Value Added

Does Fiscal or Monetary Stimulus Work?

Edward, good thoughts.

I'm of the opinion that the best stimulus is a "distribution" (my term) stimulus; viz., tax cuts combined with government spending cuts. I think it is more effective and has fewer nasty side effects than fiscal or monetary stimuli. It puts the money in the hands of those who have earned it. Unfortunately, a distribution stimulus today will be less effective than it would have been 30 years ago, since money in the hands of the consumer only partly stimulates the US economy - a lot of that money would flow overseas, stimulating foreign economies that do so much of our manufacturing.

Cree: A Bright Investment

Agreed, CREE is a winner - they lead their industry by a good margin. The only thing that takes away some of the shine is the high PE ratio; obviously their success has been noticed. Nevertheless I agree it's worth buying.

U.S. Remains Largest Manufacturer in the World

Wrong. Alive and well? No, hanging on by the fingernails. Where you find healthy US manufacturing, it tends to be in niche markets or with products for which foreign alternatives are excluded (e.g., defense), or where the products are too large/heavy/bulky, thereby making foreign-made products non-competitive when shipping is factored in. It's difficult to truly measure how hard manufacturing in the US has been hammered, because SIC codes obscure the effects: a company that imports a product and sticks a label on it can still be called a "manufacturer". Check out this link for better data: www.cbo.gov/doc.cfm?in...

Is the Dollar Too Big to Fail?

The Roman Empire was not supposed to fall, nor the Titanic sink, nor the Maginot line be penetrable. Buy-and-hold was supposed to always bring great returns. Sovereigns are supposed to never default on their debts, but that has happened a few times in history as well. Can the dollar fall? Absolutely. There are good reasons why it shouldn't happen quickly, but we are writing new history here, not revisiting a cyclical condition. I suppose that China and Japan, the two largest foreign holders of US dollars, are feeling very much between a rock and a hard place, wishing they were not holding assets that are so rapidly devaluing, but without a safe exit strategy. Someone compared the situation to having a wolf by the ears - if they let go of the dollar, it won't be without great cost. Nevertheless, my conclusion is that cautious investors should be diversified with respect to the currency denomination of their assets.

It's All About Deleveraging

John,
Thanks for the fine article. I would add one more factor into the mix which will put further constraint on the growth of GDP: the expiration at the end of 2010 of the George W. Bush era tax cuts, which will be like a lawnmower on those "green shoots".

On Releasing Citi from TARP and Banking by Accounting Subterfuge

You wrote: "If you sensed subterfuge here, you and I would be on the same page.......You may not like the methods. I certainly don’t. But, this is the route we have chosen and will continue to choose. And it will work until and unless we get a relapse in the economy that takes asset prices down with it."

Edward, I'm in agreement for the most part, except for two minor points: a) your use of the plural pronoun "we" in the snippet above, and b) your conclusion that it will "work" barring a relapse in the economy. Toxic assets are like fish in the waste barrel, you can ignore them all you want but eventually they make themselves known. The extent of the real losses is too large to be papered over and it will substantially impact economic growth negatively, sooner or later.

Are We Heading Toward a Market Crash by Jobless Recovery?

There has been no recovery, only "signs" of an impending recovery, if you're inclined to read certain tea leaves. The key assumption guiding policymakers is that sufficient liquidity will bring about a "recovery", if the pump is kept running long enough. In the short term, that may be right, although the jury is certainly still out, in my opinion. In the long term, this may just prove to be economic suicide. As far as investing, commodities may fall in real terms as the L-shaped recession continues, but with all the liquidity floating around the world, and the dollar dropping, it may never reach those lows when priced in dollars.

Gulf States' Currency Union Seen as Dollar Threat

The only true threat to the dollar can be found in the marbled halls of Washington. The actions of the Gulf states, India, China, and all other major holders of dollar reserves are fairly predictable responses to protect the value of their holdings.

Individual Investor Challenge: Can You Succeed by Going It Alone?

You wrote: "My favorite knowledge test is that more people can name the Three Stooges than can name the three branches of government."

I would argue there is not sufficient difference to distinguish between the two groups!

The Confusing Connection Between M2 and Inflation

Fine article, thanks. In my opinion, there are three factors that are primary inflation drivers: 1) the money supply, 2) the velocity of money (which in turn is affected by many variables - suitable for an entire discussion itself), and 3) supply/demand dynamics, which in turn is influenced by the other two. I think the biggest mitigation against inflation in the last two decades has been the supply side of things, driven largely by lower cost labor content due to outsourcing. This factor cannot keep prices down indefinitely, and as the standard of living in China and elsewhere rises, and energy, materials, and shipping costs rise, inflation will become a beast.

U.S. Forfeiting Billions in Future Taxes So Citi Can Exit TARP

Our primary outrage should be focused on the enactment of TARP in the first place, and after that, the terms (or lack of) under which TARP money was disbursed. The precedent set under TARP is disastrous - that the taxpayer is on the hook for every imprudent decision made by the investment banking community (heads they win, tails we lose).

Once that door was opened, the rest naturally follows. TARP surprised me, but the follow-on is no surprise. The Trojan horse is inside the city gate.

How Buying a Home Is Gambling

Fixed 30 year mortgages are under 5%. Non-owner-occupied property rates are right around 5%. When eventually the explosion in the monetary supply gains traction outside of the equities markets, the resulting inflation will make real estate investments look very good. The important questions for real estate investors are: 1) when do property values bottom, and 2) when do rates start back up.

'It's Five Minutes to Midnight for Greece' - Willem Buiter

A default by Greece would send a shock through bond markets and by extension to the rest of the global economy. Yesterday I divested some bond holdings, because I believe bond values will be dropping and rates rising soon. As for inflation, I think we do need to be concerned about it. Apart from real estate and energy, it appears to me that prices of materials are rising everywhere.

Gold: Expect a Technical Correction Before the Final Frontier

Dian, your comments are much appreciated. When it comes to gold, everyone has an opinion, but few have the statistics. Thanks for thoughtful commentary.

Andy Xie: 'World Is Drinking Poison to Quench the Thirst'

Reckless is right and the aftermath won't be pretty. As for the timing, who can tell? With global interdependencies being what they are, when someone sneezes in Iceland, someone catches cold in Sri Lanka. Who would have thought that mortgage lending to a tier of higher-risk borrowers could shake the entire financial world? We all agree that there are consequences ahead because of the irresponsible monetary policies being played out around the globe, but I think the trigger for another convulsion may well be some unanticipated small event.