Johnc

19 Comments

    • James Galbraith Joins the Obamanomics Team [view article]
      I take issue with the statement that savings are not required for investment (not that the good Prof doesn't know it but the fact that I don't like the idea). I assume that soundbite means American savings are not required for US investment. That has been true in the past. The US has been very good at recycling the rest of the world's savings. However, I would be very nervous of any economist who assumes that the "gravy train" has not been disturbed by recent events. I am all for free trade and free capital flows but a slightly higher savings rate in the US might actually be a decent idea. Perhaps the next administration can take some of the disincentives for savings out of the tax code. Not as sexy or quick as a rebate check but it might put the country on a firmer footing. Jun 16 09:28 PM
    • Aberration in Clear Thinking by JP Morgan [view article]
      I like the article and I think the issues raised will take us back to March lows (demonstrating that the last two months was a bear market rally). However, I think we should be looking to pick up long positions if the SPX can hold above March lows. While there is bad news a plenty, very little of it is new. It just takes a while for it to sink in. However, now that it is starting to sink in (and we'll see that process over the next few weeks), it will be time to swim against the crowd.

      I am talking my own book, of course, and hope that someone will be kind enough to lift my GLD at 100 (missed it last time around).       Jun 08 09:19 PM
    • Why Lower Home Prices Are in Your Interest [view article]
      While I have made money in real estate, I tend to agree with Wakeup that the experience was less than pleasant with all the expenses that dangle from the investment. I am a happy expat now so the issue of home ownership has been deferred for a while.

      The real issue I fear is that Americans are not psychologically prepared for the kinds of drops implied for the UK market. I have seen past real estate meltdowns in the UK and in Hong Kong. I am not sure that the US is really ready for what might come in the next 18 months. With an untested Democrat in the White House and a trigger happy (with my tax dollars) Congress, I fear the policy response could cause tremendously unpleasant unintended consequences.       Jun 02 10:18 PM
    • Two Ways To Profit from Frontier Markets [view article]
      One thing to watch out for on oil is the subsidies in India and China. While China can afford the subsidies (which are apparently driving a 500k new car a month market), India is running out of room. Agree that high priced oil is here for the medium term but watch out when one of these big BRIC countries abandons their gasoline/diesel subsidy regimes. Jun 01 09:48 AM
    • Boeing Soars While Airlines, Ambac Fall [view article]
      Booking flights in the Asian region is still a chore. And pricing is firm to say the least. Not surprised that non-US airlines are scooping up newer, more fuel efficient planes from the US$ producer. Do you really care if you step onto an Airbus or a Boeing? I don't as long as I can get the schedule I want. Most of the time, I can't tell the difference. Obviously the purchasers of such multi-million dollar assets are voting with their wallet as the Euro flirts with the 1.60 level. You should probably look at some of the Asian carriers before you can assume that all airlines are near bankruptcy. Pain, yes. But traffic growth is still strong. Apr 24 09:37 AM
    • Robert Shiller on America's 'Speculative Culture' [view article]
      "America has been a speculator nation since day one" Amen. May it never change!
      Apr 24 09:17 AM
    • What Does the President Know, and When Did He Know It: "We're not in a recession..." [view article]
      I agree with richjoy. ECRI told me everything I needed to know late in 4Q for $149 a year. Let NBER declare a recession in June/July so that we can start trading the recovery. Apr 24 09:13 AM
    • Who's to Blame for the Commodities Boom? [view article]
      Wow! Some of the comments here are scary!
      Speculators were not invented in the last 100 years. The process of price discover goes much further back than that. I would argue that the Government should work against markets getting "cornered" but other than illegal short term manipulation, the government has no business telling the market what the "right" prices are. If ETF's accellerate this price discovery, allow me to get some hedge against inflation and sends signals around the world about the money to be made by planting certain crops, developing promising new energy sources, re-engineering products to protect gross margins and a message to Central Banks about how we feel about their potentially inflationary policies....well, I'm not sure I see what the problem is.
      Economic dislocation will be the result. No denying it. Buggy whip makers, mainframe computer manufacturers and coal miners in England offer just a few well known examples of economic dislocation that happened well before commodity ETF's came on the scene.       Apr 16 11:59 PM
    • Going for Gold [view article]
      Good article...I like the comparison of gold supply growing 1-2% while Shadow stats shows M3 at high double digits. There's high inflation and low growth abroad in the world. It's something I vaguely remember as a young teen and I don't think we should be happy to return to that scenario. Apr 15 09:14 PM
    • Memories of Deflation and Hyperinflation [view article]
      Not just German central bankers...the Chinese had several bouts of hyperinflation in the 30's and 40's which still haunts central bankers in both China and Taiwan today. Goes a long way towards explaining why the People's Bank of China has no problem ignoring pressure from the US Treasury or Congress.
      The article is useful because it underlines a key risk to one rosy glasses scenerio which sees all the Central Banks getting together to reflate the global economy. Basically, there are a few non-US central bankers who are too allergic to the inflation that such a concerted policy is sure to breed.       Mar 24 08:49 AM
    • Is Palm Management Doing Enough to Get Back on Track? [view article]
      The problem with Palm is that they lost focus and stopped making improvements on a great product...the Treo. People will pay up for a great product (note Apple iPods and iPhones, RIMM products) but will only commit to a platform if there is demonstrated committment to incremental improvement (bug fixes and feature enhancements). A Palm with Windows Mobile? Palm has little control over the software, hasn't come up with any great new "must have" features and is not a cost leader. Hard to see how a consumer products company that is "neither here nor there" can prosper. The sports analogy is misleading. A sports team is protected by a league (TV revenue share, for example) and there will always be die hard fans. If Palm disappeared tomorrow, there would be sadness (I loved my Treo 650 to pieces, literally) but the smartphone market will hardly skip a beat. Mar 24 12:00 AM
    • iShares Taiwan ETF: A Bet on Improved China Relations [view article]
      The market has outperformed the region YTD in a large part because the KMT (Ma's party) was expected to win. Now that Ma has won, the hard work of rebuilding the economy and restructuring the cross straits relationship begins. I am very positive (and hold EWT) but would warn against anyone expecting a "quick pop". The story will unfold over the next two years. And, when that story does unfold, the front runners will have changed. Taiwan is in the early stages of a transition from a manufacturing led economy to one with a much larger services component. I expect Taiwan's economy to look much more like Hong Kong's or Singapore's than South Korea's in two to three year's time. EWT will participate but may lag behind a better constructed portfolio of Taiwan stocks. Mar 23 11:36 PM
    • How Do You Cure a Credit Bubble? [view article]
      You are right but the devil is in the details. As an American who lives in Asia, I understand but am constantly amazed by the household balance sheet carried by most of my upper middle class friends in the US. How do we get the deleveraging without collapsing the whole system? The Austrian School is right (and crowing about it) but it will take years to reeducate the average American consumer to see the benefits of saving and productive investment. And with the likely tax regime under the next administration, I fear we will move further away from a simple and flattish tax policy that would point the way towards the deleveraging you correctly identify as the cure for our (US and global) ailments. Reverse Nixon price controls...very nicely put. History rhyming but not exactly repeating. Mar 18 10:37 AM
    • Nowhere Near a Real Estate Bottom [view article]
      I liked this article because it pointed out an "article of faith" which I have always had trouble accepting...that homeownership is the best investment. It has a place, but is it logical to expect so much from bricks and sticks?

      I disagree that the housing recession will drag on too long precisely because it is an illiquid, by appointment only market. But that doesn't detract from the author's second good point that the housing bottom will lag the economic bottom by a decent interval and we shouldn't get suckered.

      Since college, the longest time I have lived at one address has been 5 years. While I made out on home ownership during those 5 years, I worried about getting caught in the wrong end of a cycle. In 20/20 hindsight, I was a fool. I should have bought two or three houses, spent more time at Home Depot and saved myself alot of mental effort looking at equity markets.

      I think this recession will bring a healthy amount of skepticism into the equation and the result will be a significantly higher level of household savings as it becomes obvious that there is no "magic bullet" for family financial (including retirement) planning. That new pool of savings will transform US national and trade accounts far more significantly than the misguided officials who think we can temporarily devalue our way out of our problems.

      As global investors, that one change will dramatically reorder the economic landscape. No longer can emerging markets count on unlimited consumer demand in the US. Places like China and India will spend more money on infrastructure to build domestic economies capable of satisfying the needs of growing middle classes in those countries. I could go on with other changes, but you get the idea...the next 3 years will see the markets trace a different path from the past 3.

      The US government can and should engage in activities that help the market to clear. It's big and powerful and quite frankly, we pay these people to keep an eye on this sort of thing. However, Congress and the officials at Treasury and the FED should be very careful about trying to "fix" the market with brilliant new schemes. Those brilliant new schemes tend to create more barriers than they tear down.

      And lack of barriers is the key. The globe is awash with fiat money but not really liquidity. Liquidity implies movement and the near frozen inner workings of the credit system have kept that cash from working its magic. Money may be the root of all evil and we may be a bit sore we handed so much over to our pals in the Middle East and China, but that investment flow, combined with a more subdued US consumer will bring the US back into the economic game...probably in the lead.       Mar 10 11:36 PM
    • Recessionary Fears: It's Not Just Housing Any More [view article]
      While I agree with the comment that high oil prices will feed into inflation pressure in almost all the CPI components, I am not sure greedy speculators or compliant politicians can have a change of heart and drive oil below $80 given the weak dollar policy and the still strong demand for energy from emerging markets like India and China.
      If oil were to "magically" drop to $90 and $80 in the short term, I would take that as a sign that the US recession had spread more quickly to the rest of the world than anyone could have anticipated. Since US exports are one of the current bright spots of the US economy, I am not sure that "the economic engine of the nation would begin to heat up..." as a result. I feel the pain every time I fill up and understand how people less fortunate than me have to be suffering greatly but the logic of the comment doesn't hold up at this time.
      The FED medicine for this credit crunch has weak dollar, higher inflation side effects that will take a long time to shake off. As we learned in the 70s, inflation is a very heavy and cruel tax on the lower and middle classes. The Treasury and the FED should know better.       Mar 05 07:52 PM
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