I normally wake up between 4:30 and 5:00 in the morning. Yesterday was no different, except the television was already on, showing a bunch of fancy-dressed-folks going into an ornate cathedral in London. More importantly, there was tens of thousands of people outside cheering wildly, which is not the same thing as working hard. British economists have already estimated the lost productivity (or the cost of…
Economists often develop a religious fervor about some school of thought. We see constant dogfights between Keynesians, Supply-Siders, and Austrian (Tough Love) economists. Sometimes, we still hear from Monetarists. But economics is more like situational ethics than religion. Different ideas are appropriate at different times in different places. Today’s editorial in “The Wall Street Journal” is an example. That newspaper is a religious devotee of…
We all know the importance of international trade, but imagine trying to do business globally if there was no traffic cop. Fortunately, 134 nations got together and created the World Trade Organization (WTO), which has been instrumental is the growth of globalization. We need a traffic cop, a big burly one! In 2001, it began the Doha round of trade negotiations. This round was called…
We all know about leading economic indicators, i.e., those that tell us where the economy is going. There are also lagging indicators that tell us where the economy has been and are usually not worth knowing. Lastly, there are coincident economic indicators that tell you where the market is right now. Two coincident indicators are underwear and guns. People defer purchasing new underwear during bad economic times,…
Today, Ben Bernanke took a risk. In an laudable effort to bring greater transparency to Fed thinking, he held the first press conference ever for a Fed Head. There was lots of anxiety that he would accidentally say something, and the market would over-react to it. Fortunately, it was a wonderful non-event. The talking heads are arguing whether he ruled out QE3 or not. I…
Yesterday was a great day for the market bulls, driving up the Dow by 115 points. Quarterly corporate earnings reports continued to be strong. In addition, the Consumer Confidence Index was unexpectedly strong. The S&P is at a three-year high! Today will be different. While the continuing flow of quarterly corporate earnings is expected to remain strong, there is a huge “unknown” at 2:15 PM,…
One of the oldest proverbs of traders (not investors) is to “sell in May and go away.” The research is pretty compelling that stocks do much better in colder months than warmer months. I don’t think this year will be any different. There are just too many unresolved issues, even more so than usual. Does that mean a person should sell all stocks now and remain…
Forgive me, but it worries me to see our elected children in Congress playing with fire, by threatening to keep the debt level at the current level. That means we cannot borrow anymore–immediately, we cannot borrow anymore — on that day. It would be immediate! Given that 42% of every dollar spent is borrowed, which means the number of dollars spent must be decreased — immediately. That could…
Without being too existential, I’m beginning to wonder why the stock market continues to bound over the famous “wall of worry.” GDP growth is slowing. Who cares? Unemployment is going down bitterly slow. Who cares? The Congressional children may cause a national disaster by not raising the debt ceiling. Who cares? The budget deficit this year is $1.5 trillion. Who cares? Did I mention we’re…
Rolling Stone magazine once referred to legendary investment banking firm Goldman Sachs as the “great vampire squid wrapped around the face of humanity.” I don’t find any reason to disagree with that. Yet, I have great professional respect for their cold, hard, unblinking analytical capabilities. In their latest analysis, they estimate that our GDP growth is being reduced by a whopping full percentage point at the current…
As a child growing up near Williamsburg and Yorktown, I was always fascinated by the notion of America revolting from the tyranny of an oppressive England. As a teenager, I enthusiastically read the books of Ayn Rand, especially Atlas Shrugged, which was a story of free-thinking people revolting against an oppressive governmental bureaucracy. (It was a great inspirational story that finally came to the silver…
OK, I’ve read the report from Standard & Poor’s yesterday that said the economic outlook for the U.S. was downgraded from Stable to Negative. I’ve listened to numerous pundits and read numerous analysis by people I respect. And, I’ve learned very little that I did not already know. In summary, here are my thoughts on it: 1. The S&P believes there is a 1-in-3 possibility…
Overnight, the engine of world economic growth, China, raised rates again, to slow their economy and the world economy. The Finnish election went badly and will likely threaten the bailout of Portugal. There is now serious talk of some bondholders of European governmental debt taking a loss at maturity of their bonds. The head of the FDIC says they already have the power to dismantle banks that…
Last night at my Rotary meeting, a friend asked me what advice a father should give his grown daughters. I promised to sleep on it and give him some thoughts this morning in my blog. In no particular order, they are: 1. Money is not everything in life, but it is important. Don’t be afraid of it. Deal with it!2. Deal with it yourself. It is not…
Initial unemployment claims expectently jumped 27 thousand last week, which is bad news. Continuing claims (which is really more important) fell to the lowest level since September of 2008, which is good news. The Producer Price Index was expected to be up 1.0% but came in better at 0.7% in March, down from 1.6% in February. However, if you strip out food and energy, producer prices were up…
When I was a bright, young economist fresh out of graduate school, I was fascinated by the writings of Nikolai Kondratieff, who was an obscure Russian economist that rose to become the Deputy Secretary of Food for Russia. Unfortunately, he would up in the infamous Gulag Archipelago with the famous Russian dissident, Aleksandr Solzhenitsyn. Communists at that time believed the major weakness of capitalism was the never-ending cycle of economic…
I have long been concerned about the damage that derivatives did during the global financial crisis and their ability to cause another one. The biggest problem is the lack of transparency. There is no clearing exchange to understand what the market was betting on, and it is important, because it is a $583 TRILLION market. Very little was done last year in the Dodd-Frank financial…
Yesterday was a lousy day in the market. First, the world over-reacted to the news that Japanese nuclear disaster was worse than previously admitted. Then, Goldman Sachs said it was time to sell oil, as the economy was weakening. So, we all lost a little money yesterday. But another report was lost in the hysterics. The trade deficit fell 2.6% to $45.8 billion in February. …
One of my favorite sources of global economic analysis is the International Monetary Fund. Their latest report was interesting. They said that worldwide GDP growth was a very healthy 5% last year, and will be 4.4% this year and 4.5% next year. That sounds really promising! However, that growth belongs to the “haves and have nots” between developed nations and emerging ones. For developed nations, growth…
Long time readers know I write a quarterly column on the economy for Inside Business, which is the regional business journal. You can copy and paste this URL to read the latest: http://www.insidebiz.com/news/q1-chock-full-market-shock In it, you will read the consensus of opinion at the conference of the National Association of Business Economics, which I attended in Washington recently, was that neither Republicans nor Democrats had the…
With a flair for needless melodrama, Congress decided not to shutdown the government last night. That is a good thing. From an economic standpoint, Keynesian economists are shaking their head, because the economy has lost stimulus, however minutely. Austrian economists are relieved, because the deficit is reduced, however minutely. Of course, supply-side economists got their feelings hurt, as they were ignored in the compromise legislation. …
Suspended between childhood and puberty, eighth graders are notoriously ill-behaved and ill-mannered. My teacher that year was Mrs. Woodward, and I wish she was in Washington, where members of Congress are both ill-behaved and ill-mannered. She did not tolerate disrespectful slackards and actually threw kids out of class if they were not working hard or playing well with others. While it will certainy not be good for the…
What a dumb question? Everybody knows love, health, friends and other things are more important than money. Yet, I was reading a new survey by the Associated Press that 25% of us have absolutely no savings and 25% of us say we have no plans to retire. Is that just a coincidence? I think so. Money doesn’t drive the retirement question as much as people (especially…
Last weekend, I wrote my quarterly column that will appear in next week’s Inside Business. I discussed the economic conference I attended last month in Washington, where speaker-after-speaker lamented the fact that neither Democrats nor Republican would deal with the financial cancer on this country, which is entitlements. The Democrats did it last year and were accused of death panels and pulling the plug on…
World markets were down overnight, and the futures market suggested a slightly down open for our market. The reason is that the Chinese are again attacking their problem with inflation, by raising interest rates for the fourth time since October. In addition, they have raised their banking reserve requirements six times, to reduce bank lending. This is in an effort to reduce demand and cool…
Warren Buffett once joked that the way to have a small fortune in airline stocks was to invest a large one. Their woes are well documented, i.e., high union costs, high fuel prices, and low fares. Here is my solution to raising their revenue, by applying a well known economic principle. It is called Elasticity of Demand and measures how a person changes their spending or…
As I type this, I’m sitting in the Atlanta airport, after a day of board meetings for the National Association of Personal Financial Advisors (NAPFA). Long ago and far away, I was privileged to serve in the U.S. Army Special Forces. One of my best memories is being one of the best. NAPFA gives me that feeling again. To be a registered investment advisor with…
Earlier in the week, the consensus estimate of the Jobs Report released this morning was that 225 thousand jobs were created in March. Over the last few days, it drifted down to 200 thousand. When the actual number of 216 thousand was released, the futures market had a nice pop-up. It should be another good day in the market. Hopefully, the 13 million people looking…