b2 gurus | business news

This week, as rain pours over Ontario, more wealth drains out of North America. The housing industry continues to drop, but it seems the rate is finally slowing down. Wachovia, SunTrust and three other banks reported a combined loss of over 11 billion, while their shares rose in value by about 11 billion. It seems, that expectations were so low, that the losses were better than what analysts saw coming. This, in turn, fueled the blind increases in their stock.

The only good news came out of tech stocks, as Apple, and Amazon posted amazing results. Speaking of Apple, there was some news regarding the health of Steve Jobs, but it seems that it has all cleared away. With oil finally falling, and a slight hint of consumer spending with box-office hits, the skies look good for next month. Oil has been hovering around $124 a barrel this week, about $20 lower than previous prices. A major contributor to this is due to the fact that global demand for oil has finally dried up. Another concern is the amount of regulation in the field of derivatives. Tougher regulations in options and futures trading could prevent or lessen future economic blow-ups like these, especially with something so fragile as oil and energy. None-the-less, the month of August has lots of sunshine on the forecast, and global expectations are high. I can’t wait to see what August brings.

Signing out,

ZEZ

Hello fellow readers, I would like to apologize again for not keeping a consistent weekly newsletter for the last while. Quite a few interesting events happened last week, especially on Friday, relating to the financial markets, technology markets as well as my own internet market failure… thanks to Rogers Communications.

Moving on, so, in the financial markets, the two largest mortgage companies were slashed almost in half, on Friday. Fears of major losses in mortgages drove away investors by the flocks. Estimates of losses rose to nearly $30 billion for these each of these two mortgage companies. Together, FreddyMac and FannieMae hold about $5 trillions worth and guarantees of mortgages. If they collapse, then we would be in major economic turmoil….

Depression *gulp*

!930s *tears*

Well, everyone knew this was coming, ever since the fall of Bear Stearns. Yep, Buffett was right about that long and painful recession. The Fed is again stepping in and preparing a backup plan, a.k.a., a buy-out. Tax-payer dollars are at rick, yet again, and the role of government in market economies is at question. In Canada, this sounds all too similar, with auto-companies, and the application of band-aid packages. Also, recently, GM announced more slashed, this time, in marketing and engineering. Wow, the two backbones of survival are being cut-off, maybe its the executives that need to be slashed. Say goodbye to innovation and next-gen designs from GM forever. It looks like governments are always wasting tax-dollars to fund bad business decisions. I think Canada tried to avoid loss of jobs and excessive strains on unemployment insurance, so they kept GM afloat, but now, nothing can prevent them from leaving.

Derivatives, and speculation are also at blame and I believe the Fed is also trying to regulate the shorting of Fannie and Freddy, to prevent huge sell-offs in the future. Many say the process of shorting even played a role in 1929, so markets learn from their bruises. Lastly, in the tech sector, Apple is expecting a billion dollar weekend from the release of the iphone, RIM missed expectations while Intel shined from foreign streams of revenue. Speaking of the iphone, Ram actually got one, so hopefully he will be able to write a product review soon, but apparently, his plan has enormous costs. Thanks to Rogers yet again, high phone plans and faulty internet services.

Signing out,

ZEZ

These days, when I look South of the border, I feel really lucky for having such a strong Loonie.

Do you know why?

It is one of the main reasons our inflation is not exploding compared to other G8 nations. All of the others in the developed world, except Japan, have seen higher rates of inflation compared to Canada.

This week, inflation in commodities, a deflating housing market, rising costs of …. everything, and a diminishing purchasing power maintains the eye on the spotlight. The largest steel maker in China - Baosteel just announced the largest increase, some 96.5%, in iron-ore contracts with their Australian supplier, Rio Tinto.

However, while petroleum related products increase in price, other non-petroleum products will become cheaper. Consumers will have less money and therefore less demand for those products. Many things in the G8 countries are shooting through the roof, from milk and cereal to cosmetics. The credit crisis has still yet to run its last sprint to home base and many traders are really unsure of what to do.

Many stocks that were once safe havens, such as beta-favourable stocks, and large-cap tech stocks are taking big hits. RIM took a big dive on Thursday, and many are predicting Google will do the same. Some traders I know are keeping their funds strictly cash, cold, hard, c-a-s-h. Well, for the moment, to wait out the storms, where risk and reward are not in-line. The head of the Federal Reserve is taking a similar approach to the interest rate, sticking to the sidelines. Buffett, on the other hand, believes this inflation will cause a drastic, long-painful, recession. But he has been wrong before, and the Fed. is hoping he is wrong now. I think the cash reserve plot utilized by many traders right now is human nature, because they think opportunities will be cheaper tomorrow, but this recessionistic ideology will only add fuel to the fire.

I read a funny comment to a financial video I saw this week, it was a random unrelated comment about how diversifying money would be great right now to look for investing opportunities, half the funds in the cookie jar, and the other half under the mattress. LOL

Anyways, I really hope our governments can turn our economies around, increase consumer spending, and patch up post-credit wounds. With Bernake on board the ship, we will have to wait and see. Maybe we will see the bottom of the ocean, or a new America, but Canada is definitely dependent on the latter.

Signing out

Zan Zhang