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.
There are two or three technical indicators suggesting the inevitable is near at hand and analysts.......rather than acknowledging this likely eventuality which involves coming to grips with a knot of problems surrounding sovereign debt, the true state of the economy and the galaxy between valuations and reality......resort to senseless explanations.
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.
While not disagreeing with anything said, what I have observed is broad, alternating themes of (1) reflation which is accompanied by strength in commodities and equities and (2) deflation which is accompanied by strength in the dollar and US Treasuries.
I make a habit of being as respectful as possible on this board and others but this article taxes my restraint.
And while there may be an Obama bounce, though that is not certain as many earnings will be released next week, the structural aspects of this decline are worsening as they surface.
Declining estimates of economic growth, rising foreclosures, collapsing industrial production, growing estimates of what is needed in the stimulus package, rising estimates of banking sector losses and growing unemployment are simply the first things that come to mind.
If we face deflation and the corrective actions are not equal to the task, we are some ways off from the streets of Barcelona where the bulls run.
Bracing for 2009 Earnings - Barron's [View article]
Many analysts have been out of touch with the severity of this contraction and its impact on corporate earnings.
Some earlier estimates for the SP500 were simply silly.
With all of the unknowns, I believe it is impossible to reliably predict when this mess will turn around.
Once the finanacial crisis is put to rest, the recession will need to be dealt with and this where the the next stimulus package will be of critical importance.
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]
Intel Can't Buy a Break [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.
Key Factors Driving the Market [View article]
These relationships can be see here:
stockcharts.com/charts...
Why Return on Capital Is So Important to Investors [View article]
Others may find it interesting that over the long run and with a fixed capital structure, ROC is the limiting factor on growth.
Holding debt to equity constant, the rate of growth in capital cannot exceed ROC.
The Bull Run Begins This Week [View article]
And while there may be an Obama bounce, though that is not certain as many earnings will be released next week, the structural aspects of this decline are worsening as they surface.
Declining estimates of economic growth, rising foreclosures, collapsing industrial production, growing estimates of what is needed in the stimulus package, rising estimates of banking sector losses and growing unemployment are simply the first things that come to mind.
If we face deflation and the corrective actions are not equal to the task, we are some ways off from the streets of Barcelona where the bulls run.
Bracing for 2009 Earnings - Barron's [View article]
Some earlier estimates for the SP500 were simply silly.
With all of the unknowns, I believe it is impossible to reliably predict when this mess will turn around.
Once the finanacial crisis is put to rest, the recession will need to be dealt with and this where the the next stimulus package will be of critical importance.