As a child growing up near Williamsburg and Yorktown, I was always fascinated by the notion of America revolting from the tyranny of an oppressive England. As a teenager, I enthusiastically read the books of Ayn Rand, especially Atlas Shrugged, which was a story of free-thinking people revolting against an oppressive governmental bureaucracy. (It was a great inspirational story that finally came to the silver…
OK, I’ve read the report from Standard & Poor’s yesterday that said the economic outlook for the U.S. was downgraded from Stable to Negative. I’ve listened to numerous pundits and read numerous analysis by people I respect. And, I’ve learned very little that I did not already know. In summary, here are my thoughts on it: 1. The S&P believes there is a 1-in-3 possibility…
Overnight, the engine of world economic growth, China, raised rates again, to slow their economy and the world economy. The Finnish election went badly and will likely threaten the bailout of Portugal. There is now serious talk of some bondholders of European governmental debt taking a loss at maturity of their bonds. The head of the FDIC says they already have the power to dismantle banks that…
Last night at my Rotary meeting, a friend asked me what advice a father should give his grown daughters. I promised to sleep on it and give him some thoughts this morning in my blog. In no particular order, they are: 1. Money is not everything in life, but it is important. Don’t be afraid of it. Deal with it!2. Deal with it yourself. It is not…
Initial unemployment claims expectently jumped 27 thousand last week, which is bad news. Continuing claims (which is really more important) fell to the lowest level since September of 2008, which is good news. The Producer Price Index was expected to be up 1.0% but came in better at 0.7% in March, down from 1.6% in February. However, if you strip out food and energy, producer prices were up…
When I was a bright, young economist fresh out of graduate school, I was fascinated by the writings of Nikolai Kondratieff, who was an obscure Russian economist that rose to become the Deputy Secretary of Food for Russia. Unfortunately, he would up in the infamous Gulag Archipelago with the famous Russian dissident, Aleksandr Solzhenitsyn. Communists at that time believed the major weakness of capitalism was the never-ending cycle of economic…
I have long been concerned about the damage that derivatives did during the global financial crisis and their ability to cause another one. The biggest problem is the lack of transparency. There is no clearing exchange to understand what the market was betting on, and it is important, because it is a $583 TRILLION market. Very little was done last year in the Dodd-Frank financial…
Yesterday was a lousy day in the market. First, the world over-reacted to the news that Japanese nuclear disaster was worse than previously admitted. Then, Goldman Sachs said it was time to sell oil, as the economy was weakening. So, we all lost a little money yesterday. But another report was lost in the hysterics. The trade deficit fell 2.6% to $45.8 billion in February. …
One of my favorite sources of global economic analysis is the International Monetary Fund. Their latest report was interesting. They said that worldwide GDP growth was a very healthy 5% last year, and will be 4.4% this year and 4.5% next year. That sounds really promising! However, that growth belongs to the “haves and have nots” between developed nations and emerging ones. For developed nations, growth…
Long time readers know I write a quarterly column on the economy for Inside Business, which is the regional business journal. You can copy and paste this URL to read the latest: http://www.insidebiz.com/news/q1-chock-full-market-shock In it, you will read the consensus of opinion at the conference of the National Association of Business Economics, which I attended in Washington recently, was that neither Republicans nor Democrats had the…
With a flair for needless melodrama, Congress decided not to shutdown the government last night. That is a good thing. From an economic standpoint, Keynesian economists are shaking their head, because the economy has lost stimulus, however minutely. Austrian economists are relieved, because the deficit is reduced, however minutely. Of course, supply-side economists got their feelings hurt, as they were ignored in the compromise legislation. …
Suspended between childhood and puberty, eighth graders are notoriously ill-behaved and ill-mannered. My teacher that year was Mrs. Woodward, and I wish she was in Washington, where members of Congress are both ill-behaved and ill-mannered. She did not tolerate disrespectful slackards and actually threw kids out of class if they were not working hard or playing well with others. While it will certainy not be good for the…
What a dumb question? Everybody knows love, health, friends and other things are more important than money. Yet, I was reading a new survey by the Associated Press that 25% of us have absolutely no savings and 25% of us say we have no plans to retire. Is that just a coincidence? I think so. Money doesn’t drive the retirement question as much as people (especially…
Last weekend, I wrote my quarterly column that will appear in next week’s Inside Business. I discussed the economic conference I attended last month in Washington, where speaker-after-speaker lamented the fact that neither Democrats nor Republican would deal with the financial cancer on this country, which is entitlements. The Democrats did it last year and were accused of death panels and pulling the plug on…
World markets were down overnight, and the futures market suggested a slightly down open for our market. The reason is that the Chinese are again attacking their problem with inflation, by raising interest rates for the fourth time since October. In addition, they have raised their banking reserve requirements six times, to reduce bank lending. This is in an effort to reduce demand and cool…
Warren Buffett once joked that the way to have a small fortune in airline stocks was to invest a large one. Their woes are well documented, i.e., high union costs, high fuel prices, and low fares. Here is my solution to raising their revenue, by applying a well known economic principle. It is called Elasticity of Demand and measures how a person changes their spending or…
As I type this, I’m sitting in the Atlanta airport, after a day of board meetings for the National Association of Personal Financial Advisors (NAPFA). Long ago and far away, I was privileged to serve in the U.S. Army Special Forces. One of my best memories is being one of the best. NAPFA gives me that feeling again. To be a registered investment advisor with…
Earlier in the week, the consensus estimate of the Jobs Report released this morning was that 225 thousand jobs were created in March. Over the last few days, it drifted down to 200 thousand. When the actual number of 216 thousand was released, the futures market had a nice pop-up. It should be another good day in the market. Hopefully, the 13 million people looking…
I just finished reading “All the Devils Are Here” by Bethany McLean and Joe Nocera. It is one of many books chronicling the global financial crash. However, there is less narration and more conclusions than most. The one that most resonated with me was “The rating agencies were at the very heart of the madness.” While there has been much highly-deserved criticism of bankers, the credit…
I just read the speech of Charles Plosser, President of the Federal Reserve Bank of Philadelphia, that he gave last Friday. It was widely reported as the Fed’s “Exit Strategy” from its very successful effort to save the economy. Mostly, I agree with him, especially his belief that the Fed’s action be made clear long before they actually do something. The markets do over-react and…
The big show is Friday at 8:30AM. That’s when the monthly jobs report is issued by the government, i.e., Bureau of Labor Statistics. It is the single most important statistic released each month and can easily move markets. If the number is much over 225 thousand jobs, the market will probably rise. If much less, the market will probably fall. Today, the huge payroll company,…
Fridays are usually the most volatile trading day of the week, as traders try to protect themselves before the weekend when the market is closed. The most volatile Friday each month is usually the day when the “Monthly Jobs Report” is issued, which will be this Friday. That is the most closely watched economic report and can easily move markets. Because it is so volatile,…
On April 8th, there could be another government shutdown, unless Congress passes a budget. They are still operating until a continuing operating resolution, their third one, unable to agree on a budget for this fiscal year. The Tea Party wants another $61 billion cut out of the budget (Who doesn’t?). The Democrats think it is immoral to cut funding for homeless veterans, poor children and…
The average trading volume of oil futures is about 890,000 thousand, which equates to about 890 million barrels per day. Yet, the average consumption of oil is less than 20 million barrels per day. While there are certainly some other issues and uses, it does lend some perspective into just how much speculation there is in oil prices. That sounds ominous and somewhat dangerous, but…
President Harry Truman is famed for asking “Give me a one-handed economist!” His lament was that economists always say “on the other hand.” Today’s economic news is a good example. First, the GDP growth rate was revised upwards to 3.1%, which was better than expected. “On the other hand” shortly afterwards, consumer sentiment numbers were released, showing the lowest in a year. How is a…
Sometimes, things come into better focus when you stop looking at them. I’m sitting on a sunny balcony in Myrtle Beach, reading “Super Sectors” by John Nyaradi. Sector rotation is a method of investment management whereby the investor buys cyclical stocks as the economy grows and defensive stocks as the economy declines. An example of a cyclical stock would be technology, and a defensive example…
Did you feel the tide going out? It is the tide of uncertainty that swept over the market for the last few weeks. Markets don’t like uncertainty! There is less uncertainty about Khaddafi; he’s toast! There is less uncertainty about Japan; it will take $235 billion over 5 years to rebuild, according to the World Bank. There is still some uncertainty about the possibility of…
It is hard to remember so many important news events happening at the same time. We’re going to establish a no-fly zone over Libya, a move advocated by France, who does not have a reputation as a war-like nation. Did you hear that the protests in Bahrain were brutally surpressed by the Saudis? Gas at $4/gallon is a certainty. At the same time, the G-7…
Shortly before 3PM on May 6th of last year, I was stunned to watch the Dow drop almost 900 points in minutes during the now infamous “Flash Crash.” Much studied since then, we have been assured the new market breakers would prevent that from happening again. Shortly after 11AM yesterday, I watched the Dow drop almost 150 points in one minute and worried it might…
In the first quarter of last year, the market set a new post-Lehman high but got de-railed by the European Debt Crisis. In the first quarter of this year, the market set another new post-Lehman high but got de-railed by the North African revolutions, the tragedy in Japan, and, oh yeah, the European Debt Crisis . . . it’s still here, darn it! If you…
As I write this on Tuesday night, Tokyo has opened up strongly, following their 17% drop this week. One would hope the crisis is over and their stock market can get back to business as usual. However, until a meltdown is no longer a possibility, I do not believe their market is anywhere near normal. Sometimes, there is a “dead cat bounce.” Forgive the imagery,…
While I am not complaining, the Dow closed down 137 — only 137! It had been down as much as 296 points in the morning. With chaos in the Middle East, with no resolution to to European credit crisis, and with heart-breaking tragedy in Japan, the U.S. market is not showing as much sympathy as expected. I still need to research the particulars, but have…
Yesterday, the Arab League, which is arguably the planet’s most impotent organization, actually requested the United Nations to establish a no-fly zone over Libya. They never speak unkindly of Arab despots. Even more incredible, the Saudi military entered Bahrain to protect the monarchy. In other words, one Arab nation “invaded” another. In a normal environment, the price of oil would skyrocket upwards. Instead, it is…