Remembering our eternally optimistic former President, consumer confidence came out this week, and it was higher than expected. Consumer sentiment (a close cousin) came out today, and it was much higher than expected. Why is there so much optimism? In 1980, average income was $24 thousand, compared to $40 thousand today. Life expectancy has gone up from 78 to 81 years. Crime has decreased from…
Remember the late 1970’s days of stagflation, when the economy was stagnant at the same time prices were inflating. (By the way, under Keynesian economics, this should not happen.) Today’s news that growth in the fourth quarter was less than expected, while inflation was higher than expected. As I’ve said repeatedly, this will be a long, slow recovery, because we are de-leveraging. Recoveries from financial…
There is honest disagreement on Wall Street about the emerging markets. For the last several years, the U.S. market has substantially under-performed the stock markets in the emerging nations, like Brazil, China, and India. This changed in the fourth quarter of last year. Many analysts believe 2011 will be the year the U.S. market beats the rest of the world. I have previously written I…
At 6AM, it looks like the Dow will drop about a hundred points at the opening, reacting to the fear of oil sky-rocketing due to the unrest in Libya. Nobody will notice that Home Depot just released their earnings, surpassing expectations for both revenue and net income, in addition to raising their dividend. On a normal day, that would lift the market. Consumer confidence will…
Let’s see . . . we have increasing estimates of inflation . . . we have an amazing amount of unrest in the oil-producing Middle East . . . we have slowing growth in corporate profits as they are squeezed by rising commodity prices . . . we have a rising level of foreclosures . . . and, nobody understands our system of national governance.…
Back in the dark days of March in 2009 when the S&P reached its low of 666, many questioned the American system of Free Enterprise. Since then, the S&P has DOUBLED! That’s right, if you had invested 100% of your portfolio into the S&P then, you would have a 100% profit now. So, how come you haven’t seen any big parties or celebrations? That’s because…
I don’t remember ever having a day when I was not concerned about my privacy. Even in the Army, I always knew I would regain my privacy one day. It is a Value that I still treasure. Before it became irrelevant, Congress even cannonized that Value into a Right to privacy. Wednesday night, I decided to clean out the “cookies” on my computer, which allow…
Yesterday, a “merger” was announced between the fabled New York Stock Exchange (NYSE) and the mighty stock exchange of Germany or the Deutsche Borse. With the majority of board seats going to the Germans, it is more like an acquisition of a American institution. At first, I was simply sad, as an American, to see the grand old NYSE owned from abroad. However, now I’m…
For years, I have tried to read everything written by investment guru Barton Biggs. He was a senior partner at Morgan Stanley for decades and now runs a large hedge fund. For the first time, he has now written a work of fiction, called “A Hedge Fund Tale of Reach and Grasp.” It is an easy read that I can recommend to non-investment professionals. While…
Core inflation for January was 0.5%, the highest in over two years. That was at the producer level. Tomorrow, we’ll hear about the consumer level. We traditionally look at the core PPI, which ignores changes in energy and food costs. Tomorrow, we worry more about those costs at the consumer level. So, is inflation coming? Yes, you cannot maintain such a high level of both…
The President has published his budget for the next year without mentioning the 800-pound gorilla in the room, which is entitlements. If we eliminate every single discretionary dollar being spent in the budget, the nation will still go bankrupt unless we address the ballooning cost of Social Security, Medicare, and Medicaid. The President knows this but is afraid to “touch the third rail of politics”…
Retail sales for January were released this morning but were disappointing, staying flat with December’s growth rate of 0.3%. Since consumption spending is 65-70% of GDP, it matters . . . a lot! The mystery to me is why anybody expected the higher growth rate of 0.5%? Despite last week’s rise in consumer confidence, the consumer is wisely more interested in reducing debt than increasing…
I’ve just returned from the annual conference on Exchange Traded Funds in Florida, often called ETFs. They have several advantages over mutual funds. For example, they can be bought or sold anytime during the day, not just at the close like mutual funds. Since their investment objective is to match some index, like the S&P 500, they don’t need a lot of high-paid portfolio managers.…
Easily, the most anticipated economic report each month is the Jobs Report, which was issued this morning by the Bureau of Labor Statistics. While much anticipated, it is becoming less meaningful. Historically, the Jobs Report for January is the most difficult to measure and most often corrected the following month. Today’s report showed only 36 thousand jobs were created last month, far less than the…
Well, it is official . . . the markets in January were mostly positive. According to the old Wall Street axiom, “so goes January, so goes the year.” For the month, the Dow was up 2.7% and the broader-based S&P was up 2.2%. Both are very healthy gains for only a month! While there is clearly a relationship between the markets performance in January and…
Despite criticism, the Fed has been prudent in trying to pump up the money supply to prevent the economy from weakening further. For technical reasons, the money supply has not increased as much as they had hoped but still enough to help the economy anyway. A consequence of pumping up the money supply faster than economic growth is inflation. Fortunately, we have seen very little…
There has been much discussion recently how “The Greatest Generation” is stealing from succeeding generations with their generous government pensions, Social Security, and Medicare. There is indeed a surprising amount of resentment among young people about this. Yet, they have lost something maybe even more important and don’t even realize it. A few months ago, I found my American Express bill laying at my front…
I remember watching television that night with my daughter as the Berlin Wall fell. It was truly a momentous event, ending the Cold War. The events now happening in Egypt are gravely important but not momentous. Unless it spreads . . . Of course, nobody expected it would ever get this big. It started with a petty bureaucrat who slapped a minor street vendor in…
Long used as a proxy for the degree of globalization, the Baltic Dry Index measures the shipping rates of dry goods. As the economy heats up, more goods are shipped, and the shippers can raise their shipping rates. When the recession began, the index or BDI dropped rapidly. After a slow, bumpy partial recovery, it looks like we may be re-testing the low. If the…
Friday is historically the most volatile day of the week in markets. That’s because traders (as opposed to investors) would rather invest in cash over the weekend, if there is any fear on the street. There was fear on the street. In addition, the stock market has gotten too far ahead of the economy. Then, throw in a major international crisis, and it is an…
Last week, the British government announced their preliminary estimate of their GDP growth in the fourth quarter was a negative 0.5%, instead of the positive 0.7% they were expecting. They blamed it on the weather. The morning, the U.S. government announced their preliminary estimate of Q4 growth in GDP was a surprisingly strong 3.2%, up from 2.6% in the previous quarter. The Democrats will take…
I’ve probably read a dozen books by libertarians over the last two years. When I started reading “The Day After the Dollar Crashes” by Damon Vickers, I toyed with putting it down as just another tired rendition of Glenn Beck, who endorsed the book. But, when I read “I believe that the primary source of our discontent comes from the advertising media,” I knew the…
The inevitable happened yesterday, when the Congressional Budget Office announced Social Security was starting to bleed, i.e., that payments out exceeded payments in. That is not good economic news. In addition, they announced the deficit for this year will be $1.5 TRILLION instead of $1.1 TRILLION. That is not good economic news. And, Standard & Poor’s reduced the credit rating for Japan, as their debt…
Bond Vigilantes are arguably the most powerful people on Earth. They can topple governments without firing a shot. Apparently, they liked the President’s speech last night, as the Asia and European stock markets are up and interest rates are down. Whew! I suspect their focus was on the promised cut in corporate income tax rates, which I support. It looks like another good day in…
Has anybody noticed the difference in interest rates between 30-year and 2-year Treasury bonds? It has reached a new high of 4% or 400 basis points. This is an all-time record! One reason might be that the Chinese have stopped buying 30-year bonds. (The longer the term of a bond, the more volatile the market value of the bond.) They needed to cut back their…
Kudos to Virginia’s Senator Mark Warner and Georgia’s Republican Senator Saxby Chambliss for introducing a bill that will actually take a step toward solving America’s deficit problem! Last week, a client faxed me a Tea Party newsletter that said “revenue is not the problem; spending is the problem.” While that sound bite is correct, it is less than helpful as it confuses what spending really…
At this time last year, 23% of U.S. companies expected to fire workers over the next six months. Only 29% expected to hire any. As the year ended, only 7% expect to fire workers, while 42% expect to hire more workers over the next six months. This is the latest survey by the National Association of Business Economics, one of my favorite organizations. (I will…
As the son of a World War II veteran on the European front, I was taught much about the war, often more than I wanted to know. As an economist, I have always wondered how anybody could have been naive enough to think Germany had the resources to win. At the beginning of the war, the U.S. economy was already twice the size of the…
Hyperbole has no place in a pedantic blog like this, but Congressman Randy Forbes’ comments yesterday at the Chamber of Commerce breakfast was simply beyond silly. He takes issue with our “friendly” treatment of China. Rather than bashing our largest foreign lender and largest supplier to the millions of Walmart shoppers, he would be better served trying to understand them. We ask China two questions.…
After seven consecutive up weeks, this week was flat. The Dow was up less than 1%, and the S&P was down less than 1%. However, it did come out this week that retail investors may be returning to stocks, after missing this huge rally. Their inflows into equity mutual funds was $3.8 billion. This was the largest since May of 2009. That returns some of…
For those who do not subscribe to “Inside Business,” the regional business journal, here is the link to my latest column http://www.insidebiz.com/news/q4-2010-two-steps-forward-and Unfortunately, it omits the graph, and the formatting is awful. Bottom Line: This should be a pretty good year in the market, as long as we don’t have a heart attack from derivatives.
“How to” books can be both entertaining and educational. However, those books can be dangerous for investing. Therefore, I seldom agree to review any “How to” books. However, I’m glad I did agree to review “The Little Book of Currency Trading”, a new book by Kathy Lien. I suspected it would be full of charts and graphs guaranteed to confuse novice investors. Instead, it was…
The markets enjoyed their seventh consecutive week of rising values. This hasn’t happened in years. We’re now back to the level of June, 2008, although that is still down about 18% from the peak in 2007. Time to switch gears and take a break. My latest column for “Inside Business” predicts a 4-8% decline beginning sometime this quarter. Relationships usually change when gears shift. For…