I should have watched the film classic by the famous Ingmar Bergman called The Seventh Seal many years ago. It plotted the emotional trail for so many combat veterans. In the mid-fourteen century, a priest convinces a young Swedish knight to leave his wife and castle to serve in the bloody Crusades. Seeing death up close, smelling it, feeling life leave others, and loathing his own…
Many laws have unintended consequences, whether at the national, state or local level. Republicans believe that is proof the government never understands what it is doing. Democrats believe that unintended consequences are a normal part of legislating. Existentialists find unintended consequences to be absurdly amusing. Over the last few years, there have many changes in laws regulating ownership of guns, especially at the state level.…
Novice investors either expect the stock market to be efficient, according to Efficient Market Theory where all information is known by all investors, or they expect to invest based on hunches or even inside information. However, experienced investors know to study the specialized analysts, and make rational decisions supported by careful analysis, but always expect some irrational behavior. For example, consider the example of IBM,…
Congress finally did their job last night to prevent America from defaulting. Yes, the international community had to get involved, with a host of “shame on you, America” comments and China asking the world to be de-Americanized. The debacle in Washington was certainly not the best promotional piece for democracy. But, that is minor. Take a look at the loss in consumer confidence: This is…
The pieces are already falling into place for the worst-case scenario to the current debt debacle in Washington. On Friday, mutual fund giant Fidelity announced they had sold all short-term Treasury notes and bonds, expecting they would be hammered if Congress cannot agree to raise the debt ceiling. Yesterday, a small auction of Treasuries was poorly subscribed, as investors are starting to avoid U.S bonds.…
During the national embarrassments that Congress creates ever more frequently, it is nice to read a little good news, such as three Americans winning this year’s Nobel Prize for Economics. They were Eugene Fama and Lars Peter Hansen of the University of Chicago and Robert Shiller of Yale University. Congratulations to each of them! Although all three have increased our understanding of how asset prices…
As someone who tries very hard to keep political opinions out of his writing, I’ve always respected The Kiplinger Letter for keeping their political opinions private. However, their newest letter said “For now, Republicans favor ideological purity over winning . . .” I’m trying to judge whether their political opinion is showing or whether that is a simple statement of the facts. It also predicts more…
Everybody knows you cannot trust information you find on the internet or receive in emails. But, sometimes, it doesn’t matter, because the idea is more important. I’m quoting from an email a honest friend sent me. While I don’t know if Warren Buffett said this or not, the idea is more important than the facts. Warren Buffett, in a recent interview with CNBC,offers one of…
Long-term readers know I write a column for Inside Business, which is affiliated with The Virginian Pilot and owned by Landmark Communications. My latest column can be found here: http://insidebiz.com/news/third-quarter-saw-us-get-past-abyss-almost
My favorite professor at Wharton has always been the brilliant Jeremy Siegel. Today, I’m quoting from his latest Commentary: With the current stalemate in Congress, I began imagining the formation of a third political party that would be fiscally conservative, socially fairly liberal, and strongly dedicated to solving the tough problems that face our country. Many of the party would be non-Tea Party Republicans who no longer want…
Communist theorist Karl Marx once said “religion is the opium of the people.” That may be true in some places and during some times. But, in America, it is more true that “credit card debt is the opium of the people.” Since the global financial crisis in 2008, Americans have taken a twelve-step program and seem to be kicking the habit of using credit cards…
A government shutdown is not new. It has already happened eighteen times. But, how has the stock market reacted in the past? Take a look at this interesting graph: The market falls for a few days before rising sharply, when investors realize the world did survive. After a little over-enthusiasm, the market then resumes its gradual, sustainable rise. Based on this, the market should start…
As a boy, I thought the ideal life was being a low-level bureaucrat, doing as little work as possible and spending as little money as possible, until I would finally got a hand-shake and a pension. However, once I read my first Ian Fleming novel, bureaucracy lost its charm for me forever. When my curiosity about existentialism began in Texas decades ago, I read about…
The impasse in Washington is difficult to understand. Is it just the tired, old Republican versus Democratic conflict? Is it more of a philosophical conservative versus liberal conflict? I have viewed it as Tea Party versus Reagan Republican conflict. But, one pundit suggested the obvious, i.e., that it is all the above but complicated by a generational conflict. She speculated that the average age of…
Wall Street pundits, from coast-to-coast, have been worrying themselves sick about the possible failure of Congress to raise the debt ceiling, followed by the first default in history by a country with the reserve currency. Only a fool would not be worried about this. It could indeed be frightening, and I have spent quite a bit of time thinking about it. Think of it in…
As if today’s government shutdown was not enough bad news, watch out for Italy. Sore-loser Silvio Berlusconi, who hasn’t been funny since his famous “boom-boom” comments, looks like he is pulling out of the ruling coalition. He just ordered five cabinet ministers to resign, who promptly did as told. This is just what Italy and Europe don’t need. The Italian stock market is down sharply,…
Imagine sitting in a high-powered car in the parking lot of a school when classes are dismissed for the day and putting the car into Drive just before jumping out. Imagine giving Roman Candle fireworks to teenagers living in a shantytown. Imagine being in a large crowd and firing hundreds of rounds from an AK-47 straight up. In each case, it is unlikely to have…
“The primary function of sports is to provide advertisers a way to sell beer and unhealthy stuff to losers who go to sports bars and pretend they have friends.” OK, that’s definitely an ouch! But, it does hint at the importance of advertising, which is widely ignored in economic theory. Economists like to talk about consumers (and investors) making informed decisions in their own self-interet…
Long ago and far away, I used to teach a junior level course at the University of Texas at Arlington called “Economics of Money and Banking.” During that course, I would teach that the risk/reward principle (higher risk deserves higher reward) applies to the pricing of loans as well. That explains why a successful doctor might get a car loan at 8%, while a…
President Reagan never referred to Goldman Sachs as “the evil empire” but some of us think he could have. He was referring to the old Soviet Union, not the giant investment banking firm that is too-big-to-fail, unfortunately. Nonetheless, their research is good, and here are their most recent predictions: 1. GDP growth will be 1.6% this year but a whopping 2.9% next year.2. Unemployment will…
Missing another bullet, the stock market is relieved that Angela Merkel’s political party did slightly better than expected in the German elections, maintaining a steady hand at the top for another four years. If she had been repudiated by the German voters, the market would be suffering badly today. The only hiccup is that her coalition partner was repudiated, meaning Merkel will have to rebuild…
I like guns. I own several. I even have my father’s old shotgun. I am very experienced with them. I also have a concealed weapons permit and usually carry one in my car with me. I feel safer with guns than without them. And, I genuinely think other people around me are safer because I have guns. While I am probably a gun-lover, that does not…
That was the date the House voted down TARP, a $700 billion nation-saving economic bailout (which was fully repaid with interest). As the House voted, I watched the Dow lose a heart-stopping 777 points. I thought about that yesterday as the House voted on the budget to kill ObamaCare. The futures market indicated the Dow would lose a mere 30 points at the open,…
Marshall Gore woke up in the cell on death row in Florida earlier this month, knowing it was his last day on Earth, as he would be executed that night. Imagine the absurdity he felt when he learned he would be allowed to live one more day, so that the state Attorney General Pam Bondi could attend a political fund-raiser. That was my feeling yesterday…
For the last three months on Wall Street, the most important guessing game has been — when will the Fed reduce quantitative easing (QE) and by how much? The guessing game started immediately after the Fed’s Open Market Committee (FOMC) last quarterly meeting, when Bernanke used a press conference to telegraph their intention to “take the punch bowl away from the party.” The stock market…
Names are not important. Thoughts, words, and policies are. The surprise announcement that Larry Summers was withdrawing his name as a candidate for Chairman of the Federal Reserve, replacing Ben Bernanke, leaves the door open now for Janet Yellen to become the first female Fed head. Appointing the head of the Federal Reserve is one of the most important appointments Presidents make. President Obama was…
Yesterday’s blog noted the list of serious worries has dwindled over the past year. One reader questioned why there was no mention of the tapering problem. Briefly, the Fed is now buying $85 billion worth of Treasury and housing bonds each month. This has been very good for the stock market, obviously. Three months ago, Bernanke suggested the time to decrease the monthly buying was…
Every Wall Street analyst knows the stock market normally falls during the Fall, with Septermber/October being particularly ugly before rising at year-end. This year, however, history may not be a reliable guide to the future. After a lousy August, September has already gotten off to a great start. Why? Have corporate earnings suddenly improved dramatically? No, they continue to grow nicely, even though the rate…
I love my wife! Yes, I know that is a bizarre way to begin a blog. Of course, after the next sentence, every husband knows why I opened with . . . “I love my wife.” When she informed me she was going to Houston to see family, my first thought was serenity, and I started making rules for my highly anticipated alone-time. First, television…
Have you heard the joke about the existentialist who says to his doctor “I have liver disease.” The doctor asks “how can you know that, since there is no discomfort of any kind with liver disease?” The existentialist replied “I know, I know, those are my exact symptoms!” OK, OK, nobody ever said that existential humor was funny. So, imagine my curiosity when I read…
Friday’s Jobs Report was widely anticipated. Wall Street was holding its breath. It has been tying itself into knots worrying that the Fed was about to “take the punch bowl away” or start tapering quantitative easing (QE). A good Jobs Report will be the trigger to start this tapering or reducing the amount of QE each month. To refresh your memory, QE is when the…
Interestingly, I have received a surprising amount of feedback that yesterday’s blog, which listed my concerns for the market this Fall, did not include anything about Syria. The reason is that I don’t expect anything to happen, i.e., that the U.S. will not attack Syria. I wish the President had immediately lobbed a couple of dozen Tomahawks into Assad’s back yard and then apologized for…
Readers know I have been concerned about the market over-reacting this Fall to the rising uncertainty. The primary cause of this uncertainty is the impact of the Fed tapering its quantitative easing (QE3). We will know much more about it on Friday when the monthly “Jobs Report” is issued. If the economy created over 200 thousand new jobs last month, we can expect tapering to…