On and off for the last three years, the stock market has been increasingly ignoring the fundamentals of earnings, earnings per share, sales growth, market share, etc. Investors have become far too focused on a possible, catastrophic European collapse. Last year, we viewed the European problem (with the exception of Greece) primarily as a banking problem. Last December, the European Central Bank (ECB) launched its…
Republicans and Democrats agree the budget deficit is a huge problem that must be resolved. However, with obedience to the right wing extremists, the Republicans will not agree to any tax increases. Likewise, with obedience to the left wing extremists, the Democrats will not agree to cut any entitlements, like Medicare and Social Security. Since the representative democracy we love seems to be failing us,…
At one point in my life, I had to fly to Europe for business almost every month. It was particularly annoying when I had to do business during the months of July and August, because the Europeans were maniacal about “going on Holiday.” Business would just stop! Nothing was more important than Holiday! So far in July, the U.S. stock market has done well, because…
The last boom was powered by residential real estate. The last bust then followed the value of residential real estate as it fell . . . and fell . . . and fell for a long six years. Last month, the chief economist of the National Association of Realtors announced that residential real estate had found its bottom and would start recovering, which would eliminate…
Recently, I had dinner with a six-year-old boy and his parents. Watching his attitude toward desserts, I saw the problem with Supply-Side economics . . . please stay with me on this! Supply-Side economics is a relatively new belief that the economy will grow if the highest marginal tax rates are decreased. It started with the realization that there is a point (the Laffer point)…
Nobody knows why Friday the 13th is considered unlucky. There is no written mention of it in Western literature before 1869. Italians find Friday the 17th to be unlucky. Greece and some parts of Spain suspect Tuesday the 13th is unlucky. And, on Wall Street, it is still called Black Friday by the superstitious. Hopefully, the CEO Jamie Dimon won’t feel unlucky today when he…
I just read the latest outlook from Wells Fargo, and here are the salient points: 1. During the second half of this year, U.S. growth is expected to remain unchanged, at about 1.7%.2. Global growth is expected to be 3.0%, if Europe doesn’t “blow up.”3. While they think Europe will instead “muddle through,” it remains the biggest risk.4. Led by lower oil prices, inflation risks…
One day, the bulls will be running down Wall Street. The next day, the bears will steal money from everybody on The Street. For those of us who are both fascinated and absorbed by such things, it is often hard to see any other things in life. This weekend, we had to help some relatives, who had been without power for eight days. One cousin…
On Monday morning, a survey of economists indicated that the June Jobs Reports issued this morning would show 80 thousand jobs were created last month. However, on Thursday morning, the ADP report said 176 thousand jobs were created, which was better than expected. As a result of the ADP report, this morning’s survey of economists showed their prediction had increased from 80 thousand to 100…
From an economic perspective, the causes of the European financial crisis are twofold. First, they give more money to their voters than they can afford to give. Second, they over-protect workers, greatly limiting business flexibility and productivity. Accountants can easily document the first, but how do you document the second? How about a crystal-clear example? The European Court of Justice just ruled that an employee…
Nobody ever spit on me, but I do remember one pimply-faced kid saying “Oh, look, a baby-killer” when he so astutely observed a young, fit Jim Flinchum with short hair returning to college in 1970. Over the next few years, there were several minor snubs, none of which mattered . . . then or now. But, somehow a nation of 300 million people got embarrassed…
That is how the chairman of the British Financial Services Authority described the environment of the big banks setting interest rates. In particular, he was talking about the current scandal involving the London Inter-Bank Offered Rate or LIBOR. This is an important scandal because the interest rate on countless home mortgages, credit cards, and virtually all commercial loans change according to LIBOR. At this point,…