Note: I am not an investment advisor and nothing I state should be taken as investment advice. Please consult your own private professional financial advisor for help in making investment decisions.
The stock market has taken a dive the past two days. Will that trend continue? I don't know.
What I do know is that on September 24th, SeekingAlpha published an article written by Robert Baggio entitled "Ten Reasons for an Imminent Stock Market Crash." Was Mr. Baggio prescient with his article? Only time will tell but its definitely worth a read.
What are his ten reasons? Well, I encourage you to go over to SeekingAlpha and read the article for yourself but I'll give you a taste here. In my own words, his ten reasons are:
1. Rampant insider selling.
2. Much of the current rally has been (a.) based on trading in bankrupt companies (Fannie Mae, Freddie Mac, Lehman Brothers, etc) (b.) made up of investors trying to cover their shorts and (c.) of a low volume.
3. Most investors are short-term bullish and long-term bearish. Furthermore, market psychology does not currently correlate with the economic fundamentals.
4. A lot of the market is short on the U.S. Dollar and long on ... "everything else."
5. Household incomes are going down while the number of people living in poverty is growing. "Income dispersion" is growing.
6. There is a Chinese commodities bubble. The rise in commodities prices isn't because the Chinese economy is really growing as fast as it appears to be, its the result of the Chinese investing in commodities so as to avoid the U.S. Dollar. The Chinese business model is just as flawed as the American one.
7. Under President Obama we have more government intervention into the economy, there is increased protectionist sentiment and there are "socialist tones" to our political rhetoric.
8. The money supply and credit continue to contract at alarming rates.
9. The market is very complacent and everyone is (falsely) assuming that everything is okay.
10. The European economy is still in shambles despite proclamations from European political leaders that "the recession is over" there. To quote Baggio:
"What happened to Latvia’s currency crisis or the Swedish Banks? Are Hungary and Poland ok? Has the Austrian Banks’ exposure to Eastern Europe disappeared? Is Spain back on its feet? Is the UK solvent again? Are Irish banks lending like there is no tomorrow? How about Germany’s manufacturing base—is it solid with a EUR at 1.48 and the US consumer missing-in-action? Is Deutsche Bank’s $3 trillion balance sheet made up of only physical Gold? Are German banks profitable and healthy again? I guess somebody waved a magic wand and fixed all Europe’s problems overnight!"
This is just a very basic summary of Mr. Baggio's article. This summary doesn't do it justice so I encourage you to go over to the actual article and read it in-depthly.
So there you have it. Are you convinced? What are your thoughts on the future of the stock market?
Source: http://seekingalpha.com/article/163213-ten-reasons-for-an-imminent-stock-market-crash
Showing posts with label Obama. Show all posts
Showing posts with label Obama. Show all posts
Friday, October 2, 2009
Monday, September 14, 2009
Obama almost surely will get another Supreme Court pick in Spring 2010
This isn't economy-related but its pretty big news and I'm surprised more people aren't talking or writing about it.
Did anyone else catch this past weekend's The Chris Matthews Show (the Sunday morning political round-table on NBC affiliates, not MSNBC's Hardball)?
A few weeks ago, around September 2nd/3rd, there was a lot of speculation in the media about whether or not U.S. Supreme Court Justice John Paul Stevens was getting ready to retire soon. At that time, it was announced that Stevens had only hired one law clerk for 2010, instead of the usual four, which many interpreted as a sign that 2010 would be his last year on the court.
On The Chris Matthews Show, panelist Howard Fineman (Newsweek's Senior Editor and Chief Political Correspondent) made it clear that the rumors are true: Stevens is almost definitely going to retire in the spring of 2010. Here's the excerpt from the show transcript:
Stevens is without a doubt a member of the 'liberal wing' of the Supreme Court so President Obama's appointment is unlikely to fundamentally alter the ideological makeup of the court.
However, if Stevens does announce his retirement in the spring it will be at the beginning of the 2010 midterm election cycle. That means his retirement will almost surely have significant political importance and we could see quite a heated political battle. If President Obama's popularity keeps slumping or if Obama loses out completely in the healthcare debate then conservatives will certainly feel emboldened and will politically press for, at least, a Justice who is more conservative than Stevens was. If someone like Justice Anthony Kennedy (who is currently the sole swingvote between the liberal and conservative wings) gets nominated then that will almost surely be seen as a conservative victory. Liberals will fight hard to hold their ground on the court and President Obama will have to make sure and appease them to some degree lest his support among his base constituency further erode.
So who's being seriously considered by the White House? I certainly don't know so I defer to the opinion of Mr. Fineman, a D.C. insider who clearly has connections in the Court. Fineman (among many others in the media, actually) mentions Harold Koh, a Legal Advisor to the State Department and dean at Yale Law School, in his article. He served in various forms under the Clinton and Reagan administrations and was a clerk for former Justice Harry Blackmun (who was appointed by President Nixon and started out as a conservative but latered authored the Roe v. Wade decision). David Bernstein, a conservative law professor at George Mason University, wrote that Koh is a "highly partisan Democrat" but the Yale Conservative Law Students group responded by writing that "Dean Koh has been very supportive of conservative students and conservative student organizations." [3] Koh, who is of Korean ancestry, would be the first Asian-American to serve on the Court.
Mr. Koh is just one possible candidate, albeit a strong one considering the media buzz surrounding him.
Other possibilities that have been mentioned by the media include:
*Diane Wood
*Merrick B. Garland
*Elena Kagan
*Cass R. Sunstein
*Jennifer Granholm
*Janet Napolitano
... among many, many other possible candidates ... there is no real way to predict this, this early. Regardless, it looks like 2010 be a big year politically (and economically! as readers of my blog know).
Sources:
1: http://www.thechrismatthewsshow.com/html/transcript/index.php?selected=1&id=182
2: http://blog.newsweek.com/blogs/thegaggle/archive/2009/09/14/fineman-predicts-justice-stevens-to-retire-next-spring.aspx
3: http://en.wikipedia.org/wiki/Harold_Koh
Did anyone else catch this past weekend's The Chris Matthews Show (the Sunday morning political round-table on NBC affiliates, not MSNBC's Hardball)?
A few weeks ago, around September 2nd/3rd, there was a lot of speculation in the media about whether or not U.S. Supreme Court Justice John Paul Stevens was getting ready to retire soon. At that time, it was announced that Stevens had only hired one law clerk for 2010, instead of the usual four, which many interpreted as a sign that 2010 would be his last year on the court.
On The Chris Matthews Show, panelist Howard Fineman (Newsweek's Senior Editor and Chief Political Correspondent) made it clear that the rumors are true: Stevens is almost definitely going to retire in the spring of 2010. Here's the excerpt from the show transcript:
Mr. FINEMAN: There's been talk that Justice John Paul Stevens may retire. I'm told by former clerks of his that it's definite, that by next spring he'll announce that he's leaving, which means that Barack Obama will have more research to do about somebody else to appoint. [1]Fineman published an article today on Newsweek's website that further verifies this. He writes:
Though there are no sure things in life or judging, Stevens's legion of former clerks are convinced that he will in fact retire late next spring. Stevens is known as particularly punctual and exacting about lining up new clerks early in the year. The fact that he did not do so is a certain indication that he will step down, one of his former clerks told me this week. "There is NO WAY he would go into next year without the full group," said this clerk, who spoke on background out of respect for court tradition and the behind-the-scenes role of clerks. Another former clerk, speaking on the same condition, agreed."He's still vigorous and I think he wants to leave the court that way," this clerk told me. [2]So there you have it. It looks like Justice John Paul Stevens will announce his retirement next spring and President Obama will get to appoint another Supreme Court Justice.
Stevens is without a doubt a member of the 'liberal wing' of the Supreme Court so President Obama's appointment is unlikely to fundamentally alter the ideological makeup of the court.
However, if Stevens does announce his retirement in the spring it will be at the beginning of the 2010 midterm election cycle. That means his retirement will almost surely have significant political importance and we could see quite a heated political battle. If President Obama's popularity keeps slumping or if Obama loses out completely in the healthcare debate then conservatives will certainly feel emboldened and will politically press for, at least, a Justice who is more conservative than Stevens was. If someone like Justice Anthony Kennedy (who is currently the sole swingvote between the liberal and conservative wings) gets nominated then that will almost surely be seen as a conservative victory. Liberals will fight hard to hold their ground on the court and President Obama will have to make sure and appease them to some degree lest his support among his base constituency further erode.
So who's being seriously considered by the White House? I certainly don't know so I defer to the opinion of Mr. Fineman, a D.C. insider who clearly has connections in the Court. Fineman (among many others in the media, actually) mentions Harold Koh, a Legal Advisor to the State Department and dean at Yale Law School, in his article. He served in various forms under the Clinton and Reagan administrations and was a clerk for former Justice Harry Blackmun (who was appointed by President Nixon and started out as a conservative but latered authored the Roe v. Wade decision). David Bernstein, a conservative law professor at George Mason University, wrote that Koh is a "highly partisan Democrat" but the Yale Conservative Law Students group responded by writing that "Dean Koh has been very supportive of conservative students and conservative student organizations." [3] Koh, who is of Korean ancestry, would be the first Asian-American to serve on the Court.
Mr. Koh is just one possible candidate, albeit a strong one considering the media buzz surrounding him.
Other possibilities that have been mentioned by the media include:
*Diane Wood
*Merrick B. Garland
*Elena Kagan
*Cass R. Sunstein
*Jennifer Granholm
*Janet Napolitano
... among many, many other possible candidates ... there is no real way to predict this, this early. Regardless, it looks like 2010 be a big year politically (and economically! as readers of my blog know).
Sources:
1: http://www.thechrismatthewsshow.com/html/transcript/index.php?selected=1&id=182
2: http://blog.newsweek.com/blogs/thegaggle/archive/2009/09/14/fineman-predicts-justice-stevens-to-retire-next-spring.aspx
3: http://en.wikipedia.org/wiki/Harold_Koh
Sunday, September 13, 2009
The Japanese Obama?
Ambrose Evans-Pritchard, International Business Editor for the Telegraph, wrote an article on the Japanese fiscal situation at the beginning of this month.
The article informs us that, fiscally, Japan is in very dire straights. The article states that:
1. The IMF is expecting the Japanese budget deficit to top 10% of GDP this year (for some perspective, the U.S.'s deficit-to-GDP level will likely end up being around 12% this year).
2. Japan's Gross Public Debt will reach 215% of GDP in 2009, the highest in the world.
3. Corporate tax revenues are negative in Japan due to "a collapse in profits."
4. The Japanese savings rate has fallen from 14% in 1990 to 2% today.
Wow. My perspective? Its important to keep in mind that Japan has reached this point after nearly 2 decades of on-and-off (mostly on) deflationary decline, numerous corporate bailouts and several rounds of attempted fiscal stimulus. Even with all that effort expended, Japan is still experiencing record year-over-year deflation and it has accumulated alarming levels of debt (which, in turn, is alarming bond investors). The Japanese deflationary period is not exactly analogous to the U.S.'s current situation but, in some ways, its a better fit than the Great Depression of the 1930s is. If the stimulus ends up being incapable of resuscitating the economy people should definitely pause, take a look at the Japanese historical experience of the past 2 decades and ask ourselves what exactly happened there and how can we avoid the same fate? That's especially true if policy-makers begin pushing for a second major stimulus package or a string of more "Cash for Clunkers"-type subsidies.
So why'd I label in this post "The Japanese Obama"? Well, as we can see, while in some ways Japan is trending years ahead of us in regard to being in a debt-fueled slump, in other ways they're just catching up.
The Japanese just elected the Democratic Party of Japan (unseating the Liberal Democratic Party for only the second time in the post-war period). The DPJ brings with it Mr. Yukio Hatoyama as the new Prime Minister. Hatoyama and his party were partly elected on the promise of Obama-style social reform including, as Evans-Pritchard's article points out, $180 billion "for child allowances and social policy." The people of Japan have invested a lot of hope in the idea that the new blood of the DPJ will re-invigorate Japan. I think the changes to the savings rate tell us everything. Japanese culture emphasizes saving and frugality. Thats why the savings rate was at 14% in 1990. It didn't come down because the Japanese suddenly became rabid consumers. My supposition is that it came down primarily because people had to utilize their savings to "make ends meet" quite often. According to Evans-Pritchard, PM Hatoyama is already backing away from some of his social policy promises after realizing the costs involved.
A lot of attention is being focused on China. This is justified of course since China is the rising star on the global stage. However, we should still pay attention to the second biggest economy in the world. Considering our similar predicaments, we potentially have a lot to learn from their experience(s).
Read the article here: Bond vigilantes fret over Japan
The article informs us that, fiscally, Japan is in very dire straights. The article states that:
1. The IMF is expecting the Japanese budget deficit to top 10% of GDP this year (for some perspective, the U.S.'s deficit-to-GDP level will likely end up being around 12% this year).
2. Japan's Gross Public Debt will reach 215% of GDP in 2009, the highest in the world.
3. Corporate tax revenues are negative in Japan due to "a collapse in profits."
4. The Japanese savings rate has fallen from 14% in 1990 to 2% today.
Wow. My perspective? Its important to keep in mind that Japan has reached this point after nearly 2 decades of on-and-off (mostly on) deflationary decline, numerous corporate bailouts and several rounds of attempted fiscal stimulus. Even with all that effort expended, Japan is still experiencing record year-over-year deflation and it has accumulated alarming levels of debt (which, in turn, is alarming bond investors). The Japanese deflationary period is not exactly analogous to the U.S.'s current situation but, in some ways, its a better fit than the Great Depression of the 1930s is. If the stimulus ends up being incapable of resuscitating the economy people should definitely pause, take a look at the Japanese historical experience of the past 2 decades and ask ourselves what exactly happened there and how can we avoid the same fate? That's especially true if policy-makers begin pushing for a second major stimulus package or a string of more "Cash for Clunkers"-type subsidies.
So why'd I label in this post "The Japanese Obama"? Well, as we can see, while in some ways Japan is trending years ahead of us in regard to being in a debt-fueled slump, in other ways they're just catching up.
The Japanese just elected the Democratic Party of Japan (unseating the Liberal Democratic Party for only the second time in the post-war period). The DPJ brings with it Mr. Yukio Hatoyama as the new Prime Minister. Hatoyama and his party were partly elected on the promise of Obama-style social reform including, as Evans-Pritchard's article points out, $180 billion "for child allowances and social policy." The people of Japan have invested a lot of hope in the idea that the new blood of the DPJ will re-invigorate Japan. I think the changes to the savings rate tell us everything. Japanese culture emphasizes saving and frugality. Thats why the savings rate was at 14% in 1990. It didn't come down because the Japanese suddenly became rabid consumers. My supposition is that it came down primarily because people had to utilize their savings to "make ends meet" quite often. According to Evans-Pritchard, PM Hatoyama is already backing away from some of his social policy promises after realizing the costs involved.
A lot of attention is being focused on China. This is justified of course since China is the rising star on the global stage. However, we should still pay attention to the second biggest economy in the world. Considering our similar predicaments, we potentially have a lot to learn from their experience(s).
Read the article here: Bond vigilantes fret over Japan
Friday, August 14, 2009
Solution to recession: more wars?
Today I stumbled upon this post on a blog called Washington's Blog. I can't say I was familiar with the blog before stumbling upon this post. Taking a quick look around, I can already see that I don't 100% agree with all of the author's opinions. Nonetheless, this is a pretty provocative post.
His post tackles a simple question: will the United States government launch more wars around the world in a last-ditch bid to salvage the American economy? He points to statements made by economist Marc Faber, trends forecaster Gerald Celente (who predicted the current recession) and Justin Raimondo in order to try and answer the question.
Of course, such a move would not be without precedent. Various schools of economics will argue that the Great Depression was overcome not by President Franklin Roosevelt's Keynesian spending but rather by the nation's mobilization for World War II. Of course, political pundits have been making comparisons between current President Barack Obama and FDR for quite some time now.
While I'm willing to consider the arguments presented in this blog post, several questions go unanswered in my mind.
How exactly would any war(s) be funded? Our country is arguably in a much worse off position now than it was at the beginning of World War II. Funding a large-scale war seems practically impossible at this point, unless we're arguing that the entire global financial system will be scrapped.
Would a war actually be able to lift the United States out of its recession (or depression, as it may be)? The United States can't create something like World War II (involving the overall majority of the world's population) out of thin air. It can, however, invade a large nation like Pakistan (the 6th most populous country in the world) on its own. What would be the actual economic impact of such a war on the United States? Keep in mind, the defense industry is not what it used to be, it is no longer a mass-employment engine. It seems like such a war might only increase our national debt load without actually reviving the economy. I suppose if our leaders and the national elites are that rapacious, it doesn't really matter.
Finally, one of the posters comments that such a war is unlikely before 2012 because of the pressing need of re-electing President Obama on the part of the Democratic Party. That seems to be true. However, if the economy is completely wrecked by 2011, might not such a war (and the massive boost of patriotism it would inject into the national consciousness) be the perfect remedy for an ailing campaign? Its impossible to tell from our current vantage point and I sincerely hope none of us ever have to find out.
I ask these questions not to knock the blog post and the ideas it presents, but rather because I take such a provocative proposition quite seriously and, considering how bleak our economy currently looks, think we all should.
His post tackles a simple question: will the United States government launch more wars around the world in a last-ditch bid to salvage the American economy? He points to statements made by economist Marc Faber, trends forecaster Gerald Celente (who predicted the current recession) and Justin Raimondo in order to try and answer the question.
Of course, such a move would not be without precedent. Various schools of economics will argue that the Great Depression was overcome not by President Franklin Roosevelt's Keynesian spending but rather by the nation's mobilization for World War II. Of course, political pundits have been making comparisons between current President Barack Obama and FDR for quite some time now.
While I'm willing to consider the arguments presented in this blog post, several questions go unanswered in my mind.
How exactly would any war(s) be funded? Our country is arguably in a much worse off position now than it was at the beginning of World War II. Funding a large-scale war seems practically impossible at this point, unless we're arguing that the entire global financial system will be scrapped.
Would a war actually be able to lift the United States out of its recession (or depression, as it may be)? The United States can't create something like World War II (involving the overall majority of the world's population) out of thin air. It can, however, invade a large nation like Pakistan (the 6th most populous country in the world) on its own. What would be the actual economic impact of such a war on the United States? Keep in mind, the defense industry is not what it used to be, it is no longer a mass-employment engine. It seems like such a war might only increase our national debt load without actually reviving the economy. I suppose if our leaders and the national elites are that rapacious, it doesn't really matter.
Finally, one of the posters comments that such a war is unlikely before 2012 because of the pressing need of re-electing President Obama on the part of the Democratic Party. That seems to be true. However, if the economy is completely wrecked by 2011, might not such a war (and the massive boost of patriotism it would inject into the national consciousness) be the perfect remedy for an ailing campaign? Its impossible to tell from our current vantage point and I sincerely hope none of us ever have to find out.
I ask these questions not to knock the blog post and the ideas it presents, but rather because I take such a provocative proposition quite seriously and, considering how bleak our economy currently looks, think we all should.
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