The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Paddling Hard . . .


Arthur Conan Doyle once described how Sherlock Holmes unraveled a mystery because of the “dog that didn’t bark”. That’s reminds me of the G-20 meeting in Korea. China is clearly manipulating its currency, but so is the U.S. But, there was little furor about this. While the finance ministries are warning of a currency war, … Continue reading Paddling Hard . . .

Please Take My Money?


Yesterday, the Treasury Department issued $10 billion in five-year bonds. In other words, they borrowed another $10 billion. But, something was different . . . very different. Instead of repaying $10 billion at the end of five years PLUS interest earned by the bond-holder, the government will repay $10 billion LESS interest paid to the … Continue reading Please Take My Money?

A Benefit of Aging


One of the benefits of aging is that a person has had time to benefit from all the good advice they have received over the years. One of the disadvantages is that you cannot remember who gave you the advice . . . Some of the best advice I received as a young investment advisor … Continue reading A Benefit of Aging

Keyboarding Burnout?


With regret, I have noticed my blog gets neglected whenever I finish doing my quarterly column for Inside Business. (You can receive copies by email at no cost by signing up at To be even more confessional, I have also been working on a book, which is still another excuse for my keyboard burnout. … Continue reading Keyboarding Burnout?

S.O.S. = Same Old Song . . . Whew!


The famous fat lady sang this morning, and, thankfully, didn’t sing anything surprising. The rate of unemployment remained constant at 9.6%, instead of increasing to 9.7% as expected. Total non-farm jobs decreased by 95 thousand, far better than the 600-700 thousand monthly decreases we saw last year but way below the 250 thousand a month … Continue reading S.O.S. = Same Old Song . . . Whew!

. . . Waiting for the fat lady . . .


She will sing this Friday morning, when the monthly Civilian Unemployement Report or “Jobs Report” will be released. To the market, this is the single most important economic report each month, probably too important. But, it is even more important this month. Yesterday, the Non-Manufacturing ISM Report indicated there was more job growth in the … Continue reading . . . Waiting for the fat lady . . .

Sometimes . . . The Truth Hurts!


For years, economists and financial analysts have talked about the BRIC countries, i.e., Brazil, Russia, India, and China. As a group, they were rapidly growing economies dependent upon export growth. As a group, they need to curb their internal savings by individuals and increase consumption spending by those individuals. This is a happy problem. Now, … Continue reading Sometimes . . . The Truth Hurts!

Final Thoughts on China


All of my life, the U.S. has been the engine of growth for the world. That is no longer the case, as China has clearly taken our place. While that may be sad, I don’t think it is anything to be feared. During my travels over the last two weeks or so, I’ve focused on … Continue reading Final Thoughts on China

Save Your Breath, America!


The Bush Administration started applying pressure on China years ago, to allow their currency to increase in value. This makes their exports more expensive to foreigners who buy them, like the U.S. As a result, foreigners buy less, which means China produces less, and fewer Chinese workers are needed. Layoffs increase and so does social … Continue reading Save Your Breath, America!

Peeling the Onion….


Last week, I marveled that China was making the same mistake as the U.S. by letting its Social Security system get as out of control as ours. Digging into this has not been easy, but I have learned that: 1. It started in 1978, when China was still a “socialist-paradise”. 2. By 2030, it is … Continue reading Peeling the Onion….

Deja Vu…..Not This Time


Back in 1986, I was a Vice President with Citibank out of New York, and based in Dallas. With no data to go on, except a general sense of unease about the possibility of serious over-building, I rented a large van for a full day and invited all the best bankers I could to spend … Continue reading Deja Vu…..Not This Time

The Triumph of Madison Avenue


Certainly, one of the most apparent changes in China from my last visit in 1987 is the western style of clothing, which has been completely adopted by the Chinese. It is not unlike a typical walk thru Chinatown in San Francisco. Who said advertising doesn’t work? Yet, this is one of those discussions where business … Continue reading The Triumph of Madison Avenue

A Day in the Life of ….China


This nation boasts the greatest number of newspapers, with over 400. It is also accused of having jailed the most jounalists, number unknown. Still, a good read of one day’s edition offer insights into Chinese thinking see 1. Pressure from the U.S. to allow the Chinese currency (Yuan) to appreciate is not motivated by … Continue reading A Day in the Life of ….China

What Mao Meant…..?


Mao said that all great men have climbed The Great Wall. What he meant to say was “All great financial advisors have . . . “

A Rocker Got it Right


As a child of the Cold War, I just assumed I would die in a nuclear war. When I first heard the song by rocker Sting, called “Do the Russians Love Their Children Too?”, I was caught a little off-balance by the question. Yesterday, I watched an older lady stop a young mother to admire … Continue reading A Rocker Got it Right

Paging Gloria Steinam


The flight attendants for Air China are young and pretty, obviously a proven branding campaign for generations. However, just like all flight attendants everywhere, they were over-worked, harassed, and annoyed. Rolling their eyes seemed to be a primary job requirement. Yet, they seem to have more authority than U.S. travelers normally see. When they tell … Continue reading Paging Gloria Steinam

A Troubled Economic Paradise


In 1987, I made my last trip to China. Mao had only been dead 11 years, and Deng was still trying to figure out how to use Soviet-style Five Year Plans to unleash the Chinese economy. To me at that time, it was a large, Second-World nation with an agrarian economy. My principle take-away was … Continue reading A Troubled Economic Paradise

More breadcrumbs leading to . . .


Yesterday, it was announced that wholesale inventory levels rose 1.3%, which is the best performance in two years. Sometimes, a rise in inventory means sales have decreased, causing inventories to backing up. However, it was also announced that sales at the wholesale level increased twice as much as expected. This means wholesalers are re-stocking their … Continue reading More breadcrumbs leading to . . .

Stealth Globalization


There is no good measure of globalization, a fact that drives economists crazy. Traditionally, we have used the Baltic Dry Index, which measures the cost of shipping dry goods around the world. It’s a good start, but here is another. Every three years, the Bank for International Settlements in Switzerland measures the volume of trading, … Continue reading Stealth Globalization

A Good Morning, Indeed!


It’s nice to start the day with two pieces of good economic data. First, initial jobless claims dropped more than expected, down 27,000 to 451,000. That makes three jobless reports in a row that have been better than expected. It certainly smells like a bottom in an awful jobs market. Second, the trade deficit shrank … Continue reading A Good Morning, Indeed!

Economic Rolaids


The Market has been holding its breath, fearful of today’s Jobs Report. Coming just before Labor Day, it seemed to be even more important than usual. Hopes started to rise Wednesday when the ISM (Institute of Supply Managment) manufacturing index actually rose more than expected. Still, most economists were expecting that the U.S. economy had … Continue reading Economic Rolaids

Did Anybody Notice?


In 1988, I took my daughter to Cozumel to scuba dive. While there, I spent some time on the beach reading a book whose name I no longer recall. What I do recall is its strident insistence that stock analysts pay much more attention to the “P/E Ratio” or Price-earnings ratio. This is a measure … Continue reading Did Anybody Notice?

The Way It Should Be!


Late last night, I returned from board meetings in Chicago of the National Association of Personal Financial Advisors (NAPFA). Like any board of any national organization, they were grappling with all the normal issues, such as budgets during the tough times. But, no matter the issue, the focus always remained on what was both fair … Continue reading The Way It Should Be!

50 Safest Banks


Each year, the highly respected Global Finance magazine publishes its list of the 50 Safest Banks in the world, and the 2010 list came out today. The highest rated U.S. bank was JP Morgan at #39. Wells Fargo was only #42. Only two U.S. banks made the Top Fifty. Bank of America was a pitiful … Continue reading 50 Safest Banks

“China, Inc.”


In anticipation of my upcoming trip to China, a good friend & client graciously loaned me her copy of “China, Inc. “How the Rise of the Next Superpower Challenges America and the World” by Ted C. Fishman. Although published in 2006, it is still required reading for serious geo-political observers. Alternating between history and travelogue, … Continue reading “China, Inc.”

Totally Unscientific . . .


One of the daily jobs of a financial advisor is to check on stocks that have been either up-graded or down-graded by the nerdy analysts. Normally, there are more downgrades than upgrades when the economy is weakening, but that is definitely not the case now. I’m seeing probably 5 upgrades for every downgrade, which indicates … Continue reading Totally Unscientific . . .

Summer Doldrums?


August is normally one of the best months for The Market, while September is normally one of the worst. Conventional wisdom is that most traders are on vacation during August but thinking about their portfolios. When they get back to work, they start selling to re-position their portfolios, which triggers the “September Slump”. But, that … Continue reading Summer Doldrums?

“Real” Stimulus


Last year, Congress approved a stimulus package of $787 billion. Since Q2 of last year through June 30th of this year, profits of the S&P 500 have risen 52%. Productivity has soared to 3.5%, compared to 1.6% in 2007 and only 1% the next year. Still, the private sector has added only 630,000 jobs this … Continue reading “Real” Stimulus

The Eye of the Hurricane?


I have long been a fan of Nouriel Roubini, a highly regarded economist more commonly known as “Dr. Doom”, for having predicted The Great Recession back in 2006. He has teamed up Stephen Mihm to author the new “Crisis Economics”, which I just completed. It is not a book for the casual reader, nor the … Continue reading The Eye of the Hurricane?

The Devil in the Details


I was enthusiastic about the $787 billion stimulus bill approved by Congress last year. Obviously, infrastructure development was necessary — with or without an anemic economy to stimulate. Infrastruture is a real investment in the future that increases demand in the short run and pays for itself in the long run. Unfortunately, of that amount, … Continue reading The Devil in the Details

One Step Forward but . . .


Yesterday, the Conference Board said its index of leading economic indicators rose modestly in July. That’s a step forward! At the same time, the Philadelphia Fed said manufacturing fell in the mid-Atlantic region to the lowest level in a year. Even worse, the weekly unemployment claims rose unexpectedly to a nine month high. That’s two … Continue reading One Step Forward but . . .

On The Bubble?


Back in 1973, when I first walked into a stock brokerage office, I saw old men watching a ticker tape cross the wall behind a black & white television. They were “stock guys”, who bet on the American economy. They made fun of the “coupon clippers”, whom they derided as being cowardly, but we call … Continue reading On The Bubble?

Where’s the beef?


No question, deflation is a much worse problem than inflation. Once people think they can buy things cheaper if they wait, then they stop spending now. At one time, economists believed deflation could easily be eliminated by doing the things that cause inflation, i.e., increasing the money supply and increasing deficit spending. Ben Bernanke was … Continue reading Where’s the beef?

. . . and, the Fed said what??


Today, the Fed left interest rates unchanged, which was no surprise and certainly no big deal. However, they also said they would stop shrinking their balance sheet, by using the mortgage paydowns they’ve been receiving to buy more Treasury bonds. When that happened, the dollar dropped suddenly. The reason this happened is because the increased … Continue reading . . . and, the Fed said what??

The Paradox of Thrift . . . huh?


The good news is that consumers are now saving 6.4% of their after-tax income. The bad news is that consumers are saving 6.4% of their after-tax income! Because most Americans have too much debt, it is good to see them saving more. It is good for them as individuals. However, consumer spending makes up about … Continue reading The Paradox of Thrift . . . huh?

Is It Party-Time Yet ??


For July, the markets were up about 7%. Yesterday, on the first trading day of the month, the markets were up another 2%. While that is always pleasant, longtime readers will recall I expect we should trade in a band between 1050 and 1150 on the S&P for most of the year, but with real … Continue reading Is It Party-Time Yet ??

Same Conclusion for Different Reasons


Readers know I have been avoiding financial stocks all year. However, when great portfolio managers, like Bruce Berkowitz of the Fairholme Fund, argue just that financial stocks are great buys, one naturally has to wonder. The International Monetary just issued a report that our financial system indeed remains very vulnerable to another crisis (1) because … Continue reading Same Conclusion for Different Reasons

The Persistence of Deflation


Tom Brokaw is the famed longtime anchor of NBC News and serious chronicler of generations. His recent study of the Baby Boomers found the belief common to most Boomers was that “things” would always get better, an undying sense of optimism. As a Boomer myself, I plead guilty! That’s why it is so important to … Continue reading The Persistence of Deflation

Financial Re-Regulation . . . FAQ


Q. Is it over?A. The bill has passed and will become law. However, any bill this important will require many months and years of regulatory implementation. As always, the “devil will be in the details”. Q. Is this a disaster for banking U.S. system?A. No, but it will require some change and increase compliance costs. … Continue reading Financial Re-Regulation . . . FAQ

Pat . . . pat . . . pat . . .


That’s the sound of me patting myself on the back. Tuesday, the Fed changed their position, saying the economy was weaker than they earlier expected and that it could take 5-6 years for the economy to fully recover. Long time readers know I have been expecting a Nike Swoosh type of recovery, not V-shaped, nor … Continue reading Pat . . . pat . . . pat . . .

Guns versus Butter…Not Really


Recently, there has been considerable debate within the economic community about the cost of the wars in Iraq and Afghanistan. Some argue the cost should only include the money appropriated by Congress, which is a little over $1 trillion. (See Others argue you should include the continuing cost of veterans’ care over their lifetimes … Continue reading Guns versus Butter…Not Really

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