Global Market Commentary, Analysis and Investments
So much information and so many ideas come to us daily in the financial press. We’re able to fill up our trash basket in just minutes.
In The Financial Times, for example, Larry Summers recently offered a solution to America’s housing debt problem. And in The Herald Tribune our favorite comedian, Thomas L. Friedman, tells us about the next Internet revolution and what a wonderful world it will create.
[Read more...]Why don't people borrow?
Because it's not a liquidity problem. It's a debt problem. A solvency problem. And it won't go away by making more cash and credit available. Instead, all those bad decisions, bad loans, and bad investments have to be cleaned up. And that takes time. And while the economy is de-leveraging, people are becoming more cautious…more risk-averse…more modest in their expectations.
[Read more...]Back in the USA, it’s still fat city. Thanks to fear of European debt, the waiters are bringing the sundaes to the US.
And here’s our own Number One ice cream salesman – Tim Geithner – in Europe. He was in Berlin on Thursday. What flavor was he pushing onto the Germans? Tutti Frutti!
He told the Germans that the US was “totally behind a cooperative, worldwide approach.”
[Read more...]The fixes are more costly than the problems.
“Systems of problem solving develop greater complexity and higher costs over long periods… the destructive potential is evident in historical cases where increased expenditures on socioeconomic complexity reached diminishing returns, and ultimately, in some instances, negative returns…where [the system] starts to become vulnerable to collapse”
[Read more...]Where do bad debts go after they die?
On Monday, investors seem to have convinced themselves that they just disappeared…like Amelia Earhart or TARP funds. But by Tuesday, they began to worry about ghosts.
As in the US, the specter haunting Europe is debt. In America, bad debt in the private sector – led by subprime mortgages – caused havoc on Wall Street in the autumn of 2008. It was as if all Hell had broken loose. The feds rushed to the rescue; but what could they do? They could not exorcise the evil spirits. They could only move the debts from one debtor to another – putting at risk an additional $8 trillion of the taxpayers’ money.
[Read more...]What’s the news? The Dow fell a little – off 36 points. Oil traded at $80. And gold dropped $22, to close at $1,129. Nothing unusual.
But poor Mr. Obama… He seemed like a nice enough fellow. More and more people seem to be mad at him.
What went wrong? It looks to us that he has been completely captured by America’s two most special interests – Wall Street and the Pentagon. Maybe he was their man from the get-go; we don’t know.
[Read more...]Is the great hope of the investment world little more than hype? We like to visit the “China boom or China bust?” debate every once in a while, and the argument today is pretty one-sided… the “busts” have it.
“Bubbles are best identified by credit excesses, not valuation excesses,” famous short seller Jim Chanos begins, “and there’s no bigger credit excess than in China.” He’s clearly made up his mind, calling China “Dubai times 1,000.” Given his history with Enron, then Tyco, then homebuilders, then banks and then overhyped infrastructure bets last year — we pay attention when this guy pounds the table.
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Over Their Dead Bodies
The more things don’t change…the more they remain the same. You can quote us on that.
On the surface, very little changed in the 2 months we were away.
The Dow was about 13,000 in mid-Feb. It’s still about 13,000.
The yield on the 10 year US note was about 2%. No change there either.
[Read more...]