Please re-read last Sunday’s blog titled “A Soap Opera for Economists.” Watching the Asian markets open at 8PM tonight will also be “must-see” TV. At this hour (1630 hours), Washington is swirling with rumors that a deal to raise the debt ceiling is imminent. If true and announced before the Asian markets open, it will … Continue reading Let Us Pray . . .
The Flinchum FileThoughtful Economic Analysis and Existential Opinions
With gold hitting record highs almost daily, it is not surprising I get asked about it almost every time I go out. Most financial advisors are comfortable putting 5% to 10% of a client’s portfolio into commodities, of which 1% to 2% would be gold. I already have a higher allocation than that in most … Continue reading So, What About Gold?
Back in Dallas, I had a good friend named Lloyd. He was 44 years old when his father died. After the funeral, his mother called the kids together to tell them a deep, dark family secret that she had promised not to reveal until her husband had passed. The secret? They were Jewish. Apparently, they lived … Continue reading Who Are We Anyway?
Assuming the worst case that the budget ceiling is not raised in a timely fashion, we have been somewhat flippant, making the choice of what to pay and what not to pay in a “guns or butter” format. It is, of course, more complicated than “the bondholders or grandma.” I expect the bondholders will be paid … Continue reading Painful Priorities . . .
The TED Spread is the relationship between Treasury bond rates and the London Interbank Offered Rate (LIBOR). Another way of saying it is the relationship between lending to the U.S. government and lending to the banks. It has been a reliable predictor of financial crisis in the past, having been as high as 470 basis points in … Continue reading Where’s the Fear?
Beware of economists making political predictions! Nonetheless, I suspect there is now less than a 50% probability any deal will be reached to raise the debt ceiling and wonder what fool linked budget negotiations to the debt ceiling anyway. Does that mean the U.S. will default on its debts for the first time? No, I … Continue reading Debt, Default, Downgrades, Dollar and Debacles
One of the main objectives of this blog is to increase awareness of the differences between the three main schools of economic thought today. With respect to the current debt ceiling crisis, the Keynesian viewpoint would be the economy is stalling and needs a stimulus of deficit spending. That only works when the nation has … Continue reading Comparative Debt Ceiling Economics
Why is the market so calm? One possibility is great confidence that the debt ceiling will be raised. Another possibility is great confidence that it doesn’t matter. Another is that the credit rating is more important anyway and is going to be reduced under any circumstance, given our inability to govern sensibly. While I agree … Continue reading Suspiciously Sanguine
Few financial advisors recommend market timing, calling it a “fool’s mission.” With retail investors such a small part of the market, they cannot compete with the hedge funds and others guessing the exact top or the exact bottom of any stock, much less the market. That is why most advisors recommend a “buy & hold” strategy, … Continue reading Extreme Market Timing
The Blame Game has started. The elected children are already blaming the other side for being even more childish on the debt ceiling. Unless something is cobbled together today, Bloomberg will be “must-see” TV at 8PM tonight. That’s our first opportunity to watch Asia react to America’s inability to govern itself intelligently. Will Asian markets collapse? No, … Continue reading A Soap Opera For Economists
When former Treasury Secretary Hank Paulson told Congress in 2008 that he needed a bazooka to convince the bond vigilantes that he had enough firepower to prevent any default, I knew he was right. Bond vigilantes have made nations cower many times. Half-measures can be fatal. Just ask Britain what George Soros did to them! Greece … Continue reading Vigilantes Love Half Measures
A few years ago, I read an excellent book by Malcolm Gladwell called The Tipping Point. It talks about how many small things can build up until finally one more small thing lights the match that burns down everything. The current president of Turkey said that democracy is like a street car: When you get to … Continue reading Which Tipping Point?
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