Category: Investing

Rising bond yields and the stock market don’t mix.  That was the story this week as the 10 year bond approached 5.25% sending the stock market reeling.  Here is a great introductory article that explains the inter-relationships.

Source: Financial Sense Online
by Andy Sutton

First, let us also make clear the role of the Fed and financial markets in the determination of interest rates. When interest rates and the Fed are mentioned, they are referring to very short term rates, in particular the rates that banks charge each other for overnight loans. When we talk about longer-term rates, these are set by the bond market. Bonds are traded in a fashion similar to stocks. Their price and yield are inversely proportional. If the price of a bond goes down, the yield rises and vice versa. Bonds of varying maturities up to 30 years are available for purchase. The yields of these various instruments make up what is referred to as the yield curve.

Bond prices have a direct impact on mortgage rates. The Fed doesn’t control mortgage rates directly through changes in the discount or overnight rates. The Fed can act clandestinely to ‘work the yield curve’, however. Higher yield rates on bonds have a profound impact on mortgage rates. The headlines have told the story in recent weeks as mortgage rates have continued to trickle higher. Obviously, this is going to create some problems. For a while, cheap loans have fueled the housing market and through it, consumer spending in the form of equity withdrawals. As rates rise, we are going to see a constriction in these loans and we’ve already been through what the results of this will be. The ramifications could prove to be very negative for the housing market, consumer spending and the economy in general. Note that GDP in the US is at a stall rate despite massive growth in the M3 monetary aggregate. In terms of inflation, the monetary authorities don’t seem to be getting as much economic bang for their fiat bucks.

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While alternative energy proposals are on the drawing boards, Echelon is addressing energy conservation today.  Here is some interesting information from their website:

As the cost of energy continues to rise, businesses are turning to Echelon’s control technology to protect their bottom line — and show their commitment to the environment.

Our products make energy conservation painless. For example, the Balanced Office Building (BOB) in Aachen, Germany, slashed its energy costs by installing an integrated HVAC and lighting system based on LonWorks technology. BOB is now one of Germany’s most energy-efficient buildings, with HVAC and lighting costs 80% lower than those found in similar buildings.

Our technology is starting to save energy in other markets as well. For example, Oslo, Norway, which uses LonWorks technology to manage and control its streetlighting system, has reduced its energy use by 62% while also improving lighting quality and lowering maintenance costs.

Continue reading “Echelon a Tech Star in the Making”

A nice report on two fine contributors to the Big Build-Out (BBO) portfolio.  The BBO is up over 30% year to date.

Source: The Street dot Com

Rising demand for giant off-the-road tires suggests there’s more upside for the makers of jumbo-sized earth-moving equipment such as Caterpillar and Terex.

The two stocks have rallied more than 50% and threefold, respectively, over the past two years on the back of the commodity-price boom as mining companies have snapped up every available digger and truck that money could buy.

But so lucrative has been the business of extracting metals and minerals that manufacturers of mining equipment can’t make enough of the vehicles. Waiting times have stretched to two years for even the best customers and even longer for those not buying fleets of the multimillion-dollar earth-haulers.