Monday, December 12, 2011
Monday, December 5, 2011
Thursday, December 1, 2011
Fast Money Fools
I love watching these fast money idiots, such as those on CNBC and including Jim Kramer, squirm when they make these short-term predictions/recommendations on air, and then they are swiftly proven to be completely wrong. My best advice - take whatever they say and do the exact opposite. You are much more likely to make a profit!
Monday, November 28, 2011
Tuesday, November 22, 2011
U.S. Economic Data Gap Widening Versus Europe
Despite today's revised GDP growth for the third quarter (revised down from 2.5% annualized growth to 2% annualized growth), the U.S. economy is beginning to show signs of improvement. We have seen retail sales improving, corporate profits overall looking solid, and even some minor improvement in employment (from 9.2% to 9%). In fact, initial jobless claims last week fell to 388,000, which was the lowest level in seven months, the Philly Fed manufacturing index, which translates to 53 on an ISM basis, shows a very strong employment component. Earlier in the week, the index of industrial production beat estimates with an especially strong reading on business equipment. This translates to strong capital-goods investment, which is also a job creation engine. Retail sales in October also beat estimates, and rose over 7 percent versus October of 2010. Both producer and consumer price inflation dropped slightly in October. Well-respected economists like John Ryding and Conrad DeQuadros are predicting 3 percent real GDP growth for Q4. Joe LaVorgna even thinks GDP could be 4 percent in the fourth quarter.
Our problem is that we are completely focused on the problems in Europe, which are overshadowing the improvements we are seeing at home. Stock markets here in the U.S. are being whipsawed day-to-day, week-by-week, as news from Europe roils global markets. But the reality is that we are (finally) starting to see real progress here, and that will translate to better financial market performance at some point. It's that "at some point" that is the 800-pound gorilla in the room.
I believe the key change in perceptions for U.S. investors (and by extension U.S. markets) will come when we see fourth quarter consumer spending results for the holiday shopping season. As we move into January and begin to get the final results from retailers, I believe we are going to see that, for the first time since the Lehman Brothers failure in late 2008, consumers are gaining real confidence in the future of our economy and are spending money again. I still feel that they will be looking for bargains, but when they find them, they will pull the trigger.
If the divergence between U.S. (positive) economic improvement and negative news from Europe continues, I believe that U.S. investors and consumers will eventually begin to focus on what is happening here with our economy and will therefore start to look ahead to 2013 and beyond with optimism. I further believe that this optimism about the future will translate to positive stock market performance, improving employment, and a much stronger economy, notwithstanding the rapidly growing national debt, which is now above $15.3 trillion and rising very quickly ($122,000+ per taxpayer, and $49,000+ for even man woman and child (citizen) of the United States).
Monday, November 21, 2011
Sunday, November 20, 2011
What is the government thinking??
It's official, the U.S. government is now the largest holder of our own national debt, surpassing China and now holding more than $1.6 trillion in U.S. treasuries. How are they buying these bonds? They are printing currency - U.S. dollars, devaluing our currency to push long-term interest rates down by 20 or 30 basis points. Why are they doing this? Because they think (wrongly) that if rates are lower, somehow banks will lend more money and it will help the economy. The 10-year treasury was already well below 3% and is now below 2%, yet banks are not lending any more money today than they were before the government started buying these bonds.
Here's a novel idea: instead of printing money to buy our own debt, why don't we spend the same $1.6 trillion on infrastructure? We have an estimated $2 trillion in needed rebuilding, repairing and replacement that is needed. We could have not only paid for the vast majority of this (80%), but could have also made a nice dent in the unemployment rate at the same time. Every $1 billion in infrastructure spending is estimated to create 30,000 new jobs. More notable still is that, if that much money was spent in the economy, it would have a massive multiplier effect, which would create more economic activity and more jobs.
I am not in favor of printing money, but if we are going to do it, wouldn't it make more sense to spend that money on something beneficial to the economy and that would create jobs, instead of simply buying our own debt?
Here's a novel idea: instead of printing money to buy our own debt, why don't we spend the same $1.6 trillion on infrastructure? We have an estimated $2 trillion in needed rebuilding, repairing and replacement that is needed. We could have not only paid for the vast majority of this (80%), but could have also made a nice dent in the unemployment rate at the same time. Every $1 billion in infrastructure spending is estimated to create 30,000 new jobs. More notable still is that, if that much money was spent in the economy, it would have a massive multiplier effect, which would create more economic activity and more jobs.
I am not in favor of printing money, but if we are going to do it, wouldn't it make more sense to spend that money on something beneficial to the economy and that would create jobs, instead of simply buying our own debt?
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