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 “We are at a new 15-month high for the Refinance index.  With rates this low, many borrowers who refinanced in the past two years may well have an incentive to refinance again, and this is likely increasing [refinance] application activity.”

“The issue is always ‘What does it cost me to do that?’ Helmer says. “It doesn’t make sense to take on a lower rate if you’re not going to be there long enough to get back what you were paying” in closing and other costs.

The other main type of refinancing popular during the housing boom was cash-out refinancing — possible when values are going up and when homeowners have equity on their houses, to pull out cash for payments.  Needless to say, this currently is not the case.

The U.S. Securities and Exchange Commission made changes to the federal proxy rules on Wednesday that require company boards to consider nominees of shareholders alongside managerial candidates on proxy materials for board elections.

Under the new rules, nominees who own at least 3 percent of a company continuously for three years prior to the proxy statements are eligible to be in the running for director.

The SEC voted to give investors more power over corporate boards

SEC Chairwoman Mary Schapiro said: “As a matter of fairness and accountability, long-term significant shareholders should have a means of nominating candidates to the boards of companies that they own.”

The Dodd-Frank Wall Street Reform Act gave the SEC the authority to make new rules on shareholders’ access to proxy materials.

While the new rule requires companies to include investors’ nominees, “for individual investors it is still a pretty high hurdle to nominate a director,” said Charles Rotblut, a vice president at the American Association of Individual Investors.

Rotblut admitted, however, that “overall, it’s good for investors in that it gives them more say. At least it should make the boards more accountable.”

With a growing Hispanic population, many Mexican brands are making their way to grocery shelves in the U.S.

Despite swelling fears of the recession, drug trafficking, the United State’s trucking ban, Mexican tariffs, the dispute over illegal immigration and the swine flu, U.S. investors should not overlook our south of the border neighbor.

Mexico is becoming an increasingly attractive location for foreign companies to do business and on the flipside, Mexican companies are becoming more interested in investment in the states.

The public has tended to cast the Mexican community in a negative light, according to Dr. Farrokh Hormozi, an economics professor at Pace University in Pleasantville, N.Y.  But ever since the North America Free Trade Agreement, or NAFTA, the Hispanic market both in the U.S. and in Mexico has become prosperous and consumption-oriented.

Mexico’s GDP has reversed course from last year’s decline and is expected to steadily increase through next year.  Mexico’s second-quarter GDP rose 3.2 percent compared with the 2010 first quarter, and was up 7.6 percent from the second quarter of 2009.

Because 80 percent of its exports go to the U.S., Mexico is dependent on a continued recovery from recession in the U.S. and may slightly lag behind until it is confident that the neighboring economy is turning around, according to an iMarketNews article by Jonathan Roeder.

In addition, Mexico’s middle class is growing and there is a larger amount of disposable income from young adults, giving the country higher demand for consumer goods.  “Analysts estimate that the Mexican retail sector will grow 43 percent during the next five years,” according to a report from UK Trade & Investment.

The Mexican economy is “quite prosperous despite some internal problems,” Hormozi said.  “Overall it is one of the most dependable economies of Central America.”

But Hormozi said the negative news such as illegal immigration and drug trafficking is seen as more “newsworthy” and publicized much more than the plethora of success stories concerning Mexican business.

American companies were first interested in looking to Mexico for “cheap labor and relaxed business laws,” he said.  Now companies are turning to the country because of its “increased productivity.”  Hormozi said Mexico is adopting many American business laws regarding labor and the environment.

In addition, some Mexican companies, like Grupo Bimbo and Sigma Alimentos, are taking advantage of their knowledge of the Hispanic market and expanding into the U.S. market. Grupo Bimbo is a baking company that owns such popular brand names as Boboli, Entenmanns and Arnold. Sigma Alimentos, the food group of Alfa SAB de CV, is a leader in refrigerated and frozen foods, with the Latin American brands of Yoplait and Oscar Mayer.

So what are some investments to take advantage of this growth?

Fomento Economico Mexicano SAB (ADR)

Femsa is the beverage company in charge of distribution and bottling of Coca-Cola products in Latin America, according to Yahoo Finance. With the growth of the Mexican middle class and increased disposable income in Mexican youth, this company is projected to continue to grow.

Grupo Bimbo SA (GRBMF.PK)

Grupo Bimbo is a baking company that owns some of the top brands in Latin America.  Bimbo is taking advantage of its knowledge of the Hispanic market to sell into the growing population in the U.S.  Bimbo has also acquired some major American bakery brand names. An investor can invest most directly in Grupo Bimbo on the Bolsa, but for an American investor it may be easiest to invest in this company over-the-counter.

iShares MSCI Mexico (NYSEArca: EWW)

Investing in this ETF is a way to take advantage of the stocks trading on the Mexican stock market and to take advantage of Mexico’s growing share of exports.

Chart courtesy of Yahoo! Finance.

Investors looking for a respite from the disastrous American housing market may be seeking refuge in a global property market that’s still riding high, such as Hong Kong.

Not so fast.

Hong Kong has been experiencing some tumultuous times of its own: home prices have increased 13 percent this year on top of a 30 percent jump in 2009.

The government has taken a number of steps to temper the rocketing market, including increasing transaction fees on luxury properties, releasing government-held prime sites for auction and selling subsidized apartments to alleviate pressure on mid- and lower-income residents.

Hong Kong’s home price surge is based on the stars aligning on a number of fronts: the Hong Kong dollar’s peg to the U.S. dollar, which essentially ties interest rates to the Fed’s rock-bottom interest rate calls; Hong Kong’s robust GDP growth in the past two quarters – the government raised its 2010 forecast to 5 to 6 percent growth from 4 to 5 percent on Aug. 13 – and money flooding into the local economy by increasingly wealthy mainland investors looking to snap up property in the glamorous shopping mecca.

Investors intent on capitalizing on companies riding the property value surge should carefully consider the risk.

Third Avenue Management’s Third Avenue Value Institutional Class (TAVFX), a mutual fund made up of just over 35 percent Hong Kong real estate and investment companies, is posting a 5.4 percent year-to-date loss despite a solid investment strategy and seasoned management team. After rebounding strongly in 2009 after a disastrous 2008, Third Avenue Value is trending once again towards the bottom of the pile.

Morningstar Inc. analyst Bridget Hughes writes in a recent note, “Although the fund may not seem to be acting like itself, the managers are playing by the same rules that have brought shareholders superior long-term returns. That includes going against the herd to get good values and having conviction and exercising patience.”

Morningstar rates this fund as an above-average risk that will yield strong results with a 10-year commitment. Hughes seems to place some faith in the strength of co-manager Marty Whitman’s solid decision-making and depth of research: “[Whitman] wants to buy cheap companies, but he wants them to be safe. The strength of a company’s balance sheet is a key factor in his investment decisions,” she wrote in a recent note.

The Hang Seng property sub-index has been reactive to the government’s moves towards limiting home prices despite indications that the restrictions are having little effect. Last week, record acquisitions were made by Cheung Kong (Holdings) Ltd. on two properties purchased at prices 44 percent and nearly double the opening bid prices last week.

Courtesy of Yahoo Finance. The stock price of

Flickr.com

If you’re looking to invest in some cheap but risky stocks, Greece might be the place to go.

 Greece has been the black sheep of the euro zone. The country has been going through massive financial troubles since 2009, with total debt amounting to almost 110 percent of its GDP , and some of its major stocks have dropped by as much as 80 percent.

 “There are a lot of assets that you could buy at very low prices in Greece but there’s a lot of risk attached to it,” said Adolfo Laurenti, deputy chief economist at Mesirow Financial.

But with the European Union and International Monetary Fund stepping in to bail out Greece with 110 billion euros, the country’s financial markets are likely to stabilize and yield big profits in the long run.

 “Time horizon is very important. If you’re looking for short-term gains, Greece isn’t the place, but in ten years some of the stocks could yield good results,” Adolfo added.

 Diana Shipping Inc. (DSX), a shipping company based in Athens, is one stock to buy on the cheap right now, at a current price of $11.65. The company posted better-than-expected second quarter results, with an earnings per share (EPS) of 42 cents, beating  the Wall Street estimate by a penny. Analysts at JP Morgan have given the stock an “overweight” rating in a research note dated August 6.

 “The company’s fleet provides stable and visible cash flows and earnings, and we forecast [third and fourth quarter ] EPS to come in exactly in-line with the 2Q results,” the report stated.  Moreover, the company has a strong balance sheet with ample liquidity.  According to JP Morgan, Diana Shipping ended its second quarter with $298.2 million of cash and a total debt-to-capital ratio of 22.5 percent, much lower than any of its competitors.

 Another potential company to look into is Hellenic Petroleum (HLPN.F), Greece’s largest oil refiner. 

The company was given an “equalweight” rating on August 25, by Euroxx Securities. According to the Athens-based research firm, Hellenic petroleum ended the second quarter with strong results due to improved refining margins and effective cost controls over the last 18 months.

Any stock play on Greece is probably risky in the short-term due to the probability that Greece won’t  be able to pay back its loans to Europe on time, Laurenti said.  That argues for a healthy dose of patience on the part of investors willing to invest in Greek stocks.

Japanese pedestrians cross an all-way intersection outside of Shinjuku Station, one of the busiest train stations, in Tokyo, Japan. Catherine Ngai/MEDILL

The Japanese yen hit a 15-year high against the dollar and a nine-year high against the euro last week. As economic conditions in the U.S. deteriorate, speculation is heating up Japan’s Central Bank will take action to weaken the currency.  

Confidence in Asia has, for the past decade, been an easy decision. With a booming marketplace in China, and increased technology, looking East for direction in the world economy has been a common trend. Except for Japan, where over the same time period, growth has dragged.

But it wasn’t always that way.

Starting in the 1960s, Japan’s economy was so strong that some dubbed it an “economic miracle.” Growth rates for the Asian country were at all-time highs. In the 1960s, real economic growth averaged 10 percent. In the 1970s, this growth was at 5 percent. In the 1980s, this growth leveled to 4 percent.

However, due to an overheated real estate sector, the bubble burst in 1989 with the crash of the Tokyo Stock Exchange. Since then, its economy hasn’t been the same. Japan entered into recession in 2008, with 2009 marking a return to near zero-percent interest rates.

Oddly enough, its problems are unlike those of the U.S., where subprime mortgages and complex derivatives were largely to blame. It was much simpler than that.

“Japan can’t stimulate internal demand, especially with China hovering over their shoulders,” Dollinger said. “The economy is flat, and it’s not growing.”

As added pressure to the yen,  Japan’s exports rose just 23.5 percent in July from a year ago, after rising 27.7 percent in June. It was the fifth straight month in which export growth slowed, according to the Finance Ministry. As a resource-poor country, Japan depends on heavy exporting to remain competitive in the world economy.

“The Japanese, in the past, at times of economic depression, has not allowed their currency to be so high that it impedes their export power,” said Thomas Duesterberg, president and chief executive officer of the Manufacturers Alliance/MAPI, a public policy and economics research organization in Arlington, Va.

Still, Duesterberg is somewhat optimistic about the potential growth and outlook for the nation.

“It’s going to be an anemic growth. Japan is in the most dynamic area in the world economy. The Pacific Rim is still growing, and Japan has a pretty good presence,” Duesterberg said.

The yen closed at 84.6 versus the dollar at market close in Asia Wednesday.

Free to Choose, by Milton and Rose Friedman

“Perfection is not of this world. There will always be shoddy products, quacks, con artists. But on the whole, market competition when it is permitted to work, protects the consumer better than do the alternative government mechanisms that have been increasingly superimposed on the market.”

-     Milton Friedman, Free to Choose

The free market ideals of Milton Friedman may have fallen from grace for some during this economic downturn, but his words are more important now than ever.

 Free to Choose, Friedman’s classic look at the relationship between freedom and economics, provides some much-needed context and insight into how an economic system can ensure liberty among citizens.

Unlike its predecessor, Capitalism and Freedom, this book is not very technical and therefore explains economic concepts in clear, layman’s terms.

 The writing is both engaging and persuasive. Friedman, the 1976 winner of the Nobel prize in economic sciences,  draws upon innumerable examples to compare the effects of different economic policies taken in various countries.

The book is organized into three broad themes. The first three chapters are devoted to analyzing the power of a market economy, and likewise how a controlled economy spells danger for a country.

Friedman then devotes a few chapters to assessing the American economy, both praising its rejection of socialism and criticizing the expansion of the welfare state. Finally, the last three chapters explore then-recent trends in inflation and the price system.

Reading this book now, many of Friedman’s points may not seem ground-breaking. But one has to keep in mind that this book was written in 1980, at a time when federal spending was swiftly growing in national defense, welfare programs and infrastructure. Keynesian policies were widely accepted and Friedman had to fight for his beliefs to be accepted. Since then, many of Friedman’s ideas have become so pervasive, they are assumed to be the norm.

Chapter 9 particularly highlights Friedman’s unique contributions to monetarism. He argues in this chapter that inflation is neither a capitalist nor communist phenomenon, but a monetary phenomenon. Friedman includes extensive empirical research comparing the quantity of money to the consumer price index in the U.S., Germany, Japan, U.K. and Brazil. The chapter essentially proves the relationship between inflation and prices, and thus the ineffectuality of using price controls (such as President Nixon’s wage-price controls).

Friedman’s overall point is that individuals should be as free as possible to use their own resources in their own way, with an outside force intervening only as necessary to maintain order. As an economist, he is passionate about dispelling myths of the free market and informing readers how regulation can limit our overall freedom.

Even the most skeptical readers will enjoy this book for its comprehensive detail—it may even convince them of the merits of the capitalist system.

Yuan is expected to appreciate gradually, mitigating the impacts on China's major exporters. Source: Zhigong Zhang / Dreamstime.com

The appreciation of the yuan initiated in June by China’s central bank has raised concerns among investors, especially regarding the impact on China’s major exporters.

However, experts agree that the immediate impacts of yuan re-valuation will be minimal as the Chinese government is expected to realize the appreciation through a series of minor steps.

“Anything like that [yuan appreciation] is not going to occur at a very rapid pace,” said Jim Wyckoff, the proprietor of Jim Wyckoff on the Markets, a trading advisory service based in Cedar Falls, Iowa. “Especially if it is not to the benefit of the overall Chinese economy, it’s going to be at a snail’s pace.”

Keeping the yuan weaker relatively to the U.S. dollar makes Chinese exports attractive, thereby allowing China to reap the benefits of an export surplus. According to Bloomberg LP, China reported an export surplus of $28.73 billion in July, the highest this year. In 2009, China reported a surplus every month.

The Chinese government took nearly three years to move the dollar-to-yuan exchange rate of 12.4 cents at the beginning of 2006 to a narrow range between 14.6 and 14.7 cents in mid-2008. In early August, the exchange rate appreciated as high as 14.8 cents, before settling back down to 14.7 cents on Monday.

The general economic principle dictates that a stronger yuan will have negative impacts on China’s export-led companies. However, Scott Testa, a professor of business administration at Cabrini College in Radnor, Pa., said the controlled pace of the appreciation will mitigate such impacts on China’s exporters.

“I do think it [impact of yuan valuation] will be minimal because I think it will be gradual and will give the exporters time to adjust to the new currency environment,” he said. “If it was something that would happen dramatically, it would hurt them more.”

In fact, the Shanghai Composite Index has already recovered nearly 15 percent after marking an annual low in July following the re-valuation of the yuan. In particular, companies such as China Petroleum & Chemical Corporation (NYSE: SNP) which exports chemical products mirrored the index, dropping as much 12 percent since the April peak leading up to the central bank’s yuan announcement but then reversing into a strong rally since then.

Herbert Kaufman, a professor of finance at Arizona State University, added that the pace of the appreciation will be closely influenced by China’s delicate efforts to balance growth and inflation and that much of the initial appreciation has since been reversed.

“I think that Chinese are reasonably nervous — they want to cool their economy some, but they don’t want to have the growth rate in China fall precipitously,” he said.

The June announcement of yuan valuation comes amid the Chinese government’s efforts to slow the country’s rate of growth. China reported second quarter GDP growth of 10.3 percent, down from 11.9 percent in the previous quarter.

However, the Consumer Price Index still showed an increase of 2.93 percent in June, compared with a decrease of 1.53 percent a year earlier. The June increase follows an increase of 2.20 percent increase in the first quarter.

As such, deflationary measures and the appreciation of yuan are expected to continue. Greg Holden, chief market analyst at ForexYard, an online brokerage service, added that the appreciation of yuan is also in line with China’s long-term policy to promote domestic spending and reduce dependence on foreign consumption.

“Appreciating the yuan gives the opportunity for a growth in the middle class, [with] more purchasing power in tangible assets such as commodities in the place of U.S. Treasury notes and other debt,” he said.

The immediate impacts of continued appreciation may be minimal, but Testa said the stronger yuan will eventually negate China’s edge in cheap production costs and the stocks for China’s export-based companies, especially those that export goods to the U.S. and Europe, may suffer in the long-term.

The

The sixth largest economy in the world, Germany has managed to escape the stress of the global financial crisis virtually unscathed.  After an initial bout at the onset of the crisis, the German economy has rebounded quickly. Its unemployment rate has dropped to 7.6 percent (as opposed to 9.5 percent in the U.S.) and experts are seeing strong growth prospects in manufacturing and engineering.

Medill Money Mavens had the chance to speak with Mathias Weidner, an advisor with IMAP Inc., a global merger and acquisitions advisory firm.  Based in Germany, Weidner spoke on his view of the euro zone and German economies, suggesting one German industry investors may want to put their money in.

MMM: In your view, what is the state of the euro zone economy? What role does the German economy have in its struggle?

MW: There is currently a sustainable stimulation of the economy in the entire euro zone. But there are differences between the development of national economics in the East, West and South of Europe. The Western Europe economies will develop faster and stronger than those in other regions.

In my view, the German economy will grow approximately 3 percent in 2010.  The economies in other regions of the world (Asia, Latin America) are still expanding. Therefore German manufacturers of machinery, cars and renewable energy still sell their goods very well. German car makers, for instance, increased their sales and strengthened their market position in China to disproportionally high levels recently.

MMM: What key industries do you feel have the most promise in Germany moving forward?

MW:  One, engineering, [followed by] renewable energies, services, financial services and healthcare.

MMM: How has the debt crisis affected the growth of the German economy?  How has it affected the companies and industries that operate in it?

MW: In my view, it seems that the debt crisis hasn’t affected the growth of German companies and the German economy. The financial crisis has sustainably changed not only the global economy, but it also changed the M&A [merger and acquisition] market and will continue to influence it even further. How German companies do evaluate the current challenges in their markets, market position and for M&A activities was part of a recent survey by IMAP Germany on “Company development in the crisis.” More than 100 companies were questioned, including medium-sized companies with revenues between €50 to €100 million, as well as big conglomerates with revenues of several billion euros.

According to the survey, more than 40 percent plan to expand their market position through targeted acquisitions – preferably in Germany, because to them, the national market has the greatest growth potential.  Almost 90 percent of those willing to do an acquisition are able to and can finance the acquisition partially out of their own pockets. If they use external capital, it will be entirely via the banks.

MMM: How would you differentiate the German economy from the U.S. economy?

MW: I guess the main difference is that German companies are more export orientated.  They also are not as affected by private consumption as the American economy is.

MMM: If I were a small investor, what kind of German companies should I look into investing in?

MW: I would recommend investing in a small- to medium-sized engineering company. After 2009, which was disappointing for the vast majority of these companies, a lot of German companies are seeing growth potential in terms of new orders.

However, many companies with revenues of less than €50 million are currently not capable to do so, since last year forced them to spend their reserves. These days, a visit to the bank to obtain credit has been very disappointing. Based on Basel II guidelines, as well as bad results in 2009, many medium-sized companies have a negative ranking, and they are unable to obtain loans from the bank.