Yesterday, a wonderful client of seventeen years came to visit. Since it was a bit of a drive, she spent the night with us, which gave us time to think together, as well as to catch up. Often, she has perceptions of such clanging clarity that I’m haunted for days. For example, once she discussed … Continue reading Canary in a Mineshaft
The Flinchum File
Thoughtful Economic Analysis and Existential Opinions
For those who cannot wait until Inside Business is delivered Monday, here is the link to my latest quarterly column . . . http://www.insidebiz.com/news/investing-q2-stalled-soft-patch
One of the principal causes of the Great Recession was derivatives, which are extremely useful in the daylight but extremely dangerous in the dark. Because there has been no sunshine or transparency in this market, no one realized what a disaster AIG was, costing the taxpayers billions and billions of dollars. We need that information, … Continue reading A Distant Ray of Sunshine
After the Lehman collapse and the government injected hundreds of billions into bank capital, the wise decision was made to study the balance sheets of those banks to estimate losses in the event of another “stressful” event in the credit markets. Although done hurriedly, it was detailed enough and serious enough to restore most of … Continue reading A Good Report Card
Answer — The truth is . . . nobody knows . . . because it has never happened before . . .that the nation with the world’s only reserve currency defaults! However, I expect interest rates paid by taxpayers on all types of debt will rise. I expect banks will stop making loans. I expect unemployment … Continue reading Question — What Happens if the Debt Ceiling is NOT Raised?
The bear returned to Wall Street on Monday and Tuesday and roared. This morning, the bear is taking a nap. Futures indicate the Dow should open up about 80-90 points. What happened? The week began with renewed and heightened anxieties about the European contagion from Greece to Italy, a much larger and more worrisome problem. … Continue reading Turning On A Dime . . . Again?
I first fell in love with Ayn Rand in 1963, when I read Fountainhead. That was a story of an idealistic architect who was willing to sacrifice everything in order to construct a building that was “correct,” and he would not permit the architectural profession nor the development community to dissuade him. It was a … Continue reading Falling In and Out of Love
Yesterday, I was worried about the market. It is always more volatile on Fridays anyway, but yesterday would be a day of very little trading volume, as most of the big traders spend July spending big bucks in the tony Hamptons beach community, outside New York City. (A few large orders can move the market on a day … Continue reading The Whimpering Bull
With the surprisingly strong ADP employment report this morning, good earnings from several retail companies, and hopeful comments on the budget negotiations, it is not surprising the bull was loose on Wall Street today, for 7th time in 8 days. With the all-important monthly DOL “Jobs Report” due out tomorrow morning, my thoughts should be … Continue reading Things That Go Bump In the Dark
As someone who manages the savings of somebody else, I know it is deathly serious work. We become achingly cynical: believing no news release, no quarterly report, no analyst report and no economic analysis. Still, there are those occasions when we must put aside our cynicism for something more simple, more naive. Today is one … Continue reading A Patriotic Thanksgiving
According to Investorguide.com, a Relief Rally is defined as “a sharp upward spike in prices following a period of investor uncertainty.” Clearly, this past week was a temporary relief that the Greece tragedy did not explode in Europe — yet. Plus, there was a rumor that former central banks were secretly increasing their holdings of U.S. … Continue reading Plop, Plop, Fizz, Fizz . . .
Today, the Fed will end its 8-month, $600 billion experiment called QE2. Despite what you may hear, nobody knows what will happen next week . . . nobody! QE2 was a program whereby the Fed would buy most all (85%) of the bonds issued by the U.S. government, in order to finance our mind-numbing deficits. In … Continue reading No More Training Wheels . . . For Now
Years ago, I was proud to serve as a member of U.S. Army Special Forces. Since then, it has always amused me to see others think of us as tough, semi-savage barbarians, when we were just ordinary guys in great physical condition who were not satisfied with being merely good soldiers and wanted to be … Continue reading Special Financial Planners
At daybreak yesterday, I was getting ready for my morning run but couldn’t stop watching CNBC, as the riots in Athens injured as many as 500 people, who were protesting an unemployment level twice as high as the U.S., as well as steeply higher taxes, including a 4% increase in their sales tax or VAT, … Continue reading . . . with a tinge of guilt
Today, I had to fly to Chicago to attend board meetings of the NAPFA (the National Association of Personal Financial Advisors). Waiting to remove my shoes, belt and whatever else the TSA requires, I was reminded of the Securities & Exchange Commission. You will recall the SEC audited Bernie Madoff twice without ever discovering he … Continue reading Looking for Trouble . . . Or Looking for Rules?
Maybe, the wall of worry or the wall of uncertainty that is retarding Wall Street is coming down? First, I’ve found it odd that Europe has suddenly become so agreeable to saving Greece over the past few days. Then, I realized the Chinese Prime Minister was visiting in Europe. What a coincidence? Like any good … Continue reading Paging Pollyanna . . .
The last time our nation enjoyed a budget surplus was under President Bill Clinton, a fact that Democrats find convenient to remind us of frequently. Still, the former President has written an important article in the current (June 27) issue of Newsweek magazine, where he lists fourteen ways to create jobs in America. Some are … Continue reading A Real Inconvenient Truth
Many readers have told me they read this blog primarily because it tries to make economics less boring and more relevant. I hope so, but confess I have now found the ultimate website for that and will henceforth refer those who want to learn economics without falling asleep. It is http://econstories.tv/ . . . enjoy!
Yesterday, the Comptroller of the Currency announced that, for the first time in three years, the banks have eased up on their strict lending criteria. Of course, that was only for large, commercial firms but is still an improvement. Much criticised for their lack of lending, the bankers have said nobody wanted to borrow, as … Continue reading Do I See Some Light??
During seven of the last eight weeks, the stock market has been down. It has been a relatively steady decline, with a few stomach-wrenching days. You might use the weekend to load up on more Rolaids. But, I think we could be approaching the bottom, because uncertainty is getting so high. In addition to the … Continue reading Next Week . . . More Rolaids
Yesterday’s announcement that the U.S. would contribute 30 million barrels from its Strategic Oil Reserve to match the release by the International Energy Agency was a shocker indeed. It made no sense from an energy standpoint. Originally established in response to the Arab oil embargo of 1973-4, there was no threat to our energy independence. It … Continue reading Tapping the Strategic Oil Reserve
Yesterday, the Fed announced they have lowered their estimate of GDP growth this year from their 3.9% estimate in January and 3.5% in April to only 2.9% now. They also lowered their estimate of next year’s growth from 4% to 3.7%. It is not a pretty picture. They blamed “transitory” factors, such as the Japan tragedy and … Continue reading Fed versus FedEx
“The price for the war in Afghanistan was paid on 9-11. Everything else are just budgetary matters.” That was the comment by a young soldier in Afghanistan yesterday, after hearing of the Obama’s decision to begin a modest withdrawal of troops. That comment bothered me. Does that mean Social Security, Medicare, and Medicaid are also … Continue reading “just budgetary matters” . . . matter!
From 9AM to 10AM each day, CNBC has a program called “Squawk on the Street” that usually conducts some unscientific viewer poll. Very often, the subject is trivia. Today, they asked viewers to call in to vote whether they felt the Chairman of the U.S. Federal Reserve System was doing a competent job or not. They … Continue reading Bad Day To Be Bernanke
The stock market has closed up for four straight days and six out of the last seven days. It is trying hard to rally, which does reflect strong underlying strength. But, the little engine, that the stock market has found, will not be enough to overcome the proverbial “wall of uncertainty” . . . that … Continue reading The Little Engine That Could . . . Not . . . Yet!
Last Friday, on a day of high quarterly uncertainty, the market closed up, largely because of comments out of the EU that they were close to a deal on Greece. However, over the weekend, it was announced that the decision would be delayed. As a result, futures indicate the Dow will drop about 60 points at … Continue reading Politics First, Economics Second
Austrian economics is often called “tough love” economics, due to its hard focus on balancing the government budget and minimizing national debt. Early advocates like Ludwig von Mises lived in Austria or Germany. Many are also “gold bugs,” believing that the yellow metal can control government spending better than legislators can. An example would be Ron … Continue reading An Austrian in Australia
Described as “the giant vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” the legendary investment firm of Goldman Sachs still deserves respect for their analytical capabilities, which is so necessary to smell money. Yesterday, they lowered their estimate of second quarter GDP growth from 3% … Continue reading Thoughts From the Vampire Squid
Investors buy companies or sectors they believe are positioned to perform well over the foreseeable future. Traders buy or sell anything that might change in value over the next day or so. Investors take little risk over a weekend, when the stock markets are closed. Traders take much risk over weekends, when politicians can make … Continue reading Just a Reminder . . .
Earlier today, I admitted to agreeing with Karl Marx about one thing. Don’t tell anybody, but I also agree with George Soros on one thing, i.e., that economics has been crippled by a dependency on quantitative methods. A few years ago, a brilliant mathematician named Nassim Nicholas Taleb, who has the warmth of a Brillo-pad, … Continue reading Picking My Friends . . . and others too!
During the Spring, I became very concerned about the stock market. (Very concerned, not scared!) I predicted it would be an ugly summer, and it has been so far. The market has dropped about 7%, not quite a technical correction, which is a 10% drop, but we are still falling. Last year, we dropped almost … Continue reading Preparing for Greed
You can imagine a large table in a plush government conference room surrounded by a bunch of smug economic advisors and frightened political leaders, facing the grim reality of what the nation needs to do, i.e., austerity. Outside, thousands of people are protesting this grim reality. They never had a course in economics, because they never had a … Continue reading The Elastic Knowledge Gap
Every time the market gets bearish, pundits begin fretting about a “double-dip” or return of the recession. While anything is always possible, it is unlikely. I have argued for almost three years that a financial crisis is very different from any garden-variety recession. There has been some impressive research by Ken Rogoff of Harvard whose … Continue reading A Double-Dip . . . Again?
Actually, it was more of a spinning contest than a debate. It was a spinning contest between the purists and the realists. The purists believe that every rich person actually produces jobs for poor people, while the realists believe people are complicated, basing their decisions on many factors, including taxes. It would be no different … Continue reading On The Republican Debate
For most of my life, the U.S. has been the engine for world economic growth. For a time in the 90’s, it was thought that the new European Union would take our place, and they almost did. Yet, we were finally displaced by China and other emerging markets during the last decade, when they routinely … Continue reading Honey . . . I Forgot the Engine!
Between now and approximately August 2nd, there will be a great deal of discussion, if not debate, about the Federal debt limit. As you think about it, please visit http://www.usdebtclock.org/ frequently. We tend to focus on the horrifying grand total at the top of the page, but please notice the components of it. For example, … Continue reading Thinking About the Debt Limit . . .
Yesterday was a good day in the stock market with the Dow closing up 75 points. That was because something unusual happened . . . we got some good economic news, i.e., our trade deficit narrowed to only $43 billion. Politicians and voters bemoan the falling dollar, but it is good for business! It makes … Continue reading Grasping at the Export Straw
CNBC usually has a quick online survey each morning. Today, they asked what we thought we would see first, the Dow back up to 13,000 or gas at $5 per gallon. 58% believed we will see gas prices go back up before the Dow does. It makes you wonder if they know what happened at yesterday’s OPEC meeting, which the Saudi … Continue reading A Crack in the Facade?
Yesterday, the Dow was up 60-80 points all day, expecting to hear good news when Fed Head Ben Bernanke spoke at 3:45 PM. As he started to speak, the stock market started to drop, finally losing 19 points for the day. So, what happened? What did he say? First, he confirmed the U.S. economy has slowed … Continue reading Closing the Candy Store
My mother always warned me not to be such a big man that I cannot apologize, so I apologize to Treasury Secretary Timothy Geithner. I have long held the belief the economy was on a slow but sustainable path to recovery, unless we have another “heart attack,” which will happen in the financial sector when … Continue reading OK . . . I Apologize!
I just finished reading “The Panic of 1907” by the Boston Fed. It is an interesting read of a near-collapse of the banking system . . . when there was no Federal Reserve System to save us. It begins with the efforts of Augustus Heinze to corner the copper market. When he failed, the savings … Continue reading The One-Man Fed
Today, the Department of Labor released their monthly report on employment, and it was ugly. The headline news is that only 54,000 jobs were created and unemployment rate increased to 9.1%. Of course, one can argue that the rise in the unemployment rate reflects nothing more than an increase of 272,000 in the number of … Continue reading Bad Day To Be Obama
Yesterday, at a meeting of fellow financial advisers, I was asked if the Fed would end the current quantitative easing program and begin a new one. I replied they should ask me at 8:31 AM this Friday, which is immediately after the monthly “jobs report.” This is easily the most important economic report each month … Continue reading Cue Up QE3….
A year ago, Greece narrowly avoided bankruptcy with a $156 billion bailout from the EU and IMF. The funds would be paid in various tranches as certain improvements were made in the Greek financial position. Since then, they have successfully cut their annual deficit by a third, to only 10.5% of budget. During this process, … Continue reading Another Old-Fashioned Greek Tragedy
A client sent me an article by Allan Sloan from Fortune dated May 2, 2011 entitled “The Hocus-Pocus Behind Paul Ryan’s Medicare Reform.” He is certainly no fan of Obama-care, calling it “long on regulations and short on common sense,” because it doesn’t penalize those who eat, drink or smoke too much nor deal with the malpractice lawyers. … Continue reading Above My Paygrade
As sure as God made those sour little things, the Chinese are manipulating their currency, which makes it all the more puzzling when the Justice Department announced yesterday that China was not, in fact, guilty. Only lawyers could get so side-tracked by trees that they cannot see the forest. Economists can simply see the trade gap … Continue reading Little Green Apples . . .
Today’s report on first quarter GDP growth was disappointing, coming in at 1.8% compared to an expected growth of 2.2%. Of course, 2.2% shows expectations were already low. This is not news. The real question is what will GDP growth be during the current quarter. My reading of it is that the economy is continuing to … Continue reading A Slowdown, Yes . . . A Double-Dip Recession, No!
Austerity is a safe, clinical-sounding word that doesn’t describe what is really being asked of the Greek citizens. Imagine yourself being told such things as: I know you’ve been planning to retire next year, but you’ll have to work another five years!I know you’ve been retired for several years, but we must cut your monthly check … Continue reading What Do We Expect Greece To Do?
There is an avalanche of bad news/uncertainty (which is the same thing to the stock market). What will happen when QE2 ends? What will happen if the Congressional children allow the U.S. to default? Why do Greece, Portugal and now Italy keep getting downgraded? Will the Euro survive? Will the over-built real estate market in … Continue reading When It Rains, It Spews?
Every weekday evening, you probably watch some earnest newscaster telling you the stock market was up or down, quoting the Dow, the S&P, and the NASDAQ closing prices. But, he seldom mentions the much larger bond market. Jim Cramer of CNBC describes the world of investments as an ice cream sundae, with the cherry on … Continue reading Bonding with Bonds . . .
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