Sunday, July 7, 2013

On U.S. Jobs and Autos, European Weakness, Egyptian Conflicts, Wireless Changes and Bitcoin Investing

Last week, in the U.S., the Department of Labor reported the 195,000 jobs were created in June and revised its estimates for April and May upward as well; also, research firm Autodata Corp. reported that U.S. auto sales during June grew at the strongest rate in 5 years. In Europe, Mario Draghi, head of the European Central Bank (ECB) said “The Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time", in order to address the continued economic weakness within its 17 member countries. In Portugal, reacting to austerity measures associated with its $101 billion financial bailout, the country's finance and foreign ministers resigned. In Egypt, clashes by supporters and opponents of the ousted President Mohamed Morsi contributed to a sharp upward move in the price of crude oil.

Also, the U.S. Federal Communications Commission approved the $21.6 billion purchase of wireless carrier Sprint Nextel by Japan’s SoftBank and South Korea’s Samsung Electronics expects weaker than expected profit and revenue results, suggesting a slowdown in the high-end smartphone market. In addition, Cameron and Tyler Winklevoss, the twins known for their legal battles with Facebook’s Mark Zuckerberg, filed with the Securities and Exchange Commission to start a fund investing in the alternative currency Bitcoin.

  • Regarding the U.S. economy – with the positive jobs growth and auto sales trend providing welcome news, the associated increase in interest rates will impact various sectors of the economy in different ways.
  • Regarding the ECB and Portugal - these actions remind us that the financial crisis in the region is not over. Regarding Egypt – if conflicts continue, it is likely that heightened oil prices will persist.
  • Regarding Softbank's acquisition of Sprint Nextel – this will likely lead to increased competition among wireless service providers in the U.S. market, which should be good news for many consumers.
  • Regarding Samsung’s profit warning – this is another indication that the high-end smartphone market may be approaching saturation.
  • Regarding the Winklevoss Twins and Bitcoin – with the twins owning about 1% of the Bitcoin market, creating this investment vehicle may make sense for them. For investors, it does not reduce the many risks associated with the Bitcoin market.

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