Does anybody think the Founding Fathers designed our government to lurch from one manufactured crisis to another? Did the Founding Fathers ever imagine Americans would be suffering crisis-fatigue or policy-fatigue? Did the Founding Fathers ever think Congress would be more despised than used-car salesmen? As stupid as all that is — and, it is — there is something else that is equally hard to understand,…
How much would you pay me for a stock that earns $1 per share per year? No, that doesn’t mean it pays out a dividend of $1 per year. It just earns that much, regardless of whether it pays out the earnings as dividends. The market determines how much you have to pay. Sometimes, you have to pay $25 for that stock earning $1. Sometimes,…
The most neglected part of governing is educating. A government cannot get too far ahead of what the people understand and are willing to follow. You’ll recall the Austrian school of economics believes government receipts and disbursements should be equal each year. The Keynesian school believes, during times of under-employment or excess capacity, the government should spend more than received. The problem with the Keynesian…
I have often written about the power of “bond vigilantes.” The clearest historical example is that the bond vigilantes determined when World War II would begin. To build-up his military, Hitler borrowed heavily by issuing government bonds. When the bond vigilantes stopped buying German bonds, Hitler knew his military would never be any stronger, and it was then time to begin the war. George Soros…
It has been many years since I watched the Academy Awards Show on television, probably decades, but I’ll be watching tonight, because I’ve actually seen four of the Best Picture nominees, which has never happened before. First, Argo is the story behind the rescue of Americans hiding in the Canadian embassy during the early days of the Iranian revolution in 1980. I watched it from the…
As a child, I was always told to “go along and get along.” And, I hated that! While I never disagree just to be disagreeable, it is a point of honor to disagree whenever I think it matters. So, it annoys me when I find myself in agreement with a large group of people. This morning, I saw a new survey of money managers by…
Merrill Lynch predicts gold will pass $2,000 an ounce by year-end. Yet, it dropped dramatically yesterday, by over $40, and is sitting about $1,570 now. As it turns out, a large commodity hedge fund had purchased a put at the $1,600 level. So, rumors spread quickly that they were dumping their gold holdings when the price touched that level, which further depressed the value of…
Sequestration is almost upon us, and the stock market doesn’t seem to care. Neither should you! You’ll recall this odd concept of arbitrary cuts in government spending was created when the Congressional partisans could not agree on raising the debt ceiling in 2011. Of course, nobody asked why they were more likely to find common ground for agreement in 2013 than 2011. I guess they…
Fourteen months ago, Italy was definitely in trouble. Some called it a “great big Greece,” where employers could not terminate employees in many jobs without regulatory approval and where tax cheats openly boasted about the taxes they didn’t pay — about $160 billion each year. In fact, their elected leader was also a convicted tax cheat, who was appealing his four year sentence to prison.…
More than any other person, Ben Bernanke prevented the financial collapse of the United States of America. But, in doing so, he laid the groundwork for the eventual financial collapse of our country. It may be more correct to say that he postponed, rather than prevented, our financial collapse. Maybe, he just bought us enough time for Congress to act, if that is possible As…
I was selected to give the keynote address at the annual economic conference of the Hampton Roads Association of Financial Professionals on Tuesday of this week and hope they enjoyed it as much as I did. While it may not make much sense without the commentary, the Association decided to post the slides I used at . . . http://hrafp.org/PastMeetings.html . . . under “When…
As a kid, I liked math. It could tell me things that words could not. Numbers can reveal nuances more quickly than words. But, numbers can also mislead. The current obsession with 14,164 is misleading. It is more nostalgic than significant. True, the Dow Jones Industrial Average is now within 1% of that all-time high on April 7th, 2008, but is nowhere near its all-time…
I don’t normally read Rolling Stone magazine, unless somebody puts a gun to my head. This weekend, my wife put a gun to my head and made me read last month’s issue, that had a long article by Matt Taibbi entitled “Secrets and Lies of the Bailout.” He was also the author of an excellent, highly-regarded article a few years ago on the corporate culture of…
One of the biggest problems in deciphering economic data is how inter-connected the data is. A change here creates a change over there. One example is the GDP report for the fourth quarter, which originally showed a 0.1% DECLINE. We could see immediately that it was skewed by the highly-unusual decrease in both government spending and business investment ahead of the Fiscal Cliff at year-end.…
A year ago, it seemed like I blogged about the European Financial Crisis almost every day. It was one of the three “wet blankets” on the stock market. Since then, it has moved to the back burner. Does that mean the crisis is over? NO! The three most important things that happened were (1) beginning operation of the European Stability Mechanism (ESM) and (2) the…
My favorite professor at Wharton was Dr. Jeremy Siegel, who also wrote Stocks for the Long Run, and I continue to follow his thoughts closely. He was enthusiastic about Friday’s “jobs report” primarily because the unexpected upward revision of 127 thousand jobs created in October and November. At the same time, he was puzzled by the GDP report, which was slightly negative. Of course, it turned…
On the long flight back last night from a conference of financial advisors in San Diego, I listed a few general observations: 1. There was almost uniform agreement from the economists that the underlying economy is improving.2. There was some question about the length of the current economic recovery. Is the recovery already longer than normal? Is the normal length of a recovery screwed-up by…
If you are seriously bored at that time, you are respectfully invited to listen to my keynote address to the Hampton Roads Association of Financial Professionals at their annual Economic Outlook Luncheon. I will be discussing the current state of the economy and the importance of having a SELL strategy. For additional information, go to http://hrafp.org/Econ_Outlook_Luncheons.html Or you could just stay home and re-arrange your sock…
