Consumer confidence is up. The rate of unemployment is down. Today’s weekly jobless claims have dropped below 400 thousand for four straight weeks. The PMI shows manufacturing is up. Now, pending home sales are at a 19-month high. Make no mistake: the U.S. economy is puny, but it is improving. The greatest threat to our economic recovery remains Europe. The “chattering class” of pundits say…
The U.S. stock market has been pleasantly snoozing along over the holiday season, but was rudely awakened yesterday, and the Dow dropped 140 points. You don’t need to ask who woke up our market so rudely, as you already know all bad news comes from Europe. Even though there was good European news that interest rates paid on Italian government bonds dropped significantly, the ECB also announced…
One of the benefits (maybe the only benefit?) of having a childless Christmas is time to read, and I spent this one studying Currency Wars: The Making of the Next Global Crisis by James Rickards. It is not an easy read and is dense with historical detail. We tend to think of WWI and WWII as the pivotal events of the last century. Instead, Rickards…
The media hyped a contest over the payroll tax extension as a Herculean battle between Republicans and the President. I saw it more as a struggle between the Republicans and the Tea Party. And, did it really matter anyway? This two-month extension is trivial in comparison to the battle this summer over the debt ceiling, which caused a loss of our AAA, a thousand point…
Today’s economic data was mixed but generally encouraging. Weekly jobless claims were better than expected for the third straight week. Even better, the number of workers on continuing claims dropped from 3.63 million to 3.55 million. (Of course, that number could drop for the wrong reason, if the current legislative impasse is not broken by year-end.) The jobs market is definitely improving, albeit s-l-o-w-l-y. Also,…
Monday, the Dow was up over 300 points. Yesterday, it was flat. Today, it looks to gain about 40 points at the open. Yea–the market has changed direction and will be moving back up?? No–as discussed last week, the trading volume or number of shares bought/sold is so low this week and next, that daily market movements are meaningless. So–pay no attention this week or…
The Wall Street Journal ran a front-page article yesterday that is guaranteed to enrage both the “Occupy Wall Street” movement and the Tea Party. It describes how hedge funds routinely prowl the hall of Congress to gain advance knowledge about the many thousands of new laws and regulations produced every year. Based on what they learn during their prowling, they make investment decisions. Of course, it can…
Years ago in the Army, I can remember straddling my bunk, methodically taking apart my M-14 rifle and then re-assembling it . . . blind-folded . . . with a buddy counting off the seconds. It was not unlike watching the Europeans wrestle with their financial crisis. They are trying to fend off the bond vigilantes by assembling a bazooka, with no idea how to…
In preparing my annual forecast for Inside Business, I predict the European Central Bank will be forced to engage in quantitative easing in order to end the crisis. This means they will buy any and all bonds issued by European governments, just like our Fed bought all bonds issued by our Treasury. The new head of the ECB, Mario Draghi, has said he will not…
It has been fashionable to malign the media for many years. While generalizations are usually wrong, my perspective is different. Ignoring the obvious extremes of Fox, MSNBC, and HDNet, I find the majority of media to be well-meaning but hapless in the face of increasing complexity. As an example, last night about 10PM, I was watching the Asian markets on Bloomberg. It was ugly, with…
At a Christmas party last night, I was amused when a good friend and loyal reader reminded me that I once said that I expected a “rip-your-face-off” recovery, whenever it happens. That comment does reflect my belief that the U.S. stock market has become entirely headline-driven and does not reflect the underlying U.S. economy, which is better that most people realize. At some point, economics…
Last year, I made my second visit to China. Readers will recall my interest in the very different cultural attitude toward disagreement. We think it is shameful for a person to suffer-in-silence. They think it is shameful for a person to disagree-in-public. The greatest fear of the Chinese government is not the U.S. Their greatest fear is civil unrest. Considering the vast numbers of people they…
Yesterday, the economic data suggested stronger-than-expected improvement in both jobs and manufacturing. That should have been good for at least a hundread points on the Dow, and it was! But then, Angela Merkel made a few despondent comments, and the Dow lost over half its gains. It just reinforces my belief that the U.S. economy is doing better than realized, but the U.S. stock market…
In the aftermath of the Bernie Madoff scandal, investment advisors are being crushed with new, often-confusing regulations. When I read the Obama Administration is killing the American economy with regulation, I tend to believe that. The Wall Street Journal is required reading for investment advisors, but its editorial page is so predictable that I seldom read it. However, something piqued my interest yesterday about excessive…
Since the stock market is obviously losing steam with the continuing European crisis, a client asked me if we should just sell everything and stay in cash until “it” is over. There have been numerous academic studies that show “market timing” is a poor strategy for investment managment, which requires perfect knowledge about the future. Most investors prefer “buy and hold” as a strategy. After…
One of the few benefits to come out of that national nightmare known as Vietnam was a wariness with “escalation” or taking an incremental approach to solving difficult problems. Fortunately, one young lieutenant with the name of Colin Powell developed the “Powell Doctrine,” which he employed in the spectacular opening to the first war in Iraq. It calls for “overwhelming force, suddenly applied.” Another example…
The market has spoken. The verdict is in. Last Friday’s agreement to resolve the European credit crisis is just another disappointment, kicking the can down the road . . again! At this hour, the Dow appears ready to lose about 80 points at the open. Investors are fleeing the Euro, driving up the value of the dollar, which temporarily drives down the value of gold. Well…
Art Cashin came to work at the New York Stock Exchange in 1959. That’s correct, he has worked there for 52 years and is now the chief floor trader for giant UBS. Self-made and even self-educated, he has become one of Wall Street thought leaders, especially on market behavior. As no hint of scandal has ever tarnished his reputation, he is a folk hero to…
It would have been hard to spend any time on Wall Street this week without over-hearing conversations on the tragedy of MF Global and it’s famous CEO, former U.S. Senator Jon Corzine. While I overheard mere conjecture and speculation, I do have a suspicion about what happened. For my clients, their cash is kept separate from mine, and they receive any income earned from their…
Yesterday, a very famous economist from Switzerland made some cutting comments about Fed Chairman Ben Bernanke. Being educated in Europe, it is not surprising that he belongs to the Austrian or “Tough Love” school of economics. Like all economists, he was judgmental and intellectually intolerant, as well as bombastic. For the record, my thought is that Bernanke did a great job keeping the U.S. out of…
No, the world is not coming to an end! Besides, that can only happen once, and there is no way to prepare for it. However, the European Union may be coming to an end. With the latest agreement, it appears that the Euro will survive among the 17 nations that use it, which would be great news. However, it is not clear what will happen…
Today, I’m attending a conference in the New York Stock Exchange on the rapidly changing commodities markets and looking forward to it. I haven’t been inside the NYSE in almost 8 years and expect to see major changes. But, I don’t expect to see any major changes in the stock market today. The world continues to watch the incredibly high stakes drama in Europe. The…
When jumping out of airplanes, it is advisable to be wearing a parachute. The only problem is that parachutes require two large straps to go between your legs. However, when the parachute opens and the rate of fall slows suddenly, there are certain anatomical challenges for males. To prepare paratroopers for this sensation, there is a building in Jump School known as “suspended agony,” where each…
Yesterday, the Dow was cruising along, having gained 156 points. Suddenly and without warning, Standard & Poor’s (S&P), who did so much to create the last crisis, announced that the individual nations of Europe, including mighty Germany, were being put on “credit-watch” for a downgrade from AAA to AA, pending the outcome of Friday’s political summit. The stock market immediately started losing steam but held…
I just listened to the chief U.S. economist for Barclay’s Capital. He is predicting the S&P, which is now 1244 will drift down to 1150 by next summer but end the year at 1330, which would be a dramatic turnaround indeed. Earlier this morning, I listened to the chief European economist for Barclays in Europe saying they do not expect a “bazooka” approach to calming…
Overnight, Asian markets were mixed but generally up. The European markets are decidedly positive. The futures indicate the Dow will gain about 90 points at the 9:30AM opening. After a record-breaking week, it is encouraging to see investors are buying risk, before the European summit this week. You will recall the European leaders promised resolution of their financial crisis this week. If they don’t .…
1957 was an important year for investment analysts. That was the year that Harry Markowitz published his Modern Portfolio Theory and later won the Nobel prize. It was also the year that Ayn Rand published Atlas Shrugged and changed America. Perhaps, that was a hyperbolic over-statement but Ms. Rand would have loved it, as she often used them. Fifty years ago, in 1961, I read…
The monthly Jobs Report issued by the Department of Labor is the most closely watched economic report every month. It is issued the first Friday of each month, i.e., Today! Before the Report was announced, the futures market indicated the Dow would gain about 130 points at the open. Economists were expecting 125 thousand jobs were created in November, and it was 120 thousand instead. …
Yesterday, the market closed out a very volatile November with a roaring 490 point gain in the Dow. Today, we start the month of December, which is historically kind to the market. In fact, December is positive 80% of the time. The average gain is an impressive 2%. The last time we had a negative December was in 2007. Often called the “Santa Claus Rally,” behavioral psychologists attribute…