Tuesday 2011-03-01

Over the last month, oil companies have been reaping the benefits of turmoil in the Middle East, while the rest of us have been worrying about higher gas prices or riots in the streets. This is good when you're long oil and live someplace safe; not so good otherwise.

The major US banks will at some time have their dividend restrictions lifted. Currently both of the Troubled Twins, Citibank and Bank of America, have equity and retained earnings greater than 10% of assets.

Banks will have until 2015 to meet the minimum core Tier 1 capital requirement, which consists of shares and retained earnings worth at least 4.5 percent of assets. An additional 2.5 percent "capital conservation buffer" will have to be in place by 2019.
-- Reuters

A large dividend payout when they resume dividends would certainly be attractive. However people have been talking about dividend resumptions for months, and we still have nothing.

Higher oil and food prices on a global scale may have the Federal Reserve in bunker mode. With open trade and India and China bidding up prices, monetary policy won't help contain inflation without tanking the US economy enough to offset the growth in asia, because what we're seeing is more a revaluation of the US dollar. Compare the USD and AUD, six months ago the USD bought 1.10 AUD, now the AUD trades at 0.98.

When will we see a correction? Maybe soon, maybe later; however, simultaneous weakness in Europe and Asia remains a concern to all of us.