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

Attack of the G-Men

Over the weekend, we learned the SEC was launching a major crackdown on insider trading. On Monday, they raided the offices of three hedge funds. Good! After the Global Financial Crisis, the 52% drop in the stock market, and the mysterious Flash Crash in May, it is no wonder that retail investors are distrustful and still on the sidelines, missing this year’s rally. To restore…

The Hidden Inflation

The Fed is justifiably worried about deflation,which is more worrisome and tenacious than inflation. That is the reason they launched the latest round of quantitative easing. Many people don’t see the danger. Even the most recent data shows no serious indication of either inflation or deflation. Yet, if you look deeper, you see the U.S. is becoming bifurcated into one section that is part of…

The Grim Reaper

If you do nothing else today, read the article titled “China’s State Capitalism Sparks a Global Backlash” on the front page of The Wall Street Journal. It is the secret to China’s success and the reason we should be afraid, not merely worried. China has the ability to put the entire force of their nation behind a particular industrial policy. The U.S. cannot even agree…

In Your Eye, Mr. President

It has never happened before. The credit of the United States was downgraded yesterday. While this is considered inevitable if we continue to run such deficits, it was nonetheless a surprise yesterday. But, the timing was interesting. It is not unusual for lots of acrimony before a G-20 Summit. This one is worse than usual. On the eve of the Summit, it was China who…

Don’t Call My Kettle Black!

Regardless of who the President is, he needs a thick skin. Certainly, President Obama does as he begins the G-20 Summit in Korea. It may even be deserved. For years, we have criticized China for maintaining an artificially cheap currency, which helps their exporters. With QE2 or quantitative easing, we are greatly increasing the supply of dollars, which reduces the value of each dollar. Not…

The N-11

Did anybody see the new IMF report raising the estimated GDP growth rate for the 47 countries of Sub-Saharan Africa for the second time this year . . . from 4.5% to 5%? Those traditionally poor nations are growing more than twice as fast as the U.S. Does that bother anybody else? As an economist, it is not surprising, as it takes longer to get…

Enjoy the Ride . . . Again

After a highly eventful week, the stock market is at a two-year high, about the same level as we were when Lehman was allowed to collapse. Nonetheless, that is some three thousand points on the Dow — below our all-time high in 2007. The market is still down 21% from those heady days. Think back to last Spring when the market was moving up daily.…

An Economist’s Lament

The study of economics has always been an enjoyable intellectual pursuit. There are lots of arcane terms and inside jokes that economists enjoy discussing and sharing. But, it seems we have reached a tipping point where economics is becoming polluted by politics, and I’m sad about that. Should I parse my thoughts to support one political side over the other? As I’ve said many times,…

Good Jobs Report . . . finally

The most important monthly economic report each month is the “Jobs Report.” The last few months, the report has shown a sadly weak economy, producing few jobs. Voters took the President to task for that on Tuesday. Today, the Labor Department announced that the private sector created 159 thousand jobs, twice what was expected. This was great news, and the Dow futures immediately jumped 40…

Fire Up the Printing Presses . . . Again

Today, the Fed announced another round of quantitative easing, which means they will buy Treasury bonds, which means the Treasury then gets that amount of money ($75 BILLION per MONTH over the next 8 months) deposited into Treasury’s checking account, which Treasury can then use to write checks for Social Security, infrastructure, anything . . . even interest payments to the Fed for having bought…

Political Pundit George Carlin ?

I think the late comedian was the first to describe our electoral process as “political masturbation”, a very intense, focused effort to accomplish nothing. The Libertarian view is that elections merely change the Masters, with the slaves remaining the same. It is just a different set of thieves. Maybe, that’s a little cynical. OK, that’s a lot cynical. Wall Street traditionally likes divided government, and…

Election Day . . . Finally!

In this world of 24/7 cable news, which spin the news as well as report the news, it is easy to become both confused and depressed. Therefore, I recommend a disinterested foreign perspective to balance the right-wing Fox News and the left-wing MSNBC. Religiously, I read The Economist, a newsweekly magazine from England and recommend it. Sometimes, it is helpful to read things like this,…

Rest Up This Weekend

Next week, the market could be exciting, maybe too exciting! As I’ve been predicting all year, the market will begin to rally when the election outcome comes into focus. I expected that in October and was pleasantly surprised when it started in September. Historically, the market likes gridlock, which appears to the outlook. Another reason for the recent rally is the expectation that the Fed…

Nailed it!

Economists get ridiculed frequently and richly deserve it. In fact, they usually enjoy it! However, today was a good day, in that they accurately predicted the GDP growth rate in Q3 would be 2.0%, compared to 1.7% in Q2. This makes it even less likely we will see a “double-dip” or experience the worst of the recession again. This makes my forecast of a “long,…

The Halloween Indicator

Of all the many market indicators, this is the most useless but must be fun, as it rolls out year after year. Here it is: Since 1950, the stock market performs best from the last trading day of October to the end of April. (Of course, there are always obvious exceptions, like the oil embargo of 1973-74, the dot com bust of 2001-2, and the…

Baking a Cake . . . or Baking a Market

When you look at a cake, you are seeing the end result of whatever ingredients went into it. The same is true when you look at the market. Instead of flour, butter, mix or whatever goes into a cake, information and expectations go into the market. Most people understand why information moves a market, but expectations about information are just as important. Yesterday’s roller-coaster market…

Paddling Hard . . .

Arthur Conan Doyle once described how Sherlock Holmes unraveled a mystery because of the “dog that didn’t bark”. That’s reminds me of the G-20 meeting in Korea. China is clearly manipulating its currency, but so is the U.S. But, there was little furor about this. While the finance ministries are warning of a currency war, there was no furor that we were already in it.…

Please Take My Money?

Yesterday, the Treasury Department issued $10 billion in five-year bonds. In other words, they borrowed another $10 billion. But, something was different . . . very different. Instead of repaying $10 billion at the end of five years PLUS interest earned by the bond-holder, the government will repay $10 billion LESS interest paid to the government for holding the money. This has never happened before!…

A Benefit of Aging

One of the benefits of aging is that a person has had time to benefit from all the good advice they have received over the years. One of the disadvantages is that you cannot remember who gave you the advice . . . Some of the best advice I received as a young investment advisor was to be an “economics agnostic and a political atheist”.…

Keyboarding Burnout?

With regret, I have noticed my blog gets neglected whenever I finish doing my quarterly column for Inside Business. (You can receive copies by email at no cost by signing up at www.baycapitaladvice.com.) To be even more confessional, I have also been working on a book, which is still another excuse for my keyboard burnout. No more excuses, just apologies! With the highly important G-20…

S.O.S. = Same Old Song . . . Whew!

The famous fat lady sang this morning, and, thankfully, didn’t sing anything surprising. The rate of unemployment remained constant at 9.6%, instead of increasing to 9.7% as expected. Total non-farm jobs decreased by 95 thousand, far better than the 600-700 thousand monthly decreases we saw last year but way below the 250 thousand a month increases that we need. Tragically, 6.1 MILLION people have been…

. . . Waiting for the fat lady . . .

She will sing this Friday morning, when the monthly Civilian Unemployement Report or “Jobs Report” will be released. To the market, this is the single most important economic report each month, probably too important. But, it is even more important this month. Yesterday, the Non-Manufacturing ISM Report indicated there was more job growth in the services sector than expected. As a result, the Dow roared…

Sometimes . . . The Truth Hurts!

For years, economists and financial analysts have talked about the BRIC countries, i.e., Brazil, Russia, India, and China. As a group, they were rapidly growing economies dependent upon export growth. As a group, they need to curb their internal savings by individuals and increase consumption spending by those individuals. This is a happy problem. Now, economists and financial analysts are talking about the HIIC countries,…

Save Your Breath, America!

The Bush Administration started applying pressure on China years ago, to allow their currency to increase in value. This makes their exports more expensive to foreigners who buy them, like the U.S. As a result, foreigners buy less, which means China produces less, and fewer Chinese workers are needed. Layoffs increase and so does social unrest. The Obama Administration has substantially increased that pressure on…

What Chinese and Americans Have In Common . . . Taxes

The Chinese have a progressive tax on income, which means your tax rate increases as your income increases, similar to ours. However, they have no estate tax, at least not yet. As income inequality increases, so does social instability, which is the greatest fear of the Chinese government and can hardly be emphasized enough. To take more from the rich, there is now growing pressure…

Peeling the Onion….

Last week, I marveled that China was making the same mistake as the U.S. by letting its Social Security system get as out of control as ours. Digging into this has not been easy, but I have learned that: 1. It started in 1978, when China was still a “socialist-paradise”. 2. By 2030, it is expected to be the oldest, on average, population on the…

The Triumph of Madison Avenue

Certainly, one of the most apparent changes in China from my last visit in 1987 is the western style of clothing, which has been completely adopted by the Chinese. It is not unlike a typical walk thru Chinatown in San Francisco. Who said advertising doesn’t work? Yet, this is one of those discussions where business bleeds into ethics quickly. If advertising works for clothing, why…

A Day in the Life of ….China

This nation boasts the greatest number of newspapers, with over 400. It is also accused of having jailed the most jounalists, number unknown. Still, a good read of one day’s edition offer insights into Chinese thinking see www.chinadaily.com.cn: 1. Pressure from the U.S. to allow the Chinese currency (Yuan) to appreciate is not motivated by any trade protection of Chinese exporters but entirely by the…