Earlier this morning, the Dow looked to gain 85 points at the open. Now, it looks to gain 285 points. It has been getting better all morning. In addition to the ten-day deadline on resolving the European crisis, the primary central banks of the world just announced a huge new liquidity measure. This should reduce the liquidity risk if not the credit risk, which still reduces…
At 5AM, the futures market indicated the Dow would lose about 25 points. By 6:30AM, it looks like it will gain 85 points at the open. Why was there a turnaround of 110 points? Some of the talking heads out of Europe said the crisis would be resolved, one way or the other, within the next ten days. Coming on the heels of the announcement…
Because I see the world thru the prism of economics, it is helpful for me to be around investment advisors who see the world thru the prism of financial planning. Every month or two, a group of 8-10 of us do just that, which we did this morning. Given the world investment markets, there was an over-arching sense of gloom, which shouldn’t be surprising. However, there…
Everybody has seen a football movie where the young player keeps begging to “send me in, coach!” That is how I see the U.S. stock market. It wants to reflect the underlying U.S. economy but is over-shadowed by European headlines. Yesterday, the rumors out of Europe suggested an alternative universe of European nations could save the Union and the Euro. That allowed the U.S. market to…
After the worst Thanksgiving week since 1932, the futures market indicates the Dow will gain about 230 points at the open. This impressive turnaround is due to several things. First, holiday sales in the U.S. appear to be remarkably strong. Second, Sarkozy and Merkel are talking about a “second European Union” that can coordinate fiscal policy and move more quickly. Third, there was an unconfirmed…
The Motley Fool column in today’s newspaper deserves emphasis as we sweat out the financial crisis in Europe. It asks the question “What should I do if the stock market crashes?” It answers with “Above all, don’t panic. Remember that the market always goes up and down, and sometimes it moves sharply . . . In the near term, anything can happen, including a crash. …
Although I have been a member of the National Association of Business Economics (NABE) for many years, I usually pay little attention to their economic forecasts, which invariably tend to see the future as a mere continuation of the past. Most economists just extrapolate the present into the future . . . it is always “more of the same.” This time, I agree with the…
Today will be boring . . . be thankful! Trading volumes have been low all month and minuscule this week. Both Asian and Europe were down somewhat overnight. The news out of Europe is disappointment that the meeting between Sarkozy and Merkel produced nothing, except an agreement not to disagree in public. Ominously, interest rates continue to rise in Europe. The futures market indicate the…
Yes, I am thankful today . . . thankful for my good health and good fortune. I’m very thankful for both my blood-related and business-related families. They show me the reason for my work everyday! I’m also thankful to live in such a great country, where freedom of religion is guaranteed. (I am especially thankful this particular morning that the European stock markets have stabilized…
I hate to be a scrooge as the holidays begin, but I do wish we could postpone Thanksgiving tomorrow. The European financial crisis smouldered in Iceland and Ireland before igniting in Greece. Then, the first “too big to save” country (Italy) came under attack from the bond vigilantes. Last week, Spainish interest rates rose dangerously, and France barely held onto its AAA rating. Most worrisome, the…
In this column and many others, there has been much gnashing of teeth over the break-up of the Euro. Yesterday, a friend and client sent me an interesting blog by Charles Hugh Smith, which makes the important point that a nation’s currency is an important throttle on that nation. Without that throttle, the nation will easily get out of control. He said it well: “The euro supporters…
Investors have been steadily moving assets from stockbrokers to Registered Investment Advisors (RIAs) over the last six years. This is despite the fact that most of those people cannot repeat the advantages of dealing with an RIA instead of a stockbroker. Here is a handy little video from YouTube that helps . . . enjoy! http://www.youtube.com/watch?v=yz7NEVtJaUY
A longtime investing principle is that only a fool invests his money based on market-timing. The number of unknowables is infinite. A market-timer cannot know what he doesn’t know that will ruin his expectation. That said, why does everybody keep asking if “this” is the bottom? In a word . . . No! I cannot say it often enough — a financial crisis is much…
As I look out the window from my hotel and see the dreary weather in Dallas this morning, I suspect it looks just as dreary on Wall Street, as well as all-across Europe, regardless of the weather. In Europe, five governments have now fallen as a result of their debt crisis, with Spain being the latest. The bond vigilantes are busy circling Italy and have started circling…
Losing a client is bad enough, but losing a friend hurts far worse. I lost one last month in Dallas. His widow asked that I skip his funeral, in order to help her with all the estate issues later. Early tomorrow, I will leave to help her, returning late Monday. I have been thinking about his life quite a bit. He lived life on his…
Who worries about running off a cliff . . . when a grizzly bear is breathing down your neck? At a meeting yesterday, I was asked why I was not more concerned about America running off a cliff if the SuperCommittee doesn’t produce a deal one week from today and Congress doesn’t approve it by Christmas before draconian cuts in government are made New Year’s…
It was three years ago that Bernie Madoff was exposed and sentenced to 150 years in jail. That only took a few months. However, it has taken the Securities and Exchange Commission three YEARS to investigate themselves and discipline eight of its employees for lousy work in auditing Madoff, despite having proof delivered to them by Harry Markopolos. Does anybody see a problem here?
Yesterday, the Dow dropped about 76 points. The futures market suggests it will lose another 70 points this morning, following the pattern of Europe, where Germany and France are both down about 2%. It is easy to think the world is just waiting to hit the SELL button as soon as the market opens. Actually, there are very few active players in the market now, mostly the…
I participated in a Veteran’s Day Parade this weekend and found it a little hollow. As society has tried to overcome its shameful treatment of Vietnam veterans, it has now become almost too effusive. I listened to a lot of pretty words about service and protecting families back home and making the world “safe for democracy,” whatever that means. It was all very well-meaning, and…
U.S. banks are required to have a certain amount of capital for each investment. European banks are not required to have capital in order to hold certain investments, such as sovereign bonds of European governments. That means a European bank can take in funds from depositors and buy bonds of some European government. They pay the depositor next to nothing for the funds to buy…
On Wednesday, the sky was falling, and the Dow lost 389 points. Europe was killing us. Then, Greece elected an economist as Prime Minister to take the place of the third-generation professional politician. Then, Italy made real progress in passing a budget, when uber-politician Berlusconi will resign. It is widely reported his replacement will also be an economist. With the replacement of two career politicians…
Most of my public speaking for the last few years has been on the subject of globalization, which fascinates me. One of the primary thought leaders on the subject is Pulitzer-winning Tom Friedman. Anything written by him is required reading. His latest book, co-written with Michael Mandelbaum, is That Used To Be Us. It is a bittersweet walk down Memory Lane beginning with the happy…
I enjoy reading the economic forecast from Wells Fargo, which inherited the highly-respected Economics Group of Wachovia when that bank failed. In short, they expect to see continued slow growth in the U.S. with no recession. However, they point out that Europe is already entering recession. Several months ago, I predicted there was only a 33% probability of a recession in this country, unless Europe pulls…
Late yesterday, Berlusconi promised to resign. U.S. markets started to rally, with the Dow closing up 101 points. Overnight, the Asian markets also rallied. Then, the European bond markets opened, and interests rate on Italian bonds promptly shot well above 7% for ten-year bonds, a critical level historically. (Short term interest rates rose even more, inverting the yield curve, which usually predicts a recession.) The “cat is…
Yesterday was election day in America. Across the country, there were numerous union-weakening measures, ALL of which went down in over-whelming defeat. My experience with unions is that they produce armies of political zombies by smothering the individuality of their members. They help perpetuate the entitlement culture that is a cancer on our country. Yet, I was glad the union-weakening measures were defeated. The irresponsible elimination of…
The gold standard for investment management has been Modern Portfolio Theory (MPT) for most of my career. It was mathematically proven to maximize return while minimizing risk over the long term, because it required money to be invested in multiple different asset classes, i.e., long, short, and medium term bonds: big, small, and medium company stocks: foreign stocks; commodities, currencies, etc. The reason MPT worked…
The world is transfixed by what is going on in Greece and Italy. It is uncertain who will be the leader going forward. Can the new Greek leader adopt the EU offer, in the face of increased rioting over increasing austerity? Will the wily but incompetent Berlusconi finally throw in the towel and let reform begin, before the market for Italian bonds evaporates? Right now, the…
The U.S. stock market is not in control of itself. It is twisting in the wind, blown by breezes out of Europe. Nobody knows what the Greek outcome will be. We can see what increased political instability in Greece is doing to stock markets worldwide. Now, political instability is rising rapidly in Italy, which is “too big to fail.” Overnight, Asia was down almost 1%. Europe…
One of the earliest values I remember being taught as an inquisitive boy was to “mind your own business,” which is difficult for the intellectually curious, but I have have tried to hold onto that value and have been annoyed by those nosey people who do try to mind my business for me. Maybe, that is why I have lamented the loss of privacy so many…
The monthly Jobs Report came out this morning. Expectations were that 95 thousand new jobs were created in October, with 120 thousand new jobs in the private sector and a loss of about 25 thousand in governments. The headline is that only 80 thousand jobs were created, with 104 thousand in the private sector and a loss of 24 thousand in the government. Also, the unemployment rate dropped…
Everybody has heard this before: With 30% of Americans now considered obese (BMI > 30), it now costs America $147 billion annually. Obese Medicare patients cost taxpayers an extra $1,723 every year and is rising more rapidly than other medical costs. There has been serious discussion that Medicare premiums be increased for obese patients. Now, there is debate among financial planners whether it is ethical to NOT discuss…
Greece is less than 2% of the European economy and far less than 1% of the world economy, but it is beating the world stock market like a dog. What makes it so important is that world banks, mostly European ones, could quickly be bankrupted if Greek bonds are worthless. (And, because nobody knows who is really holding the bag or has sold the credit…
Last week, the European Union developed a template to save Greece now and possibly other members later. But, the Greek people felt they had been ignored and abused by the process. So the Greek prime minister made a bold call to hold a referendum in January, forcing the voters to choose between severe austerity or absolute chaos, both ugly choices. If the Greeks choose to remain…