Yesterday’s report that personal income rose less-then-expected, while personal spending rose more-than-expected, made me wonder about our rate of savings. As everybody knows, cigarette companies were held legally responsible for the misfortunes caused by smoking, even though the cigarette companies didn’t hold a gun to anybody’s head. Smokers smoked because they chose to do so. So, why did cigarette makers owe damages? And, why did…
A year or so ago, I read the excellent book This Time Is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Ken Rogoff. One of the interesting conclusions from the ponderous 463-page study was that nations are condemned to slow economic growth, once their ratio of debt-to-GDP passes 90%. (In fact, economic growth became slightly negative at -0.1%.) Because the U.S. is experiencing slow…
At 1:07 PM on April 23rd, the respected Associated Press announced on their Twitter account that there were explosions at the White House and the President was injured. Within three minutes, the Dow lost 143 points but then recovered — leaving a bad case of whiplash. No harm, no foul — right? What happened is that some group of sick hackers (who have identified themselves…
Depending on what you measure, BlackRock is the largest asset manager in the world. To some extent, this actually makes their predictions of market behavior self-fulfilling; which means they manage so much money they could theoretically cause the market to behave as they suspect. Anyway, here are their latest predictions: 1. They believe the market will continue upwards over the coming months but volatility will…
Being a voice in the wilderness can be a lonely experience. So, it can be nice to hear another voice and even nicer if that voice agrees with you. I have been worried for some time that we will experience a “Jim Fixx” moment, remembering the highly trained, low-body fat runner who suddenly dropped dead from a heart attack. According to Investment News, “Jeffrey Gundlach…
One of the companies that I respect the most but trust the least is Goldman Sachs, which was once famously described as a vampire squid sucking on the face of mankind. In no particular order, here are some of their latest predictions: 1. GDP growth will slow to 2.1% this year but accelerating to 2.9% next year.2. Unemployment will drop from 7.6% now to 6.9%…
While there are many schools of thought on economics, we have, for convenience, concentrated on the Big Three. First, there is the Austrian school, which advocates a balanced budget at all times. It is often called the “tough love” school. Then, there is the Keynesian school, which advocates deficit spending when the economy has slack and budget surpluses when the economy is doing well. It…
Philosophers debate whether people have an infinite capacity for emotion or merely a finite capacity. Clearly, some people feel more emotion longer and more strongly than other people. However, most philosophers will agree that existentialists have a smaller capacity than most. If that is the case, then emotion becomes “a terrible thing to waste.” It is probably then a waste of emotion to spend it…
Long-time readers know whenever there is a lull in blog posting, there is a column in the near future. And, here it is: http://insidebiz.com/news/great-disconnect-market-and-economy In this quarterly column for Inside Business, I discuss economic and investment performance during the first quarter and offer thoughts on the second quarter. The question posed in this column is: How can the stock market do so much better than…
If confession is good for the soul, I confess to enjoying the AMC award-winning series Mad Men, which just returned to the air last Sunday. It is perhaps the most existential TV program ever. The lead character is Don Draper, who is a big-time advertising executive. He is also a brooding, unhappy person. Surrounded by both talented men and beautiful women, he is still miserably…
Democrats were happy enough with Friday’s Jobs Report, because the economy has been adding jobs for 37 straight months. And, the unemployment rate dropped from 7.7% to 7.6%. What’s wrong with that? Republicans were worried that job creation dropped two-thirds in one month. They were angry that the labor participation rate dropped to the lowest level since May of 1979. That means more people are…
The stock market hit another record high on Tuesday. The next day, it lost 111 points on the Dow. Is the rally over? Of course not! On average, the market has at least five pullbacks of 5% or more each year. We are due for one and, frankly, need it to consolidate our gains. Yesterday’s 1% drop partially reflected some weak economic data but mostly…
Readers know my expectation is the U.S. economy will continue to improve: faster with help from Washington and slower without it. However, we are increasingly vulnerable to a “Jim Fixx moment,” recalling the father of running who suddenly dropped dead while running in his neighborhood, despite having a long body-mass index. The most likely event that might trigger this heart attack is a derivatives blow-up.…
