Washington's Blog submits: The big news of the day is obviously the weak dollar. As the headline of a must-read article in Bloomberg states: "Dollar Reaches Breaking Point as [Central] Banks Shift Reserves [Away from the Dollar]".Complete Story »

  The most recent two earnings seasons have resulted in 11% and 15% rallies. Investors who were in the market for this two month period were involved in over half of the total gains we’ve seen during this 7 month rally. The following details the performance during each of the last 7 earnings seasons:Complete Story »

  Real asset investments (e.g. real estate, commodities, and gold) registered across the board gains in September. By far, the most profitable real asset investment over the past five years has been gold, which has appreciated 19.2% per annum.Gold is viewed by many as an alternate currency - one that is not subject to government-sponsored devaluation. One of the most important influences on the price of gold is the level of real interest rates, which can be derived by subtracting the expected inflation rate from the official short term lending rate. In the U.S., the official short-term lending rate is 0% to 0.25%. Inflation expectations looking out over the next five years are approximately 1.5%, so the "real" short term interest rate is negative 1.25 to 1.5%.Complete Story »

  Douglas Cress submits:Onyx Pharmaceuticals (ONXX) has agreed to purchase private biotechnology company Proteolix for $276 million in cash, Bloomberg reports. The acquisition will provide Onyx with a late-stage, next-generation therapy to treat multiple myeloma, a form of blood cancer that affects over 180,000 people worldwide. Shares in Onyx rose 5 percent on Monday following the announcement.Under the terms of the agreement, San Francisco-based Proteolix could receive an additional $575 million for achieving certain developmental and regulatory milestones. Out of the $575 million, Proteolix could earn $170 million for accelerated approval from the U.S. Food and Drug Administration.Complete Story »

  According to my tracking (chart below), NetEase's 3D online game Tian Xia II [TX2] surpassed 275000 Peak Concurrent Users [PCU] on October 6, while server utilization exceeded 95%. My checks show that such all-time high usage was created by a large-scale promotional campaign during the eight-day National Day holiday. TX2 has demonstrated strong momentum since entering open beta on September 20, and has becomes an important driver of NetEase's stock price. However, I believe now it's time for investors to know what could potentially go wrong with the game. Here are three factors that should be closely monitored by investors:Balance between server additions and average usage per server. If the speed of adding new servers outpaces the speed of attracting new users, then TX2's average users per server will decline, hurting players' experience. Investors should become cautious if TX2's server additions are beginning to have an obvious dilutive effect on average usage per server.Complete Story »

  Condor Options submits:Traders have become increasingly focused on the role that the dollar is playing in exacerbating rallies in equities, gold, and other assets, with concern in some quarters about a more precipitous dollar decline to come. At least on the implied volatility front, there’s no sign of such worries yet. EVZ, the index that tracks VIX-style implied volatility for FXE (a EUR/USD ETF) is pushing to new all-time lows. Note that sudden price spikes in recent history correlated with moves higher in implied volatility; however, the relentless trend of summer and fall 2009 has not seen any corresponding increase in implied volatility. I regard this as confidence among traders that there is little concern of a dramatic rise in EUR/USD, even if the current trend does continue.Complete Story »

  John Jansen submits: Prices of Treasury coupon securities are posting modest gains in overnight trading. The market has recouped a small amount of the carnage which transpired on Thursday and Friday in the wake of the bond auction. Several factors helped to whet the appetite of the buyers.Complete Story »

  The expectation ratio marked a new annual high this week hitting 1.58. The indicator which is made up of almost a dozen different earnings components, compared to current expectations, measures the likelihood of future strength in earnings. With the ER reaching a new high one can only conclude that expectations for the earnings outlook remain far too low and companies have plenty of room to maneuver and toy with the analysts this earnings season. Another quarter of beat and raise should shock the analyst community. Price target increases and stock upgrades will be the likely aftermath. Complete Story »

  There is, perhaps, no greater symbol of the slow decline of the United States, than the money we carry in our wallets. Of course, the United States isn’t the first nation to suffer similar currency problems. The parallels between the modern day United States and 19th century Britain are striking. Great Britain suffered from a similar currency decline as the world’s most powerful economy began to decay. The British Pound was the world’s reserve currency for much of the 19th century until their economic power declined and the world lost faith in their ability to responsibly manage the currency. Ironically, it was the Seven Years war (or The French Indian war) which began this precipitous decline. The British doubled the national debt as they battled for the colonies and borrowed massively from European bankers. This borrowing ultimately resulted in higher tariffs/taxes and led to the American Revolution. Complete Story »

  Bond investors now confront a dilemma similar to the one faced by stock investors. Broadly speaking, credit markets have had such a strong advance this year that markets now appear stretched and valuations are uninspiring. Accordingly, bond investors looking to allocate new capital are probably best served by waiting for a better entry point or sticking to shorterterm, high-quality investments.The challenge faced by investors seeking a respectable and reasonably secure stream of income from bonds is this: on one hand, you want to protect yourself against future inflation risk, which is accomplished by keeping the average maturity relatively short (i.e. under five years). On the other hand, you can't bring the average maturity in too far without damaging the income flow, due to the Fed's zero percent interest rate policy and the resulting steepness of the yield curve. Cash is unattractive, because you don't want to earn a negative real return. Meanwhile, yields on lower-quality bonds, such as high yield corporates, no longer seem to offer any margin of safety.Complete Story »

  FINalternatives submits: After a year of thinking it over—and two years after she was ousted from her perch high atop Wall Street—former Morgan Stanley (MS) co-president Zoe Cruz is starting her own hedge fund. Cruz’s new fund will focus on distressed assets and macro bets, according to The Wall Street Journal. Voras Capital Management—named for the mountainous part of Greece from which Cruz hails—is expected to launch with at least $200 million.Complete Story »

  Stocks discussed on the lightning round session of Jim Cramer's Mad Money TV Program, Monday October 12.Bullish Calls:Kinder Morgan Partners (KMP): "I have much more comfort in KMP because of CEO Richard Kinder. I think he is the pioneer in that pipeline group. I want you to stick with KMP."Complete Story »

  Daniel Zurbrügg submits:Since investing in foreign currencies is a critical component of our global macro investment strategy, we would like to present you with a few ideas and updates every quarter. In this issue we look at two of the most promising foreign currency investments that we hold: The Chinese Renminbi and the Brazilian Real. We think foreign currency exposure should be treated as a separate value driver in a portfolio since its impact on investment performance is significant and often bigger than the performance of the underlying security when the exposure is taken by buying stocks or bonds. Among the most attractive long-term opportunities we see are investments in the Chinese Renminbi and the Brazilian Real. Both economies are, in our view, in a long-term economic uptrend, albeit for different reasons. The Chinese economy is still growing at around 8% per year and its pace has only slowed marginally during the last couple of quarters, despite the global recession. This success can be attributed to the Chinese Central Bank and the government, which have reacted very swiftly by providing the necessary liquidity and an enormous amount of investment spending. Complete Story »

  These are further thoughts on a previous article. Although I have just begun to think about it, total debit and total wealth -- within the framework of balance sheets and my nascent new macro theory of wealth maximization subject to a consumption restraint -- are important stock variables that Keynesians not only ignore, but actually do affirmative damage to by their monetary policies. Consider first the problem of total debt.Complete Story »