The Economy and Markets
Analysis of the economy and markets that relates to investment ideas and strategies.
Did Government Retirements Distort January’s Economic Data by Softening the Payroll Numbers?
While last Friday’s jobs report for January had good news that unemployment declined from 10 to 9.7%, payrolls declined by 20,000, below consensus estimates that the economy would gain 15,000 jobs. 1 This raises the question of how both unemployment and the number of people with jobs can be going down at the same time. ... »
Why Hyper-Inflation Fears are Exaggerated
It’s in vogue for commentators to warn that the booming federal deficit will cause hyperinflation. However, these commentators rarely acknowledge counterbalancing forces that make this scenario—out of control inflation far beyond run-of-the-mill price increases—unlikely. The first flaw in these alarmist arguments is the presumption that the budget deficit the United States is now running is... »
Nouriel Roubini, the Obama Financial Regulation Package, and the Road to Stock Market Recovery
Investors interested in timing the stock market’s recovery to make money are tempted to track the opinions of key commentators, whose words can affect markets. In that connection, Nouriel Roubini’s opinion can move the major market averages, possibly as much as the opinions of economist Henry Kaufman—the “Dr. Doom” of his era—who arguably... »
How to Make Money Investing in Stock by Arbitraging Wall Street’s Misunderstanding of Public Policy
I’d like to introduce a theme to be developed in future posts: that knowledgeable investors can profit by making investment decisions that benefit from Wall Street’s shortcomings in understanding government policy. The increased role of government in business makes Wall Street nervous. This is partially ideological: many businesspeople and financiers just don’t want... »
Why Inflation Can be Good (Now)
It seems crazy. Don’t save and spend more than you earn, year after year. Not a good way to run a household or a business. But running a country? Maybe it’s not so bad. There’s an economic term here central to understanding the issue: the “real rate of interest.” This refers not to the numerical... »
Uptick Rule: May Help Sustain Long-Term Recovery, but Not Likely a Short-Term Fix
In July 2007, the U.S. Securities and Exchange Commission announced that it was canceling the “Uptick Rule,” a cost-free protection that had been in place for almost 70 years. Installed in 1938 as the United States was emerging from the Great Depression, the rule protected the stock market from “bear raids” by short sellers... »
What are the Scenarios for Economic Recovery?
What kind of economic recovery will there be? That’s an important question to ask in planning your investment strategy to take advantage of an upswing and protect yourself in the event that things stay sour. Let’s consider six possible scenarios: 1) Rapid snap back. Suddenly the market takes a strong upward turn towards pre crisis levels. Likelihood: ... »