Except for their excellent research department, I have not respected investment giant Goldman Sachs since 1981, and that opinion was affirmed in 2008. Therefore, it pains me to agree with their CEO, Lloyd Blankfein. The governmental tools to govern the economy fall into two categories, i.e., monetary policy and fiscal policy. Monetary policy is controlled by the Federal Reserve, using interest rates and money supply. …
In the wee hours this morning, Dow futures indicated the market would be up about 150 points. After the release of the latest inflation data, the futures dropped to negative 350 points — a swing of 500 points. That’s ridiculous! Like I said in my last article for Inside Business, inflation is breaking out. Paul Volcker was chairman of the Fed from 1979 to 1987,…
Most investors think the stock market is a cold, heartless place without emotion. Not true! Warren Buffett says the market has two emotions, i.e., fear and greed. He suggests you should be fearful when others are greedy, but be greedy when others are fearful. Good advice! But, those two emotions are not equal in strength. Fear overwhelms greed for probably 99% of investors. If I…
America became poorer last week. She lost two more members of the Greatest Generation — two great Americans, who were also two great guys. Both achieved better than ninety years of life. One was a tall, aristocratic doctor from New England, who radiated good humor. The other was a shorter, muscular waterman from Ocean View, who radiated sincerity. Certainly, they were different in many ways. …
Most people have a strong fear of recessions, which are just routine characteristics of economic growth. Recessions remove inefficiencies from the economy. Losing your job is more worrisome than any temporary drop in portfolio values. However, a financial crisis is a much more worrisome event. They happen quicker, hurt worse, and take longer to recover than a typical recession. That’s what happened during the global…
While I am often called an economist, I have never been called a technologist or computer engineer. Technology is a “black box” that absorbs power, perogatives, and flexibility from people, especially the regulators. The stock market gyrated wildly yesterday. The Dow spent the day in a roughly thousand point range, from down 500 points to up 500 points. While that alone is highly unusual,…
Concluding that a high-speed car crash was caused by high speed is a bit simplistic. The high speed was just a symptom of too much pressure on the accelerator or gas pedal. Concluding that the current stock market correction was caused by rising interest rates is also a bit simplistic. True, rising interest expense decreases net income, thereby making the stock less valuable. But there…
Those readers with gray hair may recall when cars had a manual transmission. To shift gears, you had to push in the clutch. When you did so, the car temporarily slowed. The stock market is shifting into a higher gear, and the clutch is now pushed in. It is shifting from the sugar-high of low interest rates in a one-trick-pony-world where the U.S. was growing…
Yesterday was the eighth time the Dow Jones Industrial Average (DJIA) dropped 600 points or more. How soon we forget! The last time was in 2016 when the Brits voted for Brexit. Most of the drops were in the 2008/9 global financial crisis. I hope it drops another two thousand points! Stock market corrections of 10% or so are actually good for the market. A…
I love this country. I love the people who occupy it. I love the dirt they walk on. I love the ideal that America represents. And, I still love the Reaganite view that America is a shiny city on the hill, offering hope for a better world. There was only time my love of country trembled. That was October 20th of 1973. It was a…
In his 1958 book titled The Affluent Society, economist John Kenneth Galbraith popularized the expression “conventional wisdom,” which describes the consensus opinion of the day. He wrote extensively about how “wisdom” becomes “conventional” but not as much about how that consensus changes over time. In the investing world, Benjamin Graham’s classic Security Analysis in 19344 gave birth to the notion that only an extensive analysis of…
When I took my first course in economics, I was lucky to sit between old high school buddies. On my left was Bobby Brontosaur, while Ty Rannosaur sat on my right side. We were taught that money was (1) a medium of exchange, (2) unit of account, and (3) a store of value. Our professor never said that bitcoin was a medium of exchange, but…
Back in the 1970’s, “pointy-head tree-huggers” began insisting that their investment dollars not fund “unethical” companies, e.g., defense firms or those who did business with South Africa. They insisted on SRI or socially responsible investing. Mutual funds were developed just for SRI investors. That has now morphed into ESG investing, which stands for environmental, social, and governance. Polluters are obviously unacceptable, but the target is…
“Robo-advisors” refers to canned software programs that claim to do your financial planning at a nominal cost. That software does a decent job of retirement planning but a lousy job with the rest of the planning issues. It has been especially popular among Millennials, who argue a real financial planners just takes your data and uses the same software anyway. There is considerable consternation among…
Mohamed El-Erian was born in New York City in 1958, to an Egyptian father and French mother. Educated at Cambridge and Oxford, he went on to manage the Harvard endowment fund, to be co-CEO of bond giant PIMCO, along with the legendary Bill Gross. Today, he is Chief Economic Advisor the PIMCO parent company of Allianz. He is also one of my favorite thinkers! Yesterday,…
The November report on international capital transfers was interesting. Both foreign governments and foreign citizens decreased their holdings of Treasuries by $18.8 billion. Some think that represents a no-confidence vote in the Trump Administration. What do you think? It tells me that foreigners believe the dollar will continue to weaken, and they don’t want a low-yielding investment that will lose value (when the cheaper dollar…
Bob Doll is the chief equity strategist at the giant investment firm of Nuveen. He is generally bullish and has a good track record on his predictions, which I have studied for years. Generally speaking, he expects the economy to be stronger than the stock market in 2018. His ten predictions are: 1. For the first time in a decade, real GDP in the U.S.…
It takes very little to convince Democrats that the President is racist. It takes even less for the Republicans to blame it all on the media. The President’s recent comment on which immigrants should be allowed was, in the words of Speaker Ryan, unfortunate and unhelpful. My first thought is that Trump’s alleged comment has given license to the media to grovel for viewers by repeating…
Tradition links the past with the present and hints about the future, plus there is a certain serenity that comes with respecting tradition. Like most people, I’ve attended countless Protestant and Catholic weddings, along with a good number of Jewish weddings, but I had never attended an Orthodox Jewish wedding until recently. It was a large affair, with an estimated 350 people attending. The actual…
Jeff Gundlach is the founder of DoubleLine Capital in Los Angeles and is often called the Bond King. He has just released his predictions for 2018. In no particular order, they are: 1. No recession on the one-year horizon.2. Unemployment will drop another 75 basis points, lower than 3.5% (hard to believe)3. The S&P will rise the first half of 2018 but end the year…
For gluttons of honest analysis, my latest column for Inside Business lives here: https://pilotonline.com/inside-business/news/columns/article_e4ed07df-c12a-5ccd-b24a-7f8b46127e5d.html
Each month, the Department of Labor issues their “Jobs Report” on the first Friday. Most people just look at the number of jobs created and the rate of unemployment. In the latest, for example, it was 148 thousand and 4.1% respectively. Buried inside, there were other numbers of note. First, there was the U-6 level of unemployment, which measures the people “only marginally attached to…
There was a minor earthquake yesterday in San Francisco. It is NOT true that the earthquake was caused by the millions and millions of Millenials, who were rolling their eyes when they heard that Attorney General Jeff Sessions had given license to the U.S. Attorneys across the country to begin prosecuting marijuana cases again. Generally speaking, Millenials have as little respect for pot laws, as…
The bulls have been running on Wall Street for nine years. They should be tired, but they apparently are not. Generally speaking, as long as profits continue to increase, the stock market should continue to increase. Decreasing tax expense means increased profit (unless the money is allocated to other expenses like labor). In addition, the global economic recovery continues, further increasing profit. You’ll recall that…
Most Federal agencies are required to solicit feedback from the public before making any significant change in regulation. When the Federal Communications Commission (FCC) was preparing to eliminate net-neutrality, they first solicited public opinion. Afterwards, it was discovered that about a tenth of the opinions expressed were bogus. Many people were surprised to learn they had written a letter. Even dead people wrote letters to…
After telling my father about a minor “dust-up” with four black youths when I was about 12 years old, my father explained to me that “10% of black people are bad people.” After scratching my head, I asked what percentage of white people are bad people, and he told me . . . 10%. His point, obviously, was that 10% of all types of people…
2017 was a banner year. Stocks were up. Bonds were up. Commodities were up. It was a very good year indeed! The largest company stocks did best, with the Dow rising 28.11 percent. (Your portfolio probably didn’t rise nearly that much, unless you invested solely in the Dow without diversifying or invested very heavily in technology.) The merely huge companies in the S&P 500 index…
Point #1: Fox News argues 24/7 that Secretary Clinton leaked national secrets and abused email protocols. If so, the Secretary should be punished. Point #2: Non-Fox News argues 24/7 that President Trump colluded with Russia to influence our voting. If so, the President should be punished. Point #3: All U.S. intelligence agencies concluded that Russia interfered with our election process. If so, that country should…
In the early nineteenth century city of Nottingham in England, working conditions for working men and women were barely human. In a effort to gain negotiating strength for possible unionization talks with the textile industry, workers began destroying machinery. When violence broke out, the mill owners began shooting the workers, and the rebellion from 1811-1816 was finally put down by military force. The workers became…
During the past week alone, we have learned: 1. New home sales are surging, up 17.5% in November.2. Consumer Sentiment was the highest in 2017 since the year 2000.3. Personal Income is rising nicely, up 0.3% in November alone.4. Inflation is quiet. The PCE deflator is up on 1.8% year-over-year.5. Core inflation is up even less, only 1.5% year-over-year.6. Consumer spending rose twice as much…
Bill was my buddy. He was from Kentucky, and we were bunk-mates in Officer Candidate School, room-mates in Paratrooper School, and next door neighbors in the Special Forces Officer Course. In Vietnam, he commanded a platoon of “tunnel rats” – those guys with the terrifying duty of flushing the Vietcong out of tunnels. Accepting his immediate death, one Vietcong soldier bravely popped up from a…
Q. What’s the difference between Democratic economists and Republican economists? A. Democrats like Keynesian economics,while Republicans like Supply-side economics. Q. What’s the similarity between Democratic economists and Republican economists? A. Both love budget deficits but strongly deny it! Q. How do they justify such budget deficits? A. Republicans use deficits to make the economy better, while Democrats use deficits to keep the economy from getting…
Pacific Investment Management Company (PIMCO) is a giant, well-respected bond firm. However, their latest market commentary actually made me laugh. They see continued economic growth, unless there is a ZOMBIE APOCALYPSE. The flow of economic data in the U.S. is remarkably positive, and it has been joined by a flow of positive economic data around the world. This is an extremely rare situation, where most…