The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Shorter is Better


Today’s auction of $29 billion in 7-year Treasuries was average, with a bid-to-cover ratio of 2.88, almost exactly the rolling ten average of 2.86. Of the three auctions this week, there was lots of demand for the 2-year issue, less demand than usual for the 10-year issue, and average demand for the 7-year issue. Investors … Continue reading Shorter is Better

What a difference 8 years make . . .


Yesterday, there was a very successful auction of 2-year Treasuries. Today, there was a barely successful auction of 10-year Treasuries. The bid-to-cover ratio dropped from 3.71 to 2.61. In addition, foreign interest dropped significantly. The market is saying they don’t want to hold any bonds longer than 2-years because longer-term bonds will lose value due … Continue reading What a difference 8 years make . . .

Almost Too Good . . .


The market can be much more volatile when few people are trading. That’s because one big trade can really push the market one way or the other. The period between Christmas and New Year’s Day is always a slow trading time. When I realized the U.S. was planning to sell $35 billion in 2-year Treasury … Continue reading Almost Too Good . . .

Zombie Christmas?


I spent Christmas reading John Quiggin’s new book titled “Zombie Economics: How Dead Ideas Still Walk Among Us.” It began with Keynes’ great belief that “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” I believe that statement is true. Since Quiggin is … Continue reading Zombie Christmas?

Full Circle


Surviving veterans of the European front in World War II show pride in toppling Hitler. Few take any credit for establishing the dollar as the world’s “reserve currency,” but it was terribly important. Immediately after the war, the victorious Allies met in Geneva to begin mapping the Marshall Plan for the reconstruction of Europe. One … Continue reading Full Circle

Q3 GDP Growth


Today, the Commerce Department announced that growth in the third quarter was slightly better than previously released, i.e., 2.6% versus 2.5%. It continues the stream of good economic news. Growth in the first quarter was a whopping 3.7%, while the stock market was very bullish. Growth in the second quarter was a relatively sluggish (but … Continue reading Q3 GDP Growth

Season to Celebrate


The S&P is now at the highest level since September of 2008. The Dow has been up ten out of the last eleven days. The Bull is back?? Of course, the volume of trading has been very low, making the recent good performance of the market less reliable. Obviously, traders and investors are taking the … Continue reading Season to Celebrate

Crisis Investing


An investor takes a longer term view. He looks at those sectors and nations where growth looks most promising and then positions his portfolio to benefit from that growth. A trader takes a short term view, sometimes in minutes. If war breaks out between the two Koreas, you can expect both the U.S. dollar and … Continue reading Crisis Investing

End Times ??


I was only thirteen years old in 1960, when establishment Republican Henry Cabot Lodge was the running mate of Richard Nixon in the presidential campaign, that they lost to John Kennedy. I recall Lodge being criticised by the John Birch Society and some religious groups as being supportive of a one-world government, which they believed … Continue reading End Times ??

Should I Be Worried?


I’ve been predicting a slow but steady recovery for the economy. Of course, the stock market is only loosely related to the economy. The market has improved this year more than the economy has. But, expectations for the stock market next year are awfully high. The S&P closed yesterday at 1244. Goldman Sachs predicts it … Continue reading Should I Be Worried?

A Patriot’s Lament


Last night, I watched The History Channel. (Yes, economists do watch The History Channel but only because there is no Economics Channel.) The show was about the Third Reich and showed the suffering of ordinary people. Not to be disrespectful, but it also showed their inconvenience. They had shortages of consumer goods and electricity. They … Continue reading A Patriot’s Lament

Drumroll, please . . .


Yesterday, the stock market reached the highest point in over two years. Does that mean the party is over? No, of course not! Does that mean we will get back to our 2007 market high? Yes, but not in 2011. Does that mean we face smooth sailing? Absolutely not! December and January are usually the … Continue reading Drumroll, please . . .

Manana Economics


I love that expression . . . manana economics. It covers those areas of economics that can be dealt with tomorrow, i.e., where kicking the can down the road is a good idea. Fareed Zakaria is a native of India with a Ph.D. from Harvard and writes a column for Newsweek, as well as being … Continue reading Manana Economics

A Grain of Salt


The Wall Street Journal just released their latest survey of economists. Generally, they are more optimistic! The economy grew at 2.5% in the third quarter. Estimates for the fourth quarter were raised from 2.4% to 2.6% and 3.0% for the first half of 2011. Also, they reduced the odds of a double-dip recession from 22% … Continue reading A Grain of Salt

Tax Cut Deal


Yesterday, the Senate took the first step in creating certainty about our tax burden next year. A believer in Supply-Side economics will be delighted because there are tax cuts. A believer in Keynesian economics will be relieved we didn’t increase taxes during a recession. A believer in Austrian economics will be horrified that we made … Continue reading Tax Cut Deal

Half Full or Half Empty


When the Fed announced QE2, they expected interest rates would fall. At first, everything went as expected. Now, those rates have started to rise. Ten-year Treasury bonds now pay 3.36%, which is a six-month high. One reason for interest rates to rise is that the Fed is causing it intentionally, which is not the case. … Continue reading Half Full or Half Empty

Attack of the Vigilantes


We’ve often mentioned the bond vigilantes who could cause unimaginable trouble for the U.S. and greatly increase the burden of paying interest on our huge national debt. Today, our Treasury Department auctioned off $21 billion in 10-year bonds. Fewer bidders wanted the bonds. The bid-to-cover ratio was 2.92 compared to a recent average of 3.12. … Continue reading Attack of the Vigilantes

Reducing Uncertainty


Last night, the President announced a bi-partisan deal to extend the tax cuts for another two years, which reduced uncertainty. This morning, the Dow futures are up 81 points at this hour. You’ll recall the inverse relationship between uncertainty and the markets. It should be a good day for the markets! It is probably not … Continue reading Reducing Uncertainty



Normally, I am careful to avoid any discussion of politics, finding it seldom helpful. Both parties spin shamelessly. So, it may have been surprising to see me quoted twice in The Virginian-Pilot last Friday, referring to comments I made to a Senate hearing on redistricting. Redistricting is as exciting as watching paint dry but terribly … Continue reading Partisanship

The Schizophrenic Economist


It has been fascinating, if saddening, to observe the political spinning around expiration of the Bush and Obama tax cuts this month. (Don’t forget a third of Obama’s $787 billion Stimulus bill was also a tax cut.) My inner-Keynesian economist is afraid consumer demand will decrease if they are paying more in taxes, so the … Continue reading The Schizophrenic Economist

I was wrong . . . I hope!


When was the last time you heard the word “deficit” used so often? I’ll bet I heard it or read it more often last week than the last two years combined. That’s a good thing! When President Obama first appointed the Deficit Commission, I was disappointed the Republican Party did not support that effort and … Continue reading I was wrong . . . I hope!

Awful . . . but fishy


Today’s Jobs Report was awful! Economists were expecting 144 thousand jobs were created and were stunned when they learned only 39 thousand were created. Given the steady flow of relatively good economic data over the past few months, this is a surprise . . . a fishy surprise. Data for last month’s Jobs Report was … Continue reading Awful . . . but fishy

Like A Colossus


It was no secret that small, unassuming, professorial Ben Bernanke straddles the U.S. like a colossus. I have long felt that his “out-of-the-box” thinking and long study of The Great Depression made him extraordinarily effective as head of our Fed during the dark days of the Global Financial Crisis. I think he did a great … Continue reading Like A Colossus

The Miyagi Market


Back in 1984, there was a popular movie called “The Karate Kid”. Mr. Miyagi was the mentor, teaching karate to a kid. Because karate moves are complicated, he simplified one move by telling the kid “Wax on, wax off”. The stock market has become “Risk on, risk off”. Yesterday was obviously “risk on”, as investors … Continue reading The Miyagi Market

Thinking About Friday


The first Friday of each month is the most important Friday to the market, because that is the day that the monthly “Jobs Report” is issued. The current forecast is an increase in jobs of about 144,000 and the unemployment rate holding at 9.6%. Creating that many jobs is certainly much better than losing 700,000 … Continue reading Thinking About Friday

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