a bounce and March has been lackluster. Overall, we are going nowhere.

Equity mutual funds experienced outflows of approximately $810 billion between 2009 and the end of 2012. In 2013, however, $18.4 billion flowed into that asset class, and in 2014 so far, $20 billion has flowed in. There is still a lot of cash on the sidelines relative to where we were in 2009. According to The Financial Times, investors are favoring “safer industries” such as healthcare, energy and basic materials. It is interesting to note that corporate stock buybacks soaked up $448 billion in 2013 alone and $1.6 trillion in the last five years. This means less equities available and plenty of cash needing to find a home.

As always,

Seymour W. Zises

P.S. For those of you who are not clients at this time, it would be my pleasure to sit down with you and discuss your current portfolio to see if we can bring some new ideas to light. I am reachable at 212-872-9610 and

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