ColinTwiggs, Author at the patient investor

August 12, 2013

Only Capitalism Can End Poverty | Cato @ Liberty

Marian L. Tupy argues that free enterprise is the best cure for poverty:

According to the World Bank, global poverty is declining rapidly. In 1981, 70 percent of people in poor countries lived on less than $2 a day, while 42 percent survived on less than $1 a day. Today, 43 percent live on less than $2 a day, while 14 percent survive on less than $1. “Poverty reduction of this magnitude is unparalleled in history,” wrote Brookings Institution researchers Laurence Chandy and Geoffrey Gertz in a recent paper. “Never before have so many people been lifted out of poverty over such a brief period of time.”

August 12, 2013

Anemic Business Investment Indicts U.S. Policies | Cato @ Liberty

Daniel J. Ikenson at the Cato Institute highlights the declining share of global investment attracted to the US as developing countries grow more competitive:

The good news is that the $3.5 trillion of foreign direct investment parked in the United States accounted for 17 percent of the world’s direct investment stock in 2011 – more than triple the share of the next largest single-country destination. The troubling news is that in 1999 the United States accounted for 39 percent of the world’s investment stock.

Politicians need to be aware that they are competing, as a country, for new investment against a myriad of other attractive options.

Unlike ever before, the world’s producers have a wealth of options when it comes to where and how they organize product development, production, assembly, distribution, and other functions on the continuum from product conception to consumption. As businesses look to the most productive combinations of labor and capital, to the most efficient production processes, and to the best ways of getting products and services to market, perceptions about the business environment can be determinative.

Their focus should be on minimizing red tape, lowering taxes, stabilizing exchange rates and ensuring competitive prices for basic goods and services. Failure to adapt could lead to a dearth of new investment and the consequent problems now evident in Southern Europe.

August 12, 2013

Pollies miss the point on infrastructure | MacroBusiness

I fully support Leith van Onselen’s view on infrastructure investment:

It is important to (as much as possible) take the decision-making for infrastructure investment away from the political process and instead place it in the hands of an independent authority tasked with maximising overall welfare and productivity at lowest cost. Picking infrastructure winners, based on preconceived ideas or political motivations, is a recipe for waste and is likely to end up being productivity-destroying for the economy at large.

August 12, 2013

China ‘hard landing’ could trigger Australia recession: Standard & Poor – The Economic Times

“Australia’s exposure to commodity demand from Asia, and China in particular, was a saving grace during the global recession of 2009. But by the same token it has become Australia’s Achilles’ heel,” the ratings giant [Standard & Poor’s] said.

“Particularly while mining investment remains such a large share of the Australian economy, and other sectors continue to lack growth momentum, Australia remains highly sensitive to a sharp correction in China’s economic growth.”

August 12, 2013

ASX 200 tests resistance

The ASX 200 rallied off support at 5000. Breakout above 5120 would indicate an advance to 5250. Rising 21-day Twiggs Money Flow supports the signal. Reversal below 5000 is unlikely, but would test medium-term support at 4850. Breakout above 5250 would present a long-term target of 5850*.

ASX 200 Index

* Target calculation: 5250 + ( 5250 – 4650 ) = 5850

The ASX 200 Volatility Index ($XVI) below 15 is a bullish sign.

ASX 200 Index

August 12, 2013

Europe: DAX bullish, but FTSE selling pressure

Germany’s DAX recovered above the 2007 high at 8200. Follow-through above 8500 would offer a long-term target of 9500*. Rising 13-week Twiggs Money Flow indicates buying pressure. Reversal below 8000 is now unlikely, but would warn of another test of primary support at 7700.
DAX Index

* Target calculation: 8500 + ( 8500 – 7500 ) = 9500

The FTSE 100 is consolidating between 6500 and the 2007 high of 6750. Breakout above 6750 would signal an advance to the 1999 high of 7000. Bearish divergence on 13-week Twiggs Money Flow, however, warns of a correction. Reversal below 6500 is likely, and would indicate a test of 6000.
FTSE 100 Index

Spain’s Madrid General Index is testing resistance at 900. Long-term 13-week Twiggs Money Flow remains weak, but breakout above 900 would indicate an advance to 1050*.

* Target calculation: 900 + ( 900 – 750 ) = 1050

August 12, 2013

S&P 500 healthy up-trend

The S&P 500 is again testing resistance at 1700 after a short retracement. Bearish divergence on 21-day Twiggs Money Flow continues to warn of selling pressure, but breakout above 1700 would signal an advance to 1800*. Reversal below 1675 would test support at 1650.

S&P 500 Index

* Target calculation: 1680 + ( 1680 – 1560 ) = 1800

But the primary up-trend shown on the quarterly chart is healthy and, while correction to the rising trendline would be reasonable, trend reversal is unlikely.
S&P 500 Index

The VIX below 15 indicates low market risk.

VIX Index

Canada’s TSX 60 VIX is similarly bullish.

TSX 60 VIX Index

The TSX Composite Index is testing support at 12400. Penetration of the declining trendline would indicate the correction is over and advance to 12900/13000 likely. A 21-day Twiggs Money Flow trough above zero would suggest a healthy up-trend. Breach of support remains as likely, however, and would test 12250. In the long-term, breakout above 12900/13000 would offer a long-term target of 14000*.
TSX Composite Index

* Target calculation: 13000 + ( 13000 – 12000 ) = 14000

August 11, 2013

Increase the GST to 20%? Yes, but I wouldn’t recommend it

Sinclair Davidson writes:

The Henry Review indicated that the GST had a deadweight loss (the loss of value that occurs when a tax is imposed) of some 8 cents in the dollar, compared to 24 cents for personal income tax, and 40 cents for the corporate income tax. So increasing the GST and reducing income tax rates looks like a win-win for everyone. On a purely economic assessment that is what many economists would recommend.

…but

Voters and taxpayers do not want Canberra to have too much access to easy tax dollars because they know full well the power to tax will be abused.

August 11, 2013

Marketview: Careful of that ticking noise under the hood | Dynamic Hedge

Dynamic Hedge writes:

A few weeks back I noted that the market had the potential to “shift gears into full rocket mode or sputter out at the 1700 figure and back fill.” So far, it has chosen to sputter out at the 1700 level. We now have more information and can confirm that under the hood, the market is not as strong as we’d like to see. It is too early to tell if we are in real danger here, but market conditions like usually mean you should ratchet down your risk tolerance: tighten up stops, or move to overall defensive positions. I do not feel that the overall bull run has concluded, but you’ve got to be aware of the warning signs….

For more on the warning signs, read Marketview: Careful of that ticking noise under the hood | Dynamic Hedge.

August 9, 2013

State Thugs and the Purpose of Government | Libertarianism.org

Great article by Aaron Ross Powell:

I think much tolerance of the repugnant happens because we let ourselves forget what the state is for. If the state is justified at all, it’s as somewhere to turn for protection. We create the state because we need someone stronger than those who would do us harm. But not just someone stronger. Someone better, too. We need institutions that won’t use the awesome power we give them to do us more violence than the petty criminals we seek protection from.

The state is, in other words, a tool. It exists for a purpose, and thus its every characteristic (size, powers, laws, funding, employees, and so on) should be judged by how well and how efficiently it advances that purpose.