Ed’s Daily Notes for January 24th

Bloomberg: Contagion Spreads in Emerging Markets as Crises Grow

The worst selloff in emerging-market currencies in five years is beginning to reveal the extent of the fallout from the Federal Reserve’s tapering of monetary stimulus, compounded by growing political and financial instability.

The Turkish lira plunged to a record, while Ukraine’s hryvnia sank to a four-year low and South Africa’s rand fell to the weakest level since October 2008, after tumbling yesterday beyond 11 per dollar for the first time since 2008. Argentine policy makers devalued the peso by reducing support in the foreign-exchange market, allowing it to drop the most in 12 years to an unprecedented low.

Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signaled it would scale back stimulus. While Brazil, Russia, India, China and South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability.

“The current environment is potentially very toxic for emerging markets,” Eamon Aghdasi, a strategist at Societe Generale SA in New York, said in a phone interview yesterday. “You have two very troubling things: uncertainty about the Fed policy, combined with concerns about growth, particularly in China. It’s difficult to justify that it’s time to go out and buy emerging markets at the moment.”

Keep an eye on this situation. While I would avoid emerging markets for now, this situation will either reach a market bottom, or get VERY ugly. I lean towards the “market bottom”, but the risk of a complete collapse is there.

Bloomberg: Microsoft Posts Record Sales as Ballmer Prepares to Exit

Good news for my Microsoft stock:

Microsoft Corp. (MSFT)’s customers flocked to game consoles and cloud software last quarter, helping Steve Ballmer deliver results that topped projections in his last months as chief executive officer.

Revenue climbed 14 percent to a record $24.5 billion in the fiscal second quarter, which ended Dec. 31, Microsoft said in a statement yesterday. Analysts had predicted on average $23.7 billion in sales, according to data compiled by Bloomberg. The shares rose.

Ballmer, who has said he would retire by this August, has kicked off Microsoft’s biggest transition in more than a decade. The world’s largest software maker is in the middle of implementing a reorganization and is working to close the acquisition of Nokia Oyj’s handset unit. Microsoft introduced the new Xbox One game machine in the holiday quarter and boosted sales of Web-based software such as Azure and Office 365, even as its traditional programs continue to languish along with personal-computer shipments, which posted a record drop in 2013.

…Net income in the second quarter rose 2.8 percent to $6.56 billion, or 78 cents a share, from $6.38 billion, or 76 cents, a year earlier. Analysts had projected on average profit of 69 cents.

Even though I own MSFT stock, I view this as a long-term hold, and not necessarily for anything happening in the next year, so this is a very pleasant surprise.

Washington Examiner: Moody’s slashes outlook on insurers, cites Obamacare ‘uncertainty’

This is what I’ve been saying:

Credit ratings firm Moody’s Investors Service on Thursday lowered its outlook for health insurers to “negative” from “stable,” citing “uncertainty” swirling around the rollout of President Obama’s health care law.

In a new report, the agency said that the outlook for insurance companies is no longer clear because the law’s insurance exchanges haven’t been attracting enough younger individuals. In addition, Moody’s analysts were concerned that the Obama administration has been changing regulations after insurers had already set prices for the year.

“While we’ve had industry risks from regulatory changes on our radar for a while, the ongoing unstable and evolving environment is a key factor for our outlook change,” Stephen Zaharuk, author of the report, said in a statement. “The past few months have seen new regulations and announcements that impose operational changes well after product and pricing decisions were finalized.”

This is also why I wouldn’t invest in health insurance companies.

Wall Street Journal: Google Broadens Its Outreach to GOP

Google Inc. [GOOG] employees have been a top source of campaign cash for President Barack Obama. A former chief executive campaigned for the president. Several company executives went to work in his administration.

Behind the scenes, though, the company has been working hard to change its profile as an ally of the Democratic Party, courting Republicans and building alliances with conservatives at a time when regulators and Congress are considering issues affecting its business interests.

Google has hired a string of Republican operatives as part of an effort to build relationships with GOP lawmakers and has evened out the campaign donations from its political-action committee, which had skewed in favor of Democratic candidates.

In 2011, Google began ramping up its funding of an array of conservative groups, including some that oppose the company’s policy stances, which include support for gay marriage, relaxing restrictions on immigration and reducing greenhouse gases.

Google’s quiet evolution into a pragmatic, inside-Washington player mirrors a broader shift by many major companies in Silicon Valley. Tech companies such as Facebook [FB] and Twitter [TWTR] have been staffing up in the capital, eager to head-off regulation that could harm their businesses.

One thing the article doesn’t mention is the NSA. I wouldn’t be the least bit surprised if Google’s move to the right has a lot to do with the Obama administration’s vocal support of the NSA’s internet spying, plus the rest of the Democratic Party’s support. Democrats talk a good game of civil rights, until they are in power.

At this point, Google’s interests are best served by the libertarian faction of the Republican Party.

Speaking of Google…

Financial Times: Google chief warns of IT threat

A broad range of jobs that once seemed beyond the reach of automation are in danger of being wiped out by technological advances, Eric Schmidt, executive chairman of Google, warned on Thursday.

Speaking in a briefing at the World Economic Forum in Davos, he said that an acceleration in technological innovation made this one of the biggest problems the world faces in the next 20 to 30 years.

“The race is between computers and people and the people need to win,” he said. “I am clearly on that side. In this fight, it is very important that we find the things that humans are really good at.”

Mr Schmidt’s comments follow warnings from some economists that the spread of information technology is starting to have a deeper impact than previous periods of technological change and may have a permanent impact on employment levels.

It is an interesting problem, one which will require some innovative political solutions. Unfortunately, the two political parties in the U.S. are still stuck in the 20th century…

Daily Mail: Will your next phone be powered by your HEARTBEAT? Scientists reveal implantable battery that can charge from the movement of our organs

It’s coming folks. You will be assimilated…

Forget [carrying] around a charger – you next [mobile phone] could be [powered] by the beating of your heart, researchers have revealed.

A team of US and Chinese researchers has revealed a tint implantable battery they have used to power a pacemaker.

It converts the constant movement of organs such as the heart, lungs and diaphragm into energy.

[In] the future, they say, it could be used to power a range of gadgets.

Politico: Feds to set rules for banks and pot money

Good news for you marijuana investors out there:

The Obama administration will soon announce regulations to make it easier for banks to do business with legal marijuana sellers, Attorney General Eric Holder said Thursday.

“You don’t want just huge amounts of cash in these places. They want to be able to use the banking system,” Holder said during an appearance at the University of Virginia’s Miller Center. “There’s a public safety component to this. Huge amounts of cash—substantial amounts of cash just kind of lying around with no place for it to be appropriately deposited is something that would worry me, just from a law enforcement perspective.”

Now for the bad news:

While Holder spoke twice of new “regulations” that were being prepared, a Justice Department spokesman said later that the attorney general was referring to legal “guidance” for prosecutors and federal law enforcement. Such a legal memo wouldn’t be enforceable in court and would amount to less than the kind of clear safe harbor many banks say they would want before accepting money from pot businesses.

On the bright side, at least they are thinking about it. Until then, they are just “blowing smoke”…