Let’s see . . . you expect full retirement benefits at age 55 and one of the best health care systems in Europe as well. Oh, and paying taxes is only for chumps. You are renowned across Europe for not filing your income tax returns, and the government barely tries to collect them. For the 20% of the workforce that “works” for the government, you have…
Last week, Europe developed their template to resolve their financial crisis. Stock markets around the world rallied and rallied strongly on the breakthrough. I knew it wouldn’t last, as markets cannot go straight up without falling back for consolidation. Plus, there had to be lots of details in the template that would concern the market. So, I’m not surprised nor concerned that the stock market…
Clients frequently ask me about making investments in businesses or real estate outside the stock market. I am required to tell them that I have a conflict of interest, because my fee income could decrease if they reduce the funds under my management in order to make the outside investment. In other words, it is theoretically possible I might recommend against a good investment just because…
When I turned on Bloomberg at 4 AM, I expected to see something about the European financial crisis, as usual. Instead, it was a discussion about the earnings of some company. After breathless 24/7 coverage of the crisis for months, I found this discussion of earnings to be refreshing. (Maybe, we’ll get back to economics as well? I miss writing about economics!) As expected, the devilish details of the…
It took a slow 18 months and a long 10 hour marathon negotiation last night, ending at 4AM, but Europe has done it! Of course, they have not solved all their problems, but they have taken a huge step toward fiscal integration. The hook is set, and there is no getting away. Basically, the banks have agreed to take a 50% haircut on their Greek…
Did you ever hold a cat over the water? It explodes with energy, with all four paws in frantic motion and all claws ready to hang on to anything. That’s how the market is behaving today, swinging from 150 point gains to 50 point losses within minutes. The production of so much adrenalin is caused by Europe’s meeting this afternoon to finally end their financial crisis. …
The good news is that national leaders in Europe have finally realized the grave condition of their financial system and are committed to saving it. The bad news is that they don’t know how! In July, they agreed to set up a European Financial Stability Fund (EFSF), with about 440 billion euros or $600 billion. Now, there is general agreement that is too little but no…
I was not expecting much action in the market yesterday; expecting low volume in anticipation of the important EU meeting of finance ministers today, and that’s how the day started. The market had been promised by Merkel that Wednesday’s meeting would produce the final comprehensive plan to end the European crisis. Then, there was a rumor yesterday that the meeting of finance ministers had been…
I attended the dinner meeting at the World Affair Council last night, where Senator Mark Warner was the speaker. Normally, our speaker discusses some international issue. Senator Warner spoke more about domestic issues. He talked about his experience on the Gang of Six moderate senators who tried to build on the Simpson-Bowles work to break the debt ceiling debacle, complaining the press is more interested…
I know I have done this before, but it is really important to remember this website: http://www.usdebtclock.org/ The market is discounting the problem of Europe and will soon face the challenges of our SuperCommittee.
At 4AM this morning, futures indicated the Dow would open up about 40 points. Then, it dropped down to negative 6 points. At 7AM, futures are flat. The market is slowly twisting in the wind, waiting for the G-20 in general and Sarkozy & Merkel in particular to announce their “bazooka plan” to save the European financial system. In July, they agreed all bondholders of Greek…
This weekend, I was fortunate to have my daughter visit from Texas. I had to promise to participate with her on Saturday in the Virginia Touch Mudder, which I knew nothing about. For info, click here: www.toughmudder.com/virginia In the middle of 15 thousand screaming lunatics, one gets a different view of the economy. These enthusiastic participants spent on average well over $300 each to attend something with no prize money. …
While world stock markets are being whip-sawed by every announcement out of Europe, it is easy to miss what is happening in the Chinese stock market. Take a look at this:  If China is the growth engine of the world, the world could be stalling badly! Of course, we don’t know how much to trust this graph. In the U.S., we believe our stock…
Earnings season is almost half over. Generally, the earnings reports have been slightly better-than-expected. Normally, when a company’s quarterly earnings disappoint, that stock gets hurt, but that doesn’t drive the overall market down a hundred points. Yet, the market remains painfully volatile. Something else is causing that! Yesterday, economics actually mattered briefly, when the “Beige Book” report was released at 2 o’clock. The economic report showed…
While listening to a Republican candidate for President on Fox News, he stated that the top 5% of the taxpayers pay 80% of the taxes. While directionally correct, that didn’t sound close enough to make good policy. So, I did some research on Kiplinger and found this. To be in the top 5%, you only need an Adjusted Gross Income of $154,643 in 2009. That group received…
I feel guilty kicking a sick dog, but I have this love/hate perspective of Goldman Sachs. Their earnings came out yesterday, and they are definitely sick. Fortunately, I don’t buy stock in any company that I don’t trust and do NOT have their stock in any portfolio I manage. And, I certainly would never permit my daughter to date anybody who worked there. Nonetheless, I love…
Everybody sees the world thru their own prism. Often, that prism can be mass-produced by the media. Watching the Republican Debates last night, I saw agreement that the “Occupy Wall Street” (OWS) crowd was just a bunch of left-wing extremists. My Democratic friends see the Tea Party as just a bunch of right-wing extremists. Rather than viewing either movement as left or right-wing extremists, maybe we…
Today’s Producer Price Index was worse-than-expected, 0.8% vs 0.2% in September. Also this morning, England announed their consumer inflation was running 5.2%, which is worse-than-expected. In addition, China announced their GDP growth rate dropped from an incredible 9.5% to a worse-than-expected but still incredible 9.1% . . . because they are fighting inflation. Inflation is good! For a country that is trying to de-leverage or reduce its debt, inflation…
Long-suffering readers of this blog know that I also write a quarterly column for Inside Business: The Hampton Roads Business Journal. The newspapers are being mailed today, but you can read it here: http://www.insidebiz.com/news/investing-q3-when-politics-trumped-economics-q3-when-politics-trumped-economics
Any recovery is better than not, but only some recoveries are sustainable. The ideal recovery would gain only 20-30 points on a daily basis for a long time, with heavy volume. (Heavy volume means lots of shares were traded, which usually means lots of people are buying and is very bullish.) The Dow has moved more than 100 points each day, up or down, for…
The G-20 is the international organization of the twenty largest economies that meets periodically to coordinate primarily trade policies and secondarily fiscal policies. Each meeting gets lots of media attention, as twenty chiefs-of-state deserve. The next meeting is in two weeks. Before each meeting, the finance chiefs get together to actually work out deals to make their bosses look good later. They are meeting today and…
I had a long conversation with my favorite bull yesterday. He is a long-time friend and client, who is anxiously looking forward to celebrating at his 90th birthday party in the near future. The reason he called me was that he was curious why I was removing risk from his portfolio, when the market was going up. After reminding him that I raise cash as my…
There are numerous investment theories, with Modern Portfolio Theory being the most common. Advisors often advertise that their individual investment theory is better than everybody else’s. Almost all were developed in the United States. The Battle of Thermopylae was fought in 480 BC, when legend tells us that a mere 300 Spartan soldiers withstood the one-million man army of the Persian emperor Xerxes. Obviously, that took…
Harry Markopolos is the tenacious whistle-blower that tracked Bernie Madoff and tried unsuccessfully for many years to get the SEC to investigate Madoff. Unfortunately, the SEC had more important things to do, and Madoff was exposed by the market crash of 2008, not by Markopolos. Tonight, we went to see the worth-seeing movie Chasing Madoff, which described his long ordeal to do the right thing. …
Yesterday, Slovakia decided to kill the EFSF, which would be a huge setback to ending the European crisis. One would expect markets to tank worldwide, but one would be wrong. Asia was up. Europe is up. Futures indicate our Dow will open up about 75 points. Most experts assure us that Slovakia will replace their government and pass the law next week. While I hope…
The SEC requires public companies to file financial reports on a quarterly basis, so that shareholders can have needed information about their investments. September 30th was a quarter end for the vast majority of companies. During the month of September, companies that expected to post results different from their earlier guidance usually guide those earnings estimates up or down. This is called the “confession season.” …
I’m proud that the Nobel prize for economics was awarded to two Americans yesterday and salute Thomas Sargent & Christopher Sims on their accomplishment. For decades, I have watched the profession of economics sink into the black hole of econometrics, which is an almost religious belief that everything can be quantified. If only we could get more & better data, as well as bigger & faster…
Yesterday, on the promise of Merkel and Sarkozy to resolve the European Crisis this month, the Dow was up 330 points. Overnight, Asia also rallied on that good news. Then, the European markets opened with a rumor that Slovakia would not approve the July agreement to create the EFSF (European Financial Stability Fund), which would effectively kill it. Europe is down about 1% pending the…
I remember watching two existential “philosophers” discussing the importance of absurdity. One said the only thing more commonplace than air . . . was absurdity. That crossed my mind this morning as I watched CNBC discussing the “Occupy Wall Street” movement, that does seem to be growing. When the Tea Party movement was born during the 2010 elections, the left wing was disgusted with the…
In the 24/7 investment world, every Monday is a new beginning, a time when everything is possible. The weekend provides time for almost anything to incubate and begin anew on Monday morning. Overnight, Asia was up almost 1%. Europe is also up. Futures indicate our market will be up about 150 points at the open. The primary reason is that Merkel and Sarkozy “promised” that…
There is a raging debate inside the investment industry between the fiduciary standard and the suitability standard. Under a fiduciary standard, an investment advisor must always act in the best interest of the client and must always disclose any potential conflicts of interest beforehand. Under a suitability standard, an investment advisor must not make any recommendations that are not suitable for clients. The classic example…
Last night, my Rotary Club was given a private, behind-the-scene tour of the Virginia Beach Jail. It was a sobering and provocative experience. We saw the “in-take” area, where police turn over custody to the jailers. There were tiny, barren cells with a seat and toilet only. We saw the three different types of cells, i.e., linear, dormitory, and pod. We saw the special holding area for…
When the Dow futures change from a negative 45 to a positive 100 points within ten minutes, it is a safe bet that the monthly Jobs Report was better than expected. That was certainly the case this morning! A survey of economists indicated job growth in September would be about 63 thousand, which would be better than the zero growth in August. Instead, the U.S. economy produced 103…