IMF And Fed Data: A Wake-Up Call For Long Term Investors [View article]
Lets put some of your numbers in perspective.
Global GDP is around $77 trillion and and lets say debt is around 3X this amount or $231 trillion.
In this light $11 trillion is a rounding error and is clearly insufficient to absorb losses of any serious magnitude which is why US banks are making few domestic loans while reducing their exposure to Europe.
Corporate CEOs Won't Invest in America - Should You? [View article]
I don't want in any way to minimize the economic challenges brought on by a balance sheet depression/recession, but I am confident in saying this administration has done everything within its power to more or less screw up counter cyclical fiscal policy while giving the private sector plenty of reasons not to participate in the recovery.
It's pretty widely accepted that permanent tax reductions are far more powerful than increases in fiscal spending, yet the administration and congress favored the latter over the former as it allows them to channel money to political constituencies and special interests. And when it comes to spending, there is fairly broad agreement that spending that takes the form of investment is preferable to that which simply supports consumption. This, though, did not stop the administration from pushing through what is essentially a spending package to support consumption. And then there is the malignant legislative agenda which is at odds with the direction most want the country to take.
Though not widely reported in the press or MSM, the glaring failures of these policies are "perceived" by the general public and are known by business leaders. All of this creates a disconnect, a loss of confidence, a sense of marginalization and a perception that the nation's economic and political ecology is changing in a most undesirable way. In response, consumers are more inclined to save while business leaders hoard cash, restrict investment and consider geographical diversification. And in turn, these decisions create a negative feedback loop within the economy.
It's still early in the game but it comes as no surprise that revenue misses (7) are outpacing earnings misses (5). Notwithstanding the global inventory correction, I do not think final demand is firmly in place and revenues are harder to "manage" than other P&L line items.
Inflation and the Hierarchy of Needs [View article]
1) That there is relationship between bubbles and innovation is absurd; if the innovation carries value, bubbles should not be allowed to implode. I would argue twisted innovations lead to bubbles which is different than saying bubbles foster innovation.
2) Bubbles be definition are an over allocation of resources to one or more asset groups leading to an unsustainable increase in prices. As the author suggests, the Fed simply provides the liquidity and controls the intensity of the flow sluicing into the asset categories. It is, however, most convenient we have a bubble today that confers a fairly broad based wealth effect. A suspicious person could be forgiven for thinking it was engineered.
3) If banks cannot be profitable while simultaneously being prepared for a fat tail event, the business model is inherently flawed and they should either rework the model or be allowed to fail upon the event.
The Threat Of GECC's Disappearing Tangible Common Equity Value to the Financial System [View article]
This is exactly why I have urged caution in the face of generally favorable reported reults in the financial sector.
The mess with mortgage lending still must run its course; credit card loan defaults are increasing; cracks in CRE are very visible; and along the way imbalances in Eastern Europe, a subject of great discussion at the G20, must be corrected.
U.S. companies are reducing dividends at the fastest rate in half a century, hoarding cash and squeezing investors who depend on the dividends to preserve cash.
With the cut, Immelt surrendered in his effort to convince doubters GE could earn enough profit to support both the dividend and highest-available debt rating in the deepest global slowdown since the Great Depression.
I believe earlier in the year immelt is on record as saying he was prepared to run GE without a AAA rating inorder to maintain dividend payouts and reward investors.
The decision reinforces management's commitment to the highest rating, underscoring the importance of access to credit and the still fragile credit markets.
IMF And Fed Data: A Wake-Up Call For Long Term Investors [View article]
Global GDP is around $77 trillion and and lets say debt is around 3X this amount or $231 trillion.
In this light $11 trillion is a rounding error and is clearly insufficient to absorb losses of any serious magnitude which is why US banks are making few domestic loans while reducing their exposure to Europe.
I'm short financials.
Corporate CEOs Won't Invest in America - Should You? [View article]
It's pretty widely accepted that permanent tax reductions are far more powerful than increases in fiscal spending, yet the administration and congress favored the latter over the former as it allows them to channel money to political constituencies and special interests. And when it comes to spending, there is fairly broad agreement that spending that takes the form of investment is preferable to that which simply supports consumption. This, though, did not stop the administration from pushing through what is essentially a spending package to support consumption. And then there is the malignant legislative agenda which is at odds with the direction most want the country to take.
Though not widely reported in the press or MSM, the glaring failures of these policies are "perceived" by the general public and are known by business leaders. All of this creates a disconnect, a loss of confidence, a sense of marginalization and a perception that the nation's economic and political ecology is changing in a most undesirable way. In response, consumers are more inclined to save while business leaders hoard cash, restrict investment and consider geographical diversification. And in turn, these decisions create a negative feedback loop within the economy.
Earnings Season So Far [View article]
Inflation and the Hierarchy of Needs [View article]
2) Bubbles be definition are an over allocation of resources to one or more asset groups leading to an unsustainable increase in prices. As the author suggests, the Fed simply provides the liquidity and controls the intensity of the flow sluicing into the asset categories. It is, however, most convenient we have a bubble today that confers a fairly broad based wealth effect. A suspicious person could be forgiven for thinking it was engineered.
3) If banks cannot be profitable while simultaneously being prepared for a fat tail event, the business model is inherently flawed and they should either rework the model or be allowed to fail upon the event.
The Threat Of GECC's Disappearing Tangible Common Equity Value to the Financial System [View article]
The mess with mortgage lending still must run its course; credit card loan defaults are increasing; cracks in CRE are very visible; and along the way imbalances in Eastern Europe, a subject of great discussion at the G20, must be corrected.
We have a long way to go.
Wall Street's New Math [View article]
P/E ratios are just another tool in the kit a and do tend to be mean reverting.
The problem with them is that the P/E multiplier or ratio is highly sensitive to inflation, interest rates and expectations.
GE Finally Cuts the Dividend [View article]
U.S. companies are reducing dividends at the fastest rate in half a century, hoarding cash and squeezing investors who depend on the dividends to preserve cash.
With the cut, Immelt surrendered in his effort to convince doubters GE could earn enough profit to support both the dividend and highest-available debt rating in the deepest global slowdown since the Great Depression.
I believe earlier in the year immelt is on record as saying he was prepared to run GE without a AAA rating inorder to maintain dividend payouts and reward investors.
The decision reinforces management's commitment to the highest rating, underscoring the importance of access to credit and the still fragile credit markets.