You can go to the New York Times website or read the whole article here.
Here is the best except:
First things first. It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.
The main point of the article is that we are not seeing inflation at all, and that the Japanese case is getting stronger. However, Krugman is smart enough to concede that we do have a long term issue with spending and inflation will pick up, but only after the economy starts to recover. This make take a few years. . .
David Reilly wrote a decent piece that outlines why we are not going to see consumer spending increase anytime soon. Read the full article here.
The issue with consumers: Their balance sheets are a bloated mess with household debt still unsustainably high at more than 130 percent of income. Getting the ratio down to a more realistic sub-100 percent level — never mind the 60 percent to 70 percent range seen in the 1960s and 1970s — involves serious consumption cutbacks. With consumers accounting for about 70 percent of the U.S. economy, this one-time engine of growth may easily become a dead weight.
So, do we fight the tape and short all consumer stocks? No, not yet. Just because we understand the muted spending habits will change the dynamics of corporate earnings doesn’t mean the market will make rational decisions. In fact, it most likely will keep rising until people realize we have created a bubble not based on a dot.com like euphoria, but simply believing we will go back to levels seen a few years ago.
This is a good one! And I thought only Goldman Sachs traded ahead of clients! Read here. So, a guy named Nilesh Shroff was front running trades. I know, big deal, but this is not 1999 anymore. People won’t stand for this crap anymore. At least the FSA took some action after three strikes. . . .
When clients told him to buy particular stocks, he bought those stocks for the firm first, causing the price to increase before he executed the customers’ trades. If the customer order was to sell, he first sold on behalf of the firm, decreasing the price.
Here is the latest interview from CNBC’s Closing Bell. Big credit to Michael Yoshikami of YCMNET Advisors who was great to be paired with. Great to see some young blood!!!
We cover utilities, staples, and the issue with Chinese steel demand. ENJOY!
Today in the Washington Post David Sokol wrote about how we are being gamed by the government. Read the whole article here. Here is the juicy part:
If you liked what credit default swaps did to our economy, you’re going to love cap-and-trade. Just read Title VIII of the bill, which lets investment banks, hedge funds and other speculators participate in the cap-and-trade market. They don’t have emissions to cut; they have commissions to make.
Now, I am up for making money no matter what the market does, but I would prefer good versus evil. Credit Default Swaps (CDS) never made much sense to me because it allowed people to buy insurance on stuff they didn’t own. Now, you may say that buying a put option on a stock you don’t own is the same thing, but put options cause a companies ability to issue debt to blow up. Options are also regulated and despite the pits of traders you see on TV, they are ‘orderly’. After all, we keep them in a pit!
Cap and trade will do nothing but give hedge funds and investment banking houses the ability to speculate on a new ‘green’ world while driving up prices to the consumer and killing off industrial companies. In the end, I really don’t look forward to making money off these side bets as they blow up entire industries. Maybe the bill won’t pass. . .
Check out my recent research piece on Seeking Alpha here.
On the front page of the Financial Times yesterday (sorry, I gave up reading the Wall Street Journal when it went mass market) the headline was “Oil at $60 for first time in six months.”
How wonderful! I was long oil using commodity ETFs/ETNs since December when the price was in the 30s. Thus I expected the price to be up 50-80%. This is where I hit the empty well.
The bottom line is that I will be moving on and not dealing with ETF’s that can’t perform as the marketing people suggest. There are a million excuses why the slippage happens, but my clients don’t care and neither do I.
I just got this link from an institutional broker and had to share it with the rest of the world. If you thought the Fed was asleep at the wheel, well, I just can’t even articulate anything, just watch it. The sad part is that is NOT a skit from SNL, this is REAL. No joke. Elizabeth Coleman should be fired.
You can read the whole article here. Bottom line is that never have we been more confused on the question of inflation or deflation. I attempt to explain what the issues are and what is at stake.
Prices go down, people lose jobs, interest rates disappear and the economy crumbles. The first time we saw it in the U.S. was back in 1836 when the railroads went bust, credit was squeezed, and cash was impossible to get. The money supply shrank by 34 percent! The next era of deflation occurred during the Civil War, and the last time we experienced it was during the 1930s, and we all know how that worked out. Deflation creates an environment where there is no incentive to invest and grow anything but a Victory Garden.
Let me know if you have any comments. Feel free to post them directly on NMBJ’s website.
