Republicans often argue that less regulation is always better. Democrats are often seen arguing that more regulation is always better. Sometimes, they are both right! For years, during the Bush II administration, financial deregulation was a sacred objective. Not surprisingly, the economy boomed, and the financial sector eventually became 22% of GDP. Also, not surprisingly, a little deregulation soon became too much, financial deregulation became…
One of my favorite conferences each year is the annual Policy Conference of the National Association of Business Economics, which starts today in Washington. This is the first time in many years I have missed it and already regret missing it. One of the opening events is the release of the latest member survey. What strikes me as unusual with this new survey is the…
I bought my first share of stock in 1966. Since then, there has never been one day that somebody wasn’t predicting the sky is falling. Of course, the sky does fall sometimes, like in 1929 and maybe in 2008. But, it doesn’t fall everyday. Just because the S&P 500 fell half of 1% last week — doesn’t mean the sky is falling. Last week might…
Many analysts have concluded the global financial crisis resulted from bond salesmen who were simply working their incentive plan by selling mortgage-backed-bonds secured with subprime mortgages, which created large losses around the world. How many have you seen doing the “perp-walk” when arrested? The answer is NONE. They made millions. When things went bad, they walked away as winners. Readers know I have long argued…
The legendary and powerful Wall Street firm of Goldman Sachs made an interesting investment call this morning. Yes, this is the same firm that was slimed by a former employee in The New York Times last week, setting off a firestorm of suspicion and hostility toward the firm. He alleged the firm was, to be kind, ethically-challenged, referring to its clients as “muppets” to be fooled…
If you go to Google and type in the word “privacy,” you can learn a great deal. Its a shame Google doesn’t do this . . . to learn what the famed jurist Louis Brandeis called “the right to be let alone.” Google makes money selling advertising. The more targeted the advertising to particular users, the more revenue Google makes. So, Google collects huge amounts…
A good friend of mine faithfully forwards each issue of The Kiplinger Lettter which I have studied for many decades now. I like this newsletter because it is clear, concise, and non-partisan. The current issue is unusually interesting. Even though the average price of homes is expected to drop another 2% nationally this year, home prices have already been on the rise for a year in…
One of our basic values is that the lazy should not be rewarded with the earnings of people who work. However, we have a poor, elderly relative, who is married to a husband who will not work. When her health finally failed a year or so ago and could no longer work, we thought her husband would finally be forced to get a job. We…
On Wednesday, a disgruntled employee wrote an open letter of resignation to the legendary Goldman Sachs which appeared on the Op-Ed page in the New York Times. Since then, Wall Street has been obsessed with it. Goldman Sachs has a long, storied history as an investment firm on Wall Street. They were always considered “the smartest guys in the room.” They were feared by other…
From the late 1970’s to the mid 1990’s, home prices moved within a fairly narrow range. Then, they spiked up dangerously. Today, as indicated by this graph, home prices have returned to the bottom of that range. With interest rates starting to tick up, that should send potential home buyers back into the market, making this the bottom of the market. I know there are…
Last Friday, the Department of Labor released the all-important monthly Jobs Report. Generally, it was better-than-expected, with 227 thousand jobs being created. (This morning, High Frequency Economic,whom I respect, predicted over 300 thousands being created monthly by late Spring?) Our U.S. unemployment rate did not drop, remaining at 8.3% of the workforce, because so many previously-discouraged people had re-joined the workforce to look for a…
Suppose, God forbid, that the stock market drops 50%. Suppose unemployment rises from 8.3% to 13%. Suppose home prices drop another 21% from already depressed levels. And, suppose this all happens by the end of next year . . . The Fed just announced another round of stress tests for major U.S. banks. Generally, the results were surprisingly good, with only four banks failing to…
We were in Atlanta this weekend for an interesting conference, attended by investment strategists, whose idea of athletic prowess would be to draw macro-economic graphs upside-down on drink napkins during a polite barroom discussion on economic policy. Ironically, we were surrounded by thousands of enthusiastic basketball fans attending the NCAA Tournament whose idea of physical prowess was certainly who could spill the most beer on…
That is when the deadline expires for owners of Greek government debt to either accept or reject a complicated offer to basically write off 53.5% of the face value of the bonds they hold. (In other words, if I owe you $1 thousand, I will repay you only $465 instead.) Over half of the bondholders have already announced their agreement. However, we need 90% acceptance…
Yesterday, the stock market was ugly, the worst loss since last November, but the question is whether it reflected the U.S. economy or simply the sheer weight of news. For example, so far this week, we’ve learned that: China’s growth rate has dropped to “only” 7.5%, ignoring their announcement that they plan to target future growth among consumers instead of of export. All of Greece’s…
Since today is the Republican primary and since I sit here with an “I Voted” sticker on my shirt, it might be well to see which party has produced better results for Wall Street, which is predominantly Republican. If you invested $1,000 in the S&P 500 when Kennedy took office and kept it invested only during Democratic administrations, you would have $10,920 today. On the…
Years ago, when I lived in Dallas, I enjoyed participating in their annual Vertical Marathon, which was a race up the stairwell of the tallest building there — all 72 floors. Two participants at a time were permitted to start together, followed by another pair of participants two minutes later. (Your time spent climbing was measured when you reached the top floor, based on when…
Alcoholics cannot begin to help themselves until they admit they have a problem. In that vein, we need to repeat: The American health care system in general and Medicare & Medicaid in particular are going to destroy this country! There! We said it! We’ve all seen the statistics many times, maybe so many times that we’re numb to facts, but the 800-pound gorilla in the…
