Sunday, January 01, 2006

 

A GLOBAL BUBBLE

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U.S. equities badly lagged the global boom. The Dow ended the year down 0.6%, with the S&P 500 up 3.0%, Nasdaq up 1.5% and the SOX up nearly 11%. The Internet Index was flat for 2005 - though Google managed a whopping gain of 120% for the year and now stands roughly 500% above it's IPO price of $85 a mere 17 months ago. Google is now valued at $125 Billion, roughly equivalent to IBM or the value of DELL & Apple computers combined. Selling at 25 times revenues, a quite staggering bubble mentality still pervades Wall St. to be sure.


By contrast, two well known large US companies, Ford & GM, each fell about 50% for the year to multi-decade lows.

Overall, US stocks clearly suffered from the heated competition from scores of hot asset markets overseas as can be seen below;

The major UK index (FTSE100) was up 16.7%, Germany (DAX) 27.1%, France (CAC40) 23.4%, Switzerland (Swiss Mkt) 33.2%, Spain (IBEX35) 18.2%, Italy (Milan MIB30) 13.3%, Netherlands 25.5%, Portugal (PSI) 17.2%, Ireland 18.8%, Sweden (OMX 30) 29.4%, Norway (OBX Stock) 35.5%, Finland (OMX Helsinki) 31.1%, Denmark (Copenhagen 20) 37.3%, Belgium (BEL20) 21.0%, Luxembourg 26.7%, and Iceland (ICEX15) 64.7%.

Gains were generally greater in Eastern Europe. Russia (RTS) surged 83.3%, Austria 50.8%, Hungary 41.0%, Poland (WSE WIG) 33.7%, Czech Republic 42.7%, Romania 50.9%, Ukraine 35.8%, Slovakia 26.4%, Estonia 48.0%, Latvia 63.5%, Lithuania 41.0%, Bulgaria 32.0%, Croatia (Zagreb) 27.2% and Greece 31.5%.

Liquidity indulged both Asian markets and economies, with the unrelenting Chinese economic boom and reinvigorated Japanese equities major 2005 developments. Japanese stocks generally enjoyed their strongest gains since 1986. The Nikkei 225 surged 40.2%, with the Topix up 43.5%. The Topix small cap index posted a 58.7% advance. South Korea’s KOSPI index surged 54.0%, closing today at an all-time high. India’s BSE surged 42.3%, ending the year at a record high. Indonesia (Composite) gained 16.2%, Singapore 13.6%, Philippines 15.0%, Vietnam 28.5%, Sri Lanka 27.6%, Thailand 6.8%, Taiwan 6.7%, and Hong Kong (Hang Seng) 4.5%. Malaysia (Composite) slipped 0.8% and Chinese equities continued their struggle. The Shanghai A index fell 8.2% and the Shanghai B sank 18%. Australia (All Ordinaries) gained 17.6% and New Zealand (NZX 50) 10.0%.

With Asian demand more than partially responsible for crude’s 40% gain this year, the already rampant flow of liquidity to the Middle East turned into a gusher. Saudi Arabia’s major equities index surged 104.1%, as a historic mania took hold. Kuwait (Global) rose 67.6%, United Arab Emirates 131.3%, Egypt (Hermes) 131.7%, Israel (Tel Aviv 25) 33.3%, Turkey (ISE 100) 59.3%, Bahrain (All Share) 23.8%, Qatar 70.2%, Jordan 92.9% and Oman 44.5%. Elsewhere, Pakistan gained 53.7%, Lebanon 106%, Cyprus 51.6%, Malta 62.3%, South Africa (Top 40) 44.1%, Morocco 19.8%, Tunisia 21.1% and Kenya 35.7%.

Closer to home, Canada’s TSE Composite index jumped 21.9%. Liquidity gushed into Latin America as well. Mexico (Bolsa) surged 37.8%, Brazil (Bovespa) 27.7%, Argentina (Merval) 12.2%, Chile (Select) 9.35%, Peru (General) 29.4%, Colombia 118.9%, Costa Rica 28.4%, and Bermuda 21.1%. Venezuela fell 32.4%.



Here at home, Total U.S. Mortgage Debt (TMD) growth reached $1.4 Trillion during 2005. This is an increase of almost $200 billion from 2004’s record increase of $1.214 Trillion – the first year growth exceeded $1 Trillion. For perspective, TMD expanded $500 billion during 2000, $660 billion during 2001, $820 billion during 2002, and $990 billion during 2003. TMD growth averaged $271 billion annually during the nineties.

The Goldman Sachs Commodities ended 2005 with a stunning rise of 39.1%. There were some huge commodities winners this year. Crude Oil surged 41%, Natural Gas 58%, Copper 45%, Zinc 50%, Silver 30%, Sugar 62%, Gold 18%, Cotton 21%, Aluminum 16%, Soybeans 10% and Wheat 10%. Coffee gained 3%, Corn 4%, Live Cattle 3% and Lead 4%, while Cocoa slipped 3%, Nickel fell 13% and Hogs sank 15%.

2005 was the hottest year for mergers and acquisitions since 2000, the peak of the stock-market boom. According to a preliminary report by Dealogic Global M&A volume increased 38 percent, to $2.9 trillion, compared with $2.1 trillion in 2004. In the fourth quarter alone, reported Dealogic, volume topped $783.4 billion, making it the largest quarter of the year and the fourth-largest on record.”

2006 should be a very interesting year!

HAPPY NEW YEAR!


Source: Doug Noland's Credit Bubble Bulletin -


Comments:
Google really is a silly stock. You can be sure all the stock cashed in by employees has certainly fueled and sustained Real Estate in Mountain View and surrounding areas.
 
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