The most frequent question I get is “So what? Jim, your analysis is interesting, but you don’t say what we should do now.” The reason is that I am not permitted to give investment advice to anybody who is not a client, as well any anybody whose investment needs are not clearly understood. That is the law! In most cases, it’s probably better that I…
When the financial markets didn’t behave the way he expected, President Clinton famously said “You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of xxxxing bond traders?” He was complaining about the bond market, often considered wiser and more exacting than the stock market. Watching the bond market is very important.…
One of my favorite bureaucrats is Sheila Bair, Chairman of the FDIC. She just wrote an excellent editorial in The Washington Post, asking “Will the Next Fiscal Crisis Start in Washington?” That’s a fair question. The fair answer is that the next one might start somewhere else but one is certainly coming out of Washington, and it will be terrible, far worse than the last…
Yesterday morning, the Commerce Department looked in their rear-view mirror and raised their estimate of this year’s third quarter GDP growth rate. We did better than expected. Yesterday afternoon, the Fed looked thru their windshield and lowered their estimate of GDP growth next year, saying the economy is doing worse than they expected previously. Conflicting economic data makes it tricky to read the market. That’s…
The stock market is always trying to climb a Wall of Worry. Today, the Wall was very tall, indeed! The day began with North Korea rattling a very loud saber. It continued with lots of unrest in Ireland about the pending, distasteful austerity package they have to swallow. It finished with conflicting economic data in the U.S, as well as the realization that our stock…
How will you know if you deserve a better car? When it leaves you standing beside the road in a bad neighborhood! How will you know if you deserve a better form of government? No, it is NOT un-American to ask! No, the question is NOT what should replace it. No, the question is NOT what’s wrong with either Republicans or Democrats. The question is…
Over the weekend, we learned the SEC was launching a major crackdown on insider trading. On Monday, they raided the offices of three hedge funds. Good! After the Global Financial Crisis, the 52% drop in the stock market, and the mysterious Flash Crash in May, it is no wonder that retail investors are distrustful and still on the sidelines, missing this year’s rally. To restore…
The Fed is justifiably worried about deflation,which is more worrisome and tenacious than inflation. That is the reason they launched the latest round of quantitative easing. Many people don’t see the danger. Even the most recent data shows no serious indication of either inflation or deflation. Yet, if you look deeper, you see the U.S. is becoming bifurcated into one section that is part of…
If you do nothing else today, read the article titled “China’s State Capitalism Sparks a Global Backlash” on the front page of The Wall Street Journal. It is the secret to China’s success and the reason we should be afraid, not merely worried. China has the ability to put the entire force of their nation behind a particular industrial policy. The U.S. cannot even agree…
As I sit here on the shore of the Chesapeake Bay, I know there will be a high tide twice a day. If I watch TV, I will know the exact times of the tide. It is so predictable. As I watch the stock market, I recognize the same tidal changes, as the level of uncertainty go up and down. As uncertainty about the election…
It has never happened before. The credit of the United States was downgraded yesterday. While this is considered inevitable if we continue to run such deficits, it was nonetheless a surprise yesterday. But, the timing was interesting. It is not unusual for lots of acrimony before a G-20 Summit. This one is worse than usual. On the eve of the Summit, it was China who…
Regardless of who the President is, he needs a thick skin. Certainly, President Obama does as he begins the G-20 Summit in Korea. It may even be deserved. For years, we have criticized China for maintaining an artificially cheap currency, which helps their exporters. With QE2 or quantitative easing, we are greatly increasing the supply of dollars, which reduces the value of each dollar. Not…
Did anybody see the new IMF report raising the estimated GDP growth rate for the 47 countries of Sub-Saharan Africa for the second time this year . . . from 4.5% to 5%? Those traditionally poor nations are growing more than twice as fast as the U.S. Does that bother anybody else? As an economist, it is not surprising, as it takes longer to get…
After a highly eventful week, the stock market is at a two-year high, about the same level as we were when Lehman was allowed to collapse. Nonetheless, that is some three thousand points on the Dow — below our all-time high in 2007. The market is still down 21% from those heady days. Think back to last Spring when the market was moving up daily.…
The study of economics has always been an enjoyable intellectual pursuit. There are lots of arcane terms and inside jokes that economists enjoy discussing and sharing. But, it seems we have reached a tipping point where economics is becoming polluted by politics, and I’m sad about that. Should I parse my thoughts to support one political side over the other? As I’ve said many times,…
The most important monthly economic report each month is the “Jobs Report.” The last few months, the report has shown a sadly weak economy, producing few jobs. Voters took the President to task for that on Tuesday. Today, the Labor Department announced that the private sector created 159 thousand jobs, twice what was expected. This was great news, and the Dow futures immediately jumped 40…
Today, the Fed announced another round of quantitative easing, which means they will buy Treasury bonds, which means the Treasury then gets that amount of money ($75 BILLION per MONTH over the next 8 months) deposited into Treasury’s checking account, which Treasury can then use to write checks for Social Security, infrastructure, anything . . . even interest payments to the Fed for having bought…
I think the late comedian was the first to describe our electoral process as “political masturbation”, a very intense, focused effort to accomplish nothing. The Libertarian view is that elections merely change the Masters, with the slaves remaining the same. It is just a different set of thieves. Maybe, that’s a little cynical. OK, that’s a lot cynical. Wall Street traditionally likes divided government, and…
In this world of 24/7 cable news, which spin the news as well as report the news, it is easy to become both confused and depressed. Therefore, I recommend a disinterested foreign perspective to balance the right-wing Fox News and the left-wing MSNBC. Religiously, I read The Economist, a newsweekly magazine from England and recommend it. Sometimes, it is helpful to read things like this,…