The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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Welcome to The Flinchum File

I am an Accredited Investment Fiduciary at Bay Capital Advisors, an investment firm headquartered in Virginia Beach, VA. After retiring from Truist Bank, I started this firm to work more closely with a smaller number of clients, and it has been great! Our client load is about 25% of the national average.

Writing is not for the shy or the meek. It exposes a person’s mind and character. I hope you enjoy the view.

The opinions expressed in The Flinchum File are those of the writer, Jim Flinchum, and do not necessarily reflect those of Bay Capital Advisors, LLC

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 her baby. I saw a man photographing his wife and…

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 you to close the window, it is not a request.…

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 military, i.e., that China really could field a ten-million man…

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 inventories . . . because they have reason to believe…

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, not in stocks or bonds or commodities, but in currencies.…

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 more than expected, from $49.8 billion last month to $42.8…

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 lost about 110 thousand non-farm jobs last month, for the…

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 of how much investors are willing to pay for a…

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 and best for “people”. Occasionally, someone would use the word…

Trying to Understand the Allure of Gold?

As I’ve long predicted, the President has now determined that a massive increase in exports is necessary to bring our balance of payments deficit under control. The best way to do this is to de-value the dollar, make it depreciate, which makes U.S. goods cheaper for foreigners to buy. Don’t believe any politician who says they “support a strong dollar”! No politician in Japan is…

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 #103. The U.S. was the center of financial innovation during…

“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, it poignantly describes the tidal flow of people between farms…

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 a strengthening economy, at the same time that economic data…

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 is mere conventional wisdom. Yesterday, the bad economic news was…

“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 year. We need at least 125,000 monthly, just to stay…

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 typical investor, nor the serious economist. However, it is a…

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, $237 billion was for tax cuts, which did not create…

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 steps backward! Naturally, the Dow fell 144 points. It is…

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 them “bond investors”. The same year, I became a trust…

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 one of them. We’ve since learned that increasing the money…

. . . 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 demand from the Fed to buy Treasuries caused the price…

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 67% of our GDP or national income. If they save…

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 bullish momentum at year-end. The S&P is now 1125, approaching…

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 our regulatory structure is still too cumbersome, despite the new…

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 closely examine the bad news. We have seen deflation for…

Business Cycles, News Cycles & Other Knowns

An old Wall Street axiom is that the four most dangerous words are “This Time is Different”. Preceeding the last recession, it was widely believed this time was different because the new risk management techniques provided by derivatives, such as collateralized debt obligations, prevented any financial “blow-out”. In fact, some argued that recessions were no longer possible, and that we were entering The Great Moderation…

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. Q. Will the costs be passed along to the consumer?A.…

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 W-shaped, but a long, hard slog back to recovery, primarily…

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 http://www.costofwar.com/) Others argue you should include the continuing cost of veterans’ care over their lifetimes or the wages a fallen soldier would have earned in…