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 … Continue reading Drinking From a Firehose
The Flinchum File
Thoughtful Economic Analysis and Existential Opinions
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 … Continue reading No Flash Crash II . . . Whew!
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 … Continue reading An Important Distraction
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. … Continue reading There are Rallies . . . and There are Rallies
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 … Continue reading Something Smells Fishy
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, … Continue reading Perspective Changes Everything
A week ago, Japan was the world’s third largest economy. It survived a major 9.0 earthquake and a horrific tsunami. The economic uncertainty sank in quickly, and world markets naturally sank as well. The Dow sank 51 points, which proved pleasantly resilient. Since then, the radiation leaks in their 40-year-old nuclear reactors have demonstrated the … Continue reading From Uncertainty to Fear
The first trading day after the disaster in Japan was better than expected, with the Dow dropping only 51 points. There was a good rally going into the close, but volume was quite weak all day. Most investors are too frightened or confused to make bets right now. Today’s light loss is the good news. … Continue reading So Far, So Good . . .
First, my thoughts and prayers go out to the people of Japan, who have sustained a horrific loss from the earthquake, followed by a tsunami, and followed by serious radiation leaks. It must be unimaginable for them. From an investment standpoint, this will not be good, especially in the short-term. While the world economy has … Continue reading Japan and Austria
Sometimes, you don’t recognize that you’re getting what you wished for. I’ve been wishing for the stock market to cool-off or take a break for several months, maybe even take a 4-8% dive. The stock market was just too far ahead of the economy. Did anybody notice that market is actually down 1% over the … Continue reading Maybe . . . just maybe?
Everybody with gray hair remembers the day Kennedy was assassinated, on November 22nd of 1963. Everybody post-puberty remembers the day America was attacked, on September 11th of 2001. But, do you remember where you were when the stock market hit its low point in this recession, which was two years ago today? That morning, I … Continue reading November 22nd, September 11th, and March 9th
For over three centuries, economics has been referred to as “the dismal science.” I do think it is fair to say economists are somewhat more droll than normal people. Nonetheless, there is a distinct air of pessimism at this conference, as we face to the painful changes ahead. 87% believe the deficit is the single … Continue reading Bring On The Crisis . . . Any Crisis
Yesterday, I was waiting for an elevator, when one of my favorite old economists walked up beside me. As the door opened, I asked him how he liked the conference so far. As we stepped inside, he answered “When I started attending this conference years ago, we were all Austrians.” By that, he meant all … Continue reading An Elevator Story
Guiding the financial lives and portfolios of other people in a humbling passion. To do this well, it is mandatory to seek out the thoughts of others. I have found conferences are an excellent and efficient way to do this. One of my favorites is the annual Policy Conference of the National Association of Business … Continue reading Learning Never Ends
As expected, the Jobs Report came in at 192 thousand new jobs in February, safely between the concensus estimate of 185 thousand and the “whisper” estimate of 220 thousand. As a result, the market moved very little, having already priced in a good report. Looking at the larger economy, this was indeed a good report. … Continue reading Thoughts on Friday
Even though the market is usually sleepy just before release of the monthly Jobs Report, it was anything but sleepy yesterday. There was just too much good news, i.e., the ISM report was strong, oil was down, the dollar was down, and rumors swept the floor that today’s report would show job growth of 220,000 … Continue reading Priced to Perfection
Normally, the market is dull and boring the day before the monthly “Jobs Report” is issued, which will be tomorrow. Yet, futures are predicting a bullish day for today. The economic data released this morning was so positive the market feels confident that tomorrow’s report will also be good. The weekly initial claims report this … Continue reading Not So Breathless Anticipation
This morning, Warren Buffett said revolving charge cards were not good for America, and we would be better off without them. Certainly as individuals, we’re better off without them, but would the country be better off? It would decrease consumption spending and corporate profits but only in the short term. They were introduced to “pull … Continue reading As Bad as Crack Cocaine ??
The Dow dropped 168 points or 1.38%. The first day of each month is nomally a good day for the market and has been up for seven months in a row. Some analysts link yesterday’s drop to the mideast turmoil, but that is hardly news. Some link it to oil hitting $100/barrel again, a sympton … Continue reading What Happened Yesterday?
I just studied the forecast by the Interest Rate Committee of the Bank of America/Merrill Lynch. They do not expect rates to really increase much anytime soon. In fact, they predict the 10-year Treasury will be up modestly from 3.45% to 4.0% by year-end. They expect the Fed will start decreasing money supply in the … Continue reading Interest Rates Going Up . . .When?
The market got two pleasant surprises yesterday. First, consumer income rose much more than expected in January. Second, consumer spending rose much less than expected. While the consumption-based economy that is still the American operating model is dependent upon consumers spending on goods and services, it depends on a healthy consumer. With income up and … Continue reading Nirvana ?
Economists are generally a boring bunch. Because I have been a long time member of the National Association of Business Economics, I am frequently surveyed by them on the economy. Their latest forecast was released this morning. But, was it boring enough? It predicts solid GDP growth for this year, 3.3%, which is up 2.7% … Continue reading NABE Forecast
Remembering our eternally optimistic former President, consumer confidence came out this week, and it was higher than expected. Consumer sentiment (a close cousin) came out today, and it was much higher than expected. Why is there so much optimism? In 1980, average income was $24 thousand, compared to $40 thousand today. Life expectancy has gone … Continue reading Reagan People ?
Remember the late 1970’s days of stagflation, when the economy was stagnant at the same time prices were inflating. (By the way, under Keynesian economics, this should not happen.) Today’s news that growth in the fourth quarter was less than expected, while inflation was higher than expected. As I’ve said repeatedly, this will be a … Continue reading Stagflating?
There is honest disagreement on Wall Street about the emerging markets. For the last several years, the U.S. market has substantially under-performed the stock markets in the emerging nations, like Brazil, China, and India. This changed in the fourth quarter of last year. Many analysts believe 2011 will be the year the U.S. market beats … Continue reading Ongoing Debate
At 6AM, it looks like the Dow will drop about a hundred points at the opening, reacting to the fear of oil sky-rocketing due to the unrest in Libya. Nobody will notice that Home Depot just released their earnings, surpassing expectations for both revenue and net income, in addition to raising their dividend. On a … Continue reading A Mixed Blessing?
Let’s see . . . we have increasing estimates of inflation . . . we have an amazing amount of unrest in the oil-producing Middle East . . . we have slowing growth in corporate profits as they are squeezed by rising commodity prices . . . we have a rising level of foreclosures . … Continue reading What Could Go Wrong?
Back in the dark days of March in 2009 when the S&P reached its low of 666, many questioned the American system of Free Enterprise. Since then, the S&P has DOUBLED! That’s right, if you had invested 100% of your portfolio into the S&P then, you would have a 100% profit now. So, how come … Continue reading What . . . no balloons?
I don’t remember ever having a day when I was not concerned about my privacy. Even in the Army, I always knew I would regain my privacy one day. It is a Value that I still treasure. Before it became irrelevant, Congress even cannonized that Value into a Right to privacy. Wednesday night, I decided … Continue reading When is a Right not a Value?
Yesterday, a “merger” was announced between the fabled New York Stock Exchange (NYSE) and the mighty stock exchange of Germany or the Deutsche Borse. With the majority of board seats going to the Germans, it is more like an acquisition of a American institution. At first, I was simply sad, as an American, to see … Continue reading No Shotgun in This Wedding
For years, I have tried to read everything written by investment guru Barton Biggs. He was a senior partner at Morgan Stanley for decades and now runs a large hedge fund. For the first time, he has now written a work of fiction, called “A Hedge Fund Tale of Reach and Grasp.” It is an … Continue reading Finding Non-Fiction Inside Fiction
Core inflation for January was 0.5%, the highest in over two years. That was at the producer level. Tomorrow, we’ll hear about the consumer level. We traditionally look at the core PPI, which ignores changes in energy and food costs. Tomorrow, we worry more about those costs at the consumer level. So, is inflation coming? … Continue reading Producer Level Inflation
The President has published his budget for the next year without mentioning the 800-pound gorilla in the room, which is entitlements. If we eliminate every single discretionary dollar being spent in the budget, the nation will still go bankrupt unless we address the ballooning cost of Social Security, Medicare, and Medicaid. The President knows this … Continue reading No Profile in Courage
Retail sales for January were released this morning but were disappointing, staying flat with December’s growth rate of 0.3%. Since consumption spending is 65-70% of GDP, it matters . . . a lot! The mystery to me is why anybody expected the higher growth rate of 0.5%? Despite last week’s rise in consumer confidence, the … Continue reading Christmas Hangover?
I’ve just returned from the annual conference on Exchange Traded Funds in Florida, often called ETFs. They have several advantages over mutual funds. For example, they can be bought or sold anytime during the day, not just at the close like mutual funds. Since their investment objective is to match some index, like the S&P … Continue reading InsideETF Conference
Easily, the most anticipated economic report each month is the Jobs Report, which was issued this morning by the Bureau of Labor Statistics. While much anticipated, it is becoming less meaningful. Historically, the Jobs Report for January is the most difficult to measure and most often corrected the following month. Today’s report showed only 36 … Continue reading Too Much Anticipation and Too Little Meaning
Well, it is official . . . the markets in January were mostly positive. According to the old Wall Street axiom, “so goes January, so goes the year.” For the month, the Dow was up 2.7% and the broader-based S&P was up 2.2%. Both are very healthy gains for only a month! While there is … Continue reading The January Effect
Despite criticism, the Fed has been prudent in trying to pump up the money supply to prevent the economy from weakening further. For technical reasons, the money supply has not increased as much as they had hoped but still enough to help the economy anyway. A consequence of pumping up the money supply faster than … Continue reading A Temporary Change?
There has been much discussion recently how “The Greatest Generation” is stealing from succeeding generations with their generous government pensions, Social Security, and Medicare. There is indeed a surprising amount of resentment among young people about this. Yet, they have lost something maybe even more important and don’t even realize it. A few months ago, … Continue reading Generational Theft
I remember watching television that night with my daughter as the Berlin Wall fell. It was truly a momentous event, ending the Cold War. The events now happening in Egypt are gravely important but not momentous. Unless it spreads . . . Of course, nobody expected it would ever get this big. It started with … Continue reading November 9, 1989
Long used as a proxy for the degree of globalization, the Baltic Dry Index measures the shipping rates of dry goods. As the economy heats up, more goods are shipped, and the shippers can raise their shipping rates. When the recession began, the index or BDI dropped rapidly. After a slow, bumpy partial recovery, it … Continue reading Even with the Suez Canal Open . . .
Friday is historically the most volatile day of the week in markets. That’s because traders (as opposed to investors) would rather invest in cash over the weekend, if there is any fear on the street. There was fear on the street. In addition, the stock market has gotten too far ahead of the economy. Then, … Continue reading Friday Follies
Last week, the British government announced their preliminary estimate of their GDP growth in the fourth quarter was a negative 0.5%, instead of the positive 0.7% they were expecting. They blamed it on the weather. The morning, the U.S. government announced their preliminary estimate of Q4 growth in GDP was a surprisingly strong 3.2%, up … Continue reading Stronger GDP Than Expected?
I’ve probably read a dozen books by libertarians over the last two years. When I started reading “The Day After the Dollar Crashes” by Damon Vickers, I toyed with putting it down as just another tired rendition of Glenn Beck, who endorsed the book. But, when I read “I believe that the primary source of … Continue reading An Original Libertarian
The inevitable happened yesterday, when the Congressional Budget Office announced Social Security was starting to bleed, i.e., that payments out exceeded payments in. That is not good economic news. In addition, they announced the deficit for this year will be $1.5 TRILLION instead of $1.1 TRILLION. That is not good economic news. And, Standard & … Continue reading Markets versus Economies
Bond Vigilantes are arguably the most powerful people on Earth. They can topple governments without firing a shot. Apparently, they liked the President’s speech last night, as the Asia and European stock markets are up and interest rates are down. Whew! I suspect their focus was on the promised cut in corporate income tax rates, … Continue reading Last Night’s Speech
Has anybody noticed the difference in interest rates between 30-year and 2-year Treasury bonds? It has reached a new high of 4% or 400 basis points. This is an all-time record! One reason might be that the Chinese have stopped buying 30-year bonds. (The longer the term of a bond, the more volatile the market … Continue reading A Favorite Indicator
Kudos to Virginia’s Senator Mark Warner and Georgia’s Republican Senator Saxby Chambliss for introducing a bill that will actually take a step toward solving America’s deficit problem! Last week, a client faxed me a Tea Party newsletter that said “revenue is not the problem; spending is the problem.” While that sound bite is correct, it … Continue reading Goring Everybody’s Ox
At this time last year, 23% of U.S. companies expected to fire workers over the next six months. Only 29% expected to hire any. As the year ended, only 7% expect to fire workers, while 42% expect to hire more workers over the next six months. This is the latest survey by the National Association … Continue reading 2010 — In like a lamb . . . but out like a tiger!
As the son of a World War II veteran on the European front, I was taught much about the war, often more than I wanted to know. As an economist, I have always wondered how anybody could have been naive enough to think Germany had the resources to win. At the beginning of the war, … Continue reading The Economics of World War II
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