Do you still stick to the prediction you made in November 2008 that we would have the Dow at 27,000 by 2012? When do you think that the hyperinflation will begin - it sure hasn't materialized thus far.
Sex Scandal Revealed: Is Hewlett Packard a Buy or Sell? [View article]
How did the US dollar do when the Clinton scandal broke? I am reminded of a lunch I had with a British diplomat just as the Profumo scandal hit the front pages of the newspapers - he looked relatively complacent and said "What a relief!! A heterosexual sex scandal for a change."
FHA Insured Mortgages: A Disaster in the Making, Part 2 [View article]
This is another example of the "backdoor" deficit that faces us unless there is a sharp upturn in the economy. While it may appear that cutting spending and/or raising taxes will balance the budget and reduce the deficit, in fact if such action results in a deflationary recession, the net impact will be a bigger deficit as the federal government burdened with additonal entitlement payments, liabilities to the FHA, FDIC, Fannie and Freddie, and probably has to appropriate more money for prison construction and maintenance(we should recognize that the criminal justice system with rigid sentencing guidelines is - from a macroeconomic point of view - an entitlement program).
The Harsh Reality of Floating Currencies [View article]
A couple of points: 1. a lot of this analysis applies only when much of the debt within a country is denominated in a foreign currency - this is not generally the case in the United States and so devaluation of the dollar would not generally make it harder for US debtors to repay their debts; 2. maintaining a low currency valuation seems to have worked quite well for China which does not seem to have trouble attracting investment and expanding its economy.
Coming Inflation To Boost Stocks, Gold [View article]
Do you still stick to your prediction of a 27,000 Dow by 2012? When do you think that the hyperinflation will begin - it certainly hasn't materialized so far.
Implications of QE2 and the Soaring CRB [View article]
Lower long term rates should translate into higher prices for yield oriented equities (MLPs, BDCs, mortgage REITs, electric utility stocks and reliable dividend paying stocks which may now be trading at prices primarily determined by dividend yield). Commodity producers would also benefit under this scenario. It is also likely that the dollar would decline under this scenario and this would automatically increase the dollar denominated value of foreign earnings of multinationals. So I am not sure that QE2 nets out as a negative but your argument is interesting.
Energy demand growth in China, India, Russia, the OPEC countries themselves, and in other emerging market countries will swamp the effects of conservation in the US and developed countries. The US should be moving off oil and onto natural gas via either CNG vehicles (the entire taxi fleet in China is powered with CNG) or plug in hybrid cars with electricity provided by nukes and natural gas.
Taking Long-Term Position in Consumer Service Gem [View article]
I have always been troubled by the double entendre associated with the name, but your analysis is very helpful and suggest a great opportunity. Smuckers overcame its name issue and even managed to turn it into a positive in its ads.
So You Wanna Predict a Banking Crisis? [View article]
One thing still confuses me. I was under the impression that interbank loans for US banks were insured by the FDIC just as deposits are. I may be incorrect in this matter, but, if I am right, why would there be any spread at all?
Are There Any Glimmers of Hope in July's Employment Report? [View article]
One of the problems here is that we are dealing with extremely small changes in a workforce of over 100 million - 100,000 jobs is one tenth of one percent - it is like trying to decide how much weight Albert Haynesworth loses when he shaves or clips a fingernail. To the degree that numbers are distorted, there is an argument that as long as the distortion stays the same, the numbers are useful for determining trends. But when we are looking for these microscopic changes, there must be a great potential for the numbers to be affected by relatively minor changes or judgment calls in the methodology of calculation. For this reason, I think analysts should "reality check" the numbers by looking at things like payroll tax receipts, ADP payroll numbers, etc. We might also monitor commuting patterns (toll collections, parking lot receipts, etc.) in major metropolitan areas. I remember that in the early 1980s recession, I was in Detroit and had to catch a 6:30 flight back home. I mentioned to my host that I better leave early to avoid the "rush hour" and he reassured me that Detroit didn't have a rush hour.
Picking the Wrong Names, Or Is It Just a Sour Market? [View article]
I think that a yield oriented portfolio - high yield closed end funds, BDCS, mortgage REITS, MLPs, electric utilities, reliable recession resistant dividend paying stocks (VZ, T, KFT, MCD, KO, JNJ,etc) - is probably the best way to play this situation. You will get somewhat of a lift from low interest rates and if there is a recovery you will participate.
The numbers are bad; the real question is - what is the solution? I am not hearing very much constructive on this website so let me through something out - a short term tax cut targeted to small businesses reducing the payroll tax to zero on all jobs paying less than $100,000 per year, a one time payment of $100 per citizen to all state governments, a two year investment tax credit allowing businesses of all sizes to write off investment in plant and equipment, a program targeted at accelerated powerplant construction by electric utilities, and a committment of the Federal Reserve to monetize all increased debt associated with the above.
One of the surprising aspects of the current situation is the relatively low level of arson. One would expect more "self help" on the part of homeowners who can't sell their properties; I guess this is just another sign the decline in American resourcefulness.
I would be interested in your thoughts on two subjects: 1. can we discern anything from the "hard" data - tax receipts, ADP payroll statistics, actual unemployment claims, etc. My sense is that this data also shows a sluggish but not declining economy but I get very confused. 2. For all the rhetoric about the deficit, the Republicans are now advocating an extension of the Bush tax cuts. Isn't likely that the federal budget will remain in a huge deficit for the foreseeable future and won't this have the effect of continuing to goose the economy? 3. With political resistance to increasing the deficit and interest rates at zero, isn't the only remaining policy handle quantitative easing (the Fed buying treasuries and agency securities) which will force private investors up the risk and duration curves, lead to appreciation of corporate bonds and other yield oriented securities (electric utility stocks, mortgage REITS, BDCs, MLPs,and dividend paying stocks) which in turn will stimulate the economy through a kind of trickle down "wealth effect" as wealthy investors see their portfolios appreciate and start to spend more money. Does this suggest that investments in yield oriented securities and luxury goods retailers and producers are the best place to be??
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Sex Scandal Revealed: Is Hewlett Packard a Buy or Sell? [View article]
FHA Insured Mortgages: A Disaster in the Making, Part 2 [View article]
The Harsh Reality of Floating Currencies [View article]
Coming Inflation To Boost Stocks, Gold [View article]
Implications of QE2 and the Soaring CRB [View article]
Eating Gasoline in America [View article]
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Taking Long-Term Position in Consumer Service Gem [View article]
So You Wanna Predict a Banking Crisis? [View article]
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Parsing the Jobs Report [View article]