The Flinchum File
Thoughtful Economic Analysis and Existential Opinions
The European Central Bank announced their second round of Long-Term Re-financing Operations” or LTRO this morning. It was bigger than the first round, and over 800 banks signed up. The European markets rallied on this news. But, what is it? Consider that the interest cost of government bonds in Europe has increased significantly, which starves … Continue reading Carrying the Water for Politicians
Yesterday, we learned that consumer confidence has risen to a one-year high, improving from 61.5 to 70.8 in the last month alone. It is interesting that their confidence has risen at the same time as gasoline prices have risen. This is unusual. Their confidence in the improving labor market is greater than their anxiety about … Continue reading The Confident Weakling
As a long-time member of the National Association of Business Economics, I pay close attention to their forecasting survey. Here is the bottom line on the latest survey, which was just released this morning: The NABE Outlook Panel of 45 forecasters continues to predict moderate real GDP growth through 2012. Economists expect the economy to … Continue reading A Survey of Economists . . . zzzzzzzzzzz
In the final scene of Ernest Hemingway’s 1940 classic, the American Robert Jordan lies wounded. He awaits his certain death at the hands of General Franco’s soldiers, but he is determined to take as many of those soldiers with him as possible. He never knows the outcome of the Spanish Civil War. Mario Draghi is … Continue reading For Whom the Bell Tolls
Suppose you have a first cousin living in California and another one living in Texas. You trust and respect them equally. Both of them have an investment proposal for you. You like each proposal equally. Incredibly, each proposal projects the same revenue as the other. However, one of the proposals shows higher expenses, which means … Continue reading Holding My Breath . . . Nope!
There is an old Wall Street adage that you should buy when you hear the cannons fire and sell when they fall silent. In other words, if and when Israel attacks Iran’s nuclear reactors, stock markets around the world will fall, which is a good time to buy. When a sustainable truce is announced, the … Continue reading The Smell of Napalm in the Morning . . .
Americans usually demand excellence but, being realists, accept something less. Our political debate often looks for the best or most excellent solution to problems. But, the politics of the possible makes us accept something less. Readers will recall we live in a tri-polar world of economics. We have Austrian economics, which argues that the budget should be balanced … Continue reading Framing the Election . . . ??
January was the best month for the stock market in 25 years. Unfortunately, a huge number of retail investors have been so shell-shocked by the 2008 collapse that they still remain on the sidelines. This is one of the primary reasons why trading volumes on the New York Stock Exchange and others have been so … Continue reading Market Timing?
First, a little review of Accounting 101 — If you subtract total liabilities from total assets, you get net worth or capital. If you sustain a loss on the sale of an asset, you decrease net income by the amount of the loss. If you have no net income, you must decrease net worth or … Continue reading Extend and Pretend
We have spent the last four days on Jekyll Island, a lovely resort of gentility and Spanish Moss. It was originally founded 125 years ago by the famous “Robber Barons” as a place to escape the awful New York winters. They spent lavishly on their 5,000 square foot “cottages.” Their clubhouse even had a restaurant … Continue reading On Wealth Watching
Yesterday, the headlines screamed there is finally a deal to solve the Greek financial crisis. Yet, the stock market barely reacted. Why? Frankly, the market doesn’t believe it. The announcement was made only by the Greeks. (The “troika” still have a few more conditions they insist must be part of the package.) Greece has unfortunately lost … Continue reading The Fat Lady Has NOT Sung Yet
America entered the 1960’s as a simple and trusting nation in many ways. One was that we liked to believe that the election of a president was a serious, thoughtful, and intellectual exercise. However, in 1969, I read a then-controversial book by Joe McGinniss entitled The Selling of the President 1968. McGinniss’ book showed us that … Continue reading The “Selling” of Conservatism
TD Bank (think Toronto Dominion) is the second largest bank in Canada and the eighth largest in the United States, which few people know. It is also the largest shareholder of trading giant TDAmeritrade. Last Friday, I listened to their chief economist’s slightly Canadian view of the U.S. economy. They see the world dividing into … Continue reading The View from Up North
In the sixth century Before Christ, the poet and philosopher, Lao Tzu, observed “Those who have knowledge don’t predict. Those who predict don’t have knowledge.” So, why do economists make predictions every year? Because the supply of predictions will rise to meet the demand for predictions. So, why do people demand them? Behavioral psychologists tell … Continue reading Some Things Never Change
In keeping with the age-old tradition of shooting the survivors, it was not surprising when regulators of financial advisors flooded us with confusing new paperwork to somehow better protect investors from advisors like Bernie Madoff (who had been audited by both the SEC and FINRA several times.) Today, I attended a class on the new rules … Continue reading A Blizzard of Paper
Yesterday’s monthly Jobs Report that our nation created 234 thousand jobs in January was very good news indeed. It was about 90 thousand more than expected. The report also reported that almost 50 thousand more jobs were created in December than earlier reported. While it is great that the unemployment rate dropped nicely from 8.5% to 8.3%, … Continue reading Good News From DOL
Nobody ever accused former Vice President Cheney of being “warm and fuzzy.” Still, he looked small and frail earlier today, even straining somewhat to open a bottle of water. But, once he started talking, I remembered why he was nicknamed Darth Vader. He believes any withdrawal from either Iraq or Afghanistan is a tragedy. He … Continue reading The Venerable NeoCon
One of the more difficult communications challenges for financial advisors is getting across the idea that a number means so little. For example, is 4% a good return or a bad return? If you take minimal risk and get 4%, then it is probably a good return. If you take a great deal of risk … Continue reading Risk-Adjusted Challenge
For the list of the Top Ten Best Lifelong Public Servants, I nominate Robert Gates, former Secretary of Defense. Fresh out of college, he started with the CIA, eventually becoming the first head of the Agency to have worked his way up thorough the ranks and later the 22nd Secretary of Defense. A moderate Republican, … Continue reading The Open Gates
Years of presidential elections are usually positive. Most of the upside occurs when the market “thinks” it knows the winner. Regardless of the party winning, the market tends to rise as uncertainty goes down. However, the market tends to do better that year if a Repubican wins. Over the four-term term of the presidency, the market … Continue reading A Romney Rally ?
My mother always told me “if you can’t say anything nice about a person, then just shut up,” which I still think is good advice. As a result, it has been painful for me to be in Florida the last few days and watching the attack commercials on TV, leading up to yesterday’s Republican primary. As … Continue reading One Gestation Period Away