Today’s news carried a story about the benefit of working past normal retirement age. It cited a French study that each additional year of work decreased our probability of getting dementia by 3.2%. All I could say was . . . surprise, surprise? Recently, a good friend said I was becoming positively Calvinistic in my zeal for advocating work as good and healthy. He knows…
The London Interbank Offered Rate or LIBOR was designed to measure the cost of borrowing between banks in London when they borrowed overnight to cover minimum liquidity requirements. The rate would increase whenever the banking system had too little liquidity or too little cash-on-hand. It was an early-warning-system for the Bank of England that it might need to increase liquidity by increasing the money supply.…
My latest quarterly column for Inside Business on the economy and the stock market can be found at: http://insidebiz.com/news/q2-was-swoon-time-movement-away-bonds
There is an old expression on Wall Street that it is always “climbing a Wall of Worry.” We saw that last month when the stock market had a temper tantrum following Ben Bernanke’s press conference. Most such emotional outbursts are more annoying than instructive. But, there is something bothering me that I don’t think the market has focused on . . . yet. And, that…
Consumer confidence reached a six-year high in May before falling slightly in June. This is good news, but we always looks for some confirmation of economic data. One of Alan Greenspan’s favorite economic indicators was the Men’s Underwear Index (MUI). Because so few people ever see men’s underwear, replacing it is an expense that men readily defer when the economy is weak. Sales of men’s…
The Department of Labor issued their latest Jobs Report yesterday. Of the 130 economic reports issued each month, the stock market focuses most intently on this one. While the stock market is famous for over-reacting, it is most famous for over-reacting to this report. Yesterday, we learned that non-farm payrolls increased by 195 thousand in June, which was more than expected. Private sector jobs increased…
It may be the best advice my father ever gave me: Never discuss politics or religion! That was good advice, which has helped over the years. Sometimes, my love of economics would cause me to slip into a political discussion, but I’ve faithfully avoided any discussion of religion. It is simply too important and too private to discuss with mere mortals. In fact, I would…
When, in the course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes…
The second quarter of this year was the worst quarter gold has ever experienced, since markets began trading it many years ago. From over $1,900 per ounce a few years ago to less than $1,200 at quarter-end, what happened? The truth is seldom flip, and neither is this. First of all, since we measure the value of gold in dollars, the value of gold falls…
Last week, the stock market got pounded when Ben Bernanke repeated his plan to begin withdrawing quantitative easing. This means the Fed would buy fewer government bonds than the $85 billion they are buying each month . . . like, say, $84 billion. In other words, no big deal! Still, the market did what it does best . . . over-react. This week, more attention…
Wall Street’s infamous Vampire Squid, AKA Goldman Sachs, has issued their latest quarterly assessment. I take their thoughts seriously, even though I don’t trust anything they say. Here are some of their current thoughts: 1. “Global markets have started to worry that the US economy is moving a bit too nicely over the hump of fiscal contraction.” Paging Congress — are you listening? Never mind .…
Republicans use the word “taxes” too much.Democrats use the word “fairness” too much.Existentialists use the word “absurd” too much. Thursday’s market convulsion was absurd, losing 354 points! Yes, yes, it was partially due to bad data coming out of China, but it was primarily due to the absurd reaction of U.S. traders (not investors) to Ben Bernanke’s press conference on Wednesday. In the real, rational…
It takes thousands of hours studying economic textbooks and decades of experience to be even a fair economic forecaster. Last week, a noted hedge fund operator, whose expertise was forecasting, said his skills were irrelevant in this market. His argument was that Ben Bernanke, Chairman of the Federal Reserve System, has suspended the laws of economics. He said the trading game is now fixed .…
I have a relative whose only ambition in life was NOT to work. It was a negative ambition that I never understood. Sadly,it is also a “luxury” that fewer and fewer people have.The Great Recession has many older Americans considering the prospects of staying in the workforce past their normal retirement age. But, working past your normal retirement age is not a new necessity. According…
I just re-read one of the best investment books ever written: Unexpected Returns: Understanding Secular Stock Market Cycles, written by Ed Easterling in 2005. When I read it the first time, the most interesting lesson was what he styled the “Y-curve effect.” He demonstrated pretty clearly that PE multiples decrease whenever there is a change in the rate of inflation. In other words, investors will…
Yes, yes, I know the sky really is falling this time! Europe still tries to maintain one currency with seventeen different fiscal policies. Derivatives still present a clear and present risk to both the market and the economy. Still, nobody knows what caused the infamous Flash Crash on May 6, 2010 or how to prevent another one. And, we just learned that traders can buy…
Years ago, I realized that I was working for a crook. After carefully nailing down the details, I went to the FBI and later testified against him. Although he is probably out by now, the last I heard, he was serving time in a Federal prison in California. During the infamous Savings & Loan crisis in Texas, the Governor appointed me to the Texas State…
When I was a boy, there was a turnip farm about an hour’s walk away. In those pre-citified days before I learned fancy ways, it was not unusual for me to simply pull a turnip out of the ground, brush the dirt off with my pants and eat it raw. But, the reason I went to this little farm was that there was a small,…
The stock market has been drifting down over the past few weeks, almost entirely due to the concern that the Fed may start “tapering” or reducing QE3 from $85 billion monthly to something lower, like maybe even $84 billion. The stock market is afraid of this! And, because the Fed has said they will begin this when unemployment hits 6.5%, the monthly Jobs Report this…
The economy is clearly showing signs of recovery, albeit a weak one. Investment pundits on Wall Street are mostly enthusiastic about a continued bull run. Yes, the market over-reacts to any comments about quantitative easing (QE), forgetting that reduced QE means the economy is getting better. But, of course, that’s what the market always does: it over-reacts. Against this generally bullish environment, I have feared…
The two most practiced schools of investment management are fundamental analysis and technical analysis. Mostly, I practice fundamental analysis, which means I look at the company, how its stock trades relative to the company, how the stock is rated by full-time analysts, how it is impacted by the business cycle, etc. Sometimes, I will take a look at technical analysis. That is the type of…
Back in the Dark Ages, there was a TV commercial for Timex watches that said “it takes a licking but keeps on ticking.” That came to mind Tuesday morning when I heard the latest consumer confidence numbers. Since consumer spending is two-thirds of GDP, it is important to see how confident they are and whether they will increase or decrease their spending. Confidence increased 7.2…
I was a brash young lieutenant who knew everything and was on my first assignment after completing my Special Forces training. He was a wise, older Command Sergeant Major (CSM), which means he was an enlisted man and out-ranked by any brash young lieutenant like myself. Of course, he could have subtly embarrassed me somehow in front of my troops or tolerated me as merely…
Goldman Sachs is a huge investment banking firm, once satirized as a giant vampire squid sucking on the face of mankind. I find nothing about that description to disagree with! However, they do have a great research department, and here are some of their latest projections: 1. GDP growth will sharply accelerate from 1.9% this year to 2.9% next year.2. Unemployment will drop to 6.6%…
Yesterday, we discussed the latest outlook from the National Association of Business Economics (NABE) and Jeremy Siegel of Wharton, both of whom I respect and both of whom are very bullish about the underlying economy. It is now apparent that there is more than just quantitative easing by the Fed that is impacting the stock market. However, the bulls have already been running down Wall…
It is a small secret that I find economics endlessly fascinating. One would expect I would be a member of the American Economic Society, but I found those are the nerdy, academic type of economists who value mathematical purity more than usefulness. Instead, I have been a long-time member of the National Association of Business Economics (NABE). Yesterday, NABE released their latest Outlook, predicting that…
One of the reasons that the U.S. stock market is doing so much better than the U.S. economy is that the U.S. economy is doing so much better than the European economy. The latest data from Europe is not good, with GDP decreasing 0.2% last quarter. Over the last 1.5 years, the GDP has decreased 1.5%. The European GDP is now 3.3% lower than its…
As a white male, it is dangerous to discuss certain issues, and most of us avoid those subjects like the plague. We can never discuss racial issues or gender issues . . . because we are wrong, no matter what we say. But, I can report comments by a female speaker at the conference this week about gender issues. She said women communicate with…
Yesterday morning, I was in Indianapolis and spent three hours listening to a brilliant Italian mathematician speak rapidly in a thick Italian accent, as he discussed numerous, long complex formulas with lots of Greek letters. (You know, the type of formulas that Warren Buffett doesn’t trust.) Listening required absolute focus, and I was exhausted after those three long hours. The short version is that binary…
This is the seventh Mother’s Day that I thought was the last one for my Mother. It is also the first she has spent in hospice care. It is not easy for anybody, especially my Father. She has taught me much about life and death. But, I have been thinking about the dying process – of being between life and death. As an existentialist, I…
Yes, I’m aware that the Dow broke the 15,000 barrier. That’s great! I’m actually more impressed that the S&P broke 1,600. But, I’m most impressed by the fact that the stock market held both levels. This rally is real! The media is paying a lot more attention to the 15,000 barrier than it did when the Dow broke the 14,000 level, and I doubt it…
While most people consider their military experience to be good, most of their memories are bad. Some memories, however, are just plain annoying. My nomination for the most annoying of all military memories is the “IG Inspection.” This is when some field-grade officer from the Inspector General Department comes to inspect the troops. Ostensibly, he makes sure the troops have the equipment they need and…
Conventional wisdom is a dangerous thing. For generations, investors have been told that bonds are always safer than stocks, which is WRONG, WRONG, WRONG! Today, the popular “retirement-date funds” just allocate a greater and greater portion of a person’s portfolio into bonds as they get older, which should be WRONG, WRONG, WRONG! Investors think they are being prudent by investing in bonds — but are…
