Readers may have noticed that we have a soft spot in our heart for negative news about the economy. That’s because the business and popular press dwell on the postive and give short shrift to the other side (with the exception of the Financial Times). So we have a tense geopolitical climate, global warming looking […]
Read more...This excellent post in Barry Ritzholtz’s The Big Picture was prompted in part by Alan Abelson’s article, “Spendthrift Nation,” in today’s Barron’s. The key point is that consumers spent more than they made for two years running, 2005 and 2006. The last time this happened was in the depths of the Depression. Yesterday, DF asked […]
Read more...We have been featured a lot of discouraging reports about the markets of late. Just so you know that we are open to new information, here is a positive indicator, which was reported in Seeking Alpha: Birinyi’s Ticker Sense submits: Regular readers of our research will know that we often cite various indicators to track […]
Read more...We have been hard on the Journal for its tendency to politicize news coverage and omit stories that point to systemic financial risk. So we would like to give credit to the Journal when credit is due. This morning, the Wall Street Journal had a first page story on the stock market mania in China, […]
Read more...A post from Mark Thoma’s Economist’s View, “Will the Euro Replace the Dollar?,” is useful and informative, but I am surprised that Thoma didn’t mention developemnts that confirm the authors’ thesis, namely, that the euro is becoming a competitor for the dollar as a reserve currency: Some countries that have been key providers of capital […]
Read more...While this topic may seem a bit esoteric to some readers, it is just about the most simple-minded trade in the financial markets, which is precisely why so many players are involved in it. You borrow in a currency that has low prevailing interest rates, like the yen, and invest in instruments in a currency […]
Read more...We’ve taken note of excessive optimism and leverage (see, as examples, “The Rising Tide of Liquidity” and “More Signs of a Toppy Market“). Now the European Central Bank is also sounding cautionary notes. Ever since Alan Greenspan’s famous “irrational exuberance” observation produced a 140 point (then 2%) fall in the Dow, central bankers have been […]
Read more...We’ve commented from time to time on loose credit conditions (see our “Rising Tide of Liquidity“, plus Part 2 and Part 3 on the same topic) and indifference to risk (“Where Has the (Perception of) Risk Gone?“). The tide may be turning. Today, the New York Times had a lengthy, well researched article, “Tremors at […]
Read more...We have pointed out various signs of complacency in financial markets regarding risk: declining credit spreads (January 16), a lack of concern about systemically high use of leverage (previous post plus January 18), and technical indications that suggest we are near a stock market peak (January 22). Yet there is an almost irrationally high level […]
Read more...The Financial Times reports that in 2006 the US economy showed its lowest level of productivity growth in more than ten years, according to a study by the Conference Board. This isn’t surprising. Falling productivity growth is an end-of-cycle phenomenon. And what has been unusual about this cycle has been business’ reluctance to invest and […]
Read more...An interesting set of posts, all more or less pointing in the same direction, namely, that investor optimism is out in front of reality, and some of the behaviors are consistent with a frothy market. On Seeking Alpha, Michael Panzner discusses how the view that “cash is trash” is getting traction, both leading private equity […]
Read more...A good couple of posts from The Big Picture (see the first and second) on the increase in margin debt. The data comes from a Wall Street Journal piece: Such debt is accumulated by investors who trade “on margin” with funds borrowed from their brokers. As tracked by the New York Stock Exchange, margin debt […]
Read more...The Financial Times has had three stories on loose credit conditions in three press days: one on Friday the 12th, two on Monday the 15th, all worried in tone. Apologies for getting this to you on a delayed basis, but the FT website was not cooperating from Friday evening through Monday (colleagues had the same […]
Read more...Martin Wolf is the Financial Times’ chief economic writer and is always thoughtful and balanced. This column in today’s paper presents a more jaundiced view than the sunny forecasts from most US economists. In particular, he focuses on the role of liquidity in the current expansion: What is going to happen to the world economy […]
Read more...Good post this morning on the debate over what the inverted yield curve means for economic prospects by Barry Ritholtz at The Big Picture | Yield Curve: Its different this time. The trigger was that Arthur Laffer has been arguing that the negative yield curve does not point to an impending recession, while a story […]
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