Like many young boys who were raised in the mid-1950s, my initial values were “flag, motherhood, and apple pie” . . . and in that order. (I was raised to be fiercely patriotic and suspect my military record supports that.) However, I later learned my three primary values: love of democracy, love of privacy, and the rule of law. Readers know I have been struggling…
Worldwide, stock markets are up this morning, on news that the EU agreed on something. Working late into the night, national leaders of Europe browbeat Angela Merkel into doing something. My first thought was “thank God, they are not completely useless and can actually do something.” The something is that the European Stability Mechanism (ESM) can put money directly into bank capital. (This is what the…
Today, Americans stand transfixed, waiting for the Supreme Court to determine the fate of ObamaCare. As it directly impacts as much as one-sixth of our economy, it is a very important decision indeed. But, note that it has long-term economic importance. Today, stock markets around the world are transfixed, waiting for tomorrow’s announcement from the 20th European Summit on the European financial crisis. That crisis…
Many Americans get all riled-up when they read about the thousand dollar commode seats, etc. bought by the Federal government. To me, that always seemed like “chump change” compared to the stupidity of paying people who are living longer . . . to retire sooner. Or, even worse, to borrow billions from China, so we can spend unlimited amounts of money on terminal patients?? However,…
It is time-well-spent for me to read the perspectives of other investment advisors, such as Goldman Sachs or Wells Fargo. Locally, I enjoy reading the perspective of Palladium Registered Investment Advisors, whose newsletter is aptly named Palladium Perspectives. Their summer issue makes the point that the European financial crisis is “the most over-examined debacle in financial history . . . which, by the way, has…
The weight of uncertainty is crushing. The stock market abhors uncertainty. I’m surprised it is not at least a thousand points lower. It seems spring-loaded to go up, but I don’t see that happening anytime soon. The weight of uncertainty is just too heavy. The Supreme Court will rule this week on one-sixth of the economy. That ruling is likely to increase uncertainty even more.…
On Wednesday, the Fed left the world markets with a lollipop instead of a box of chocolates. The market was hoping for another round of quantitative easing. This is a way of injecting money into the market, because the Fed then buys either Treasury bonds or mortgage bonds. These bonds were already in the market. Think about “supply and demand.” When demand increases, the price…
Readers know the only thing I like about Goldman Sachs is their research. Here is a recap of their latest research analysis, which was released today: 1. While GDP growth was 1.9% in the first quarter, it will drop to only 1.6% this quarter and average 2.0% the rest of the year. They stated that “fiscal policy remains the biggest source of uncertainty in the…
Have you ever watched a kid’s face when asking him if he wants to go to the candy store? His eyes get big, and his enthusiasm increases. He even smiles. That’s the reason the stock market has been rising lately. While there has been no good news out of Europe, the flow of bad news has slowed. Also, the economic data on jobs over the…
Congratulations to the voters of Greece! Yesterday, they voted to accept severe austerity, thus preventing a bearish attack on stock markets worldwide. Of course, their only alternative to severe austerity was a severe depression . . . a terrible choice between the Devil and the Deep Blue Sea! Still. the world is celebrating, not because the war to end the European financial crisis is…
This Sunday, the slow-motion train wreck known as Greece makes a momentous decision. They will go to the polls to elect either a pro-bailout party or an anti-bailout party. The pro-bailout party or New Democracy will continue the ongoing severe austerity program. Assuming they win, Europe will continue the bailout program. The anti-bailout party or Syriza will ask for a two-year window before resuming the…
It was only twelve years ago — that most investment advisors still believed that bonds, especially U.S. Treasury bonds, were a safe investment. It was only twelve years ago — that the U.S. had a balanced budget (ignoring some off-balance sheet entitlements). The Berlin wall had recently fallen. America clearly dominated the world. Investment advisors expected the supply of U.S. Treasury bonds available for investment…
There were two important news reports out of Europe this weekend. The first one is a report that Merkel is holding serious discussions about a genuine fiscal union, whereby no nation would be permitted to run a budget deficit without consent of a panel of European finance ministers, plus consent of a new pan-European finance minister for all of Europe. This is news because it…
Last Friday, the Dow dropped 275 points, and the world was ending. Today, it was up 286 points, and the world just yawned. Situation normal . . .
Yesterday, I was asked what the likely outcome of the European debt crisis would look like. Will the Cavalry save us? And, how will we recognize the Cavalry when they arrive? Reporters chase politicians . . . because that’s what reporters do. Politicians think about politics . . . because that’s what politicians do. It is not surprising that the current perception of the crisis…
Last year, I read a book called Currency Wars: The Making of the Next Global Crisis by James Rickards. It was interesting — because it changed my historical perspective of the last century from two World Wars to two Currency Wars instead. But, in the end, I felt this book was just another ambush from a “gold bug.” Technically, a currency war occurs when one country…
Some wars never end. One battle just follows another. That is the world of the investor, who is in a never-ending battle to manage risk and protect his or her portfolio. Like all battles, there is fog everywhere, which makes it difficult to see reality. There is the sudden eruption of loud things requiring immediate attention . . . but sometimes not. There is always…
The all-important monthly Jobs Report was released this morning, and it was terrible. While economists were expecting 155 thousand jobs were created in May, we learned it was only 69 thousand instead. The unemployment rate rose from 8.1% to 8.2%. Dow futures indicate the market will drop about 200 points at the open. Interest rates on Treasury bonds are sinking to historic lows as investors…
Historically, gold has been the asset to own during a financial crisis or inflation. Since there is a crisis in Europe, the price of gold should be increasing. The huge increases in money supply should eventually increase the value of gold. Instead, it has been crushed! Why? As the crisis in Europe has mounted, European investors have been liquidating their gold holdings to pay for…
The U.S. stock market is extremely sensitive to the monthly Jobs Report, which will be released tomorrow morning. In addition, the giant payroll company, ADP, always releases their estimate of private sector job growth the day before, which gives the market some expectation about the Jobs Report, along with the usual weekly unemployment claims that comes out every Thursday. This morning, ADP disappointed the market…
One of the most defining characteristics of existentialists is a certain contempt or ridicule for death, considering the disadvantages of death being over-rated and the advantages of death being under-rated. For example, the disadvantage of death is missing life, which is over-rated . . . while the end of suffering is under-rated. That fairly describes my belief . . . 364 days each year. Somehow,…
Last December, the editor of Inside Business called me, asking for the one thing economists fear the most . . . an economic forecast. It was published January 15th of this year, when I predicted “2012 will be an emotional roller-coaster.” Last month, Wall Street was bullish, before turning bearish early this month. When I watched the European markets open early this morning, I could tell…
Every quarter, the National Association of Business Economics (NABE) conducts a random sample survey of its members. Despite the fact that I’ve never been one of the 50 economists called to participate, I still enjoy reading their quarterly predictions, which were released today. Job growth averaged 254 thousand new jobs each month from December thru February but fell to an average of 134,500 for March…
Everybody has had the sad experience of watching doctors, nurses, and ministers make a valiant but futile effort to delay the inevitable death of a loved one. Could we be watching the inevitable death of democracy? Thomas Babington Macaulay was a famous British historian and Secretary of War. Before his death in 1859, he once said: A democracy cannot survive as a permanent form of…
Now, tell me one more time, why is it that Republicans and Democrats cannot work together: http://www.youtube.com/watch?v=IWDJEc92d38&feature=player_embedded http://www.youtube.com/watch?v=IWDJEc92d38&feature=player_embedded You may need to copy & paste this URL, but it is worth it, I promise!
Normally, I get up each day about 4:30AM, to see how the Asian markets are doing and to watch the opening of the European markets, switching between CNBC and Bloomberg TV. But, not today! Oh, I was up at the normal time, but those channels were just “un-watchable.” Today is the Initial Public Offering (IPO) for Facebook, and the media coverage is both intense and…
Late Tuesday afternoon, my anxiety level with the market rose markedly. That was when the Greek president announced that almost $900 billion of bank deposits left the country that DAY. While not always true, a run-on-the-bank is a very strong indicator that big trouble is imminent. Since January of 2010, total bank deposits in Greece are down a whopping 29%. Some of that decrease is…
Although all the details are not known yet and likely won’t be known for a very long time, I have seen the basic idea of their horrible trade-gone-wild, and it simply reinforces why I’ve been so bearish on financial stocks. As a large commercial bank, they have a large portfolio of loans they have made. As the economy gets stronger, the risk of those loans…
After the market closed yesterday, JP Morgan announced a huge trading loss, with estimates ranging from $2 billion to $4.2 billion. While the Wall Street bank can certainly handle the loss, it is important to note the loss occurred in their “synthetic credit portfolio” (Read: derivatives portfolio). The derivatives market is a vast, thinly-regulated set of largely private contracts that worries me. The market is…
Among economists, the University of Chicago has the reputation for being the home of “conservative” economics. Famed Nobel-winning economist Milton Friedman, who was the father of the Monetarist philosophy, worked here for decades. Yesterday, I attended a lecture by a current professor there, Austan Goolsbee, who is a Yale graduate and earned a Ph.D. from M.I.T. He was also Chairman of the Council of Economic…
I attended a fascinating lecture late yesterday by Carolyn McClanahan, who is both a physician and a financial planner. She has actually read the entire bill on ObamaCare and has become one of the leading experts on the subject. When she wears her hat as a financial planner, she doesn’t like the individual mandate. However, when she wears her hat as a physician, she lists…
Mainstream economics is similar to mainstream religion. There is near-universal agreement that long-term sustainable economic growth is the goal. Also, there are many “denominations” or schools of thoughts about how to achieve that goal. As discussed here before, there are three mainstream economic denominations in the U.S. today. The oldest denomination is the Austrian school, which calls for tough love or austerity to reach that…
I suppose every married person has a list of things or experiences they want to share with their spouse before they die. Unfortunately, one of the things on my wife’s list was a trip to the Rock-&-Roll Hall of Fame in Cleveland, which we toured Sunday. Because I care little and know even less about music, it was not time well spent for me. However,…