2012-11-29
Right now the evidence is mounting that companies and individuals alike are not making big decisions about money. Corporate spending on durable goods has fallen. Business cash balances have risen. Cash on hand at active managers of mutual funds and pension plans is running close to all-time highs.
Cash-equivalent investments are popular with the public: Total assets under management with money-market funds have risen to almost 10% of US GDP.
Will the hoards of cash be spent and help the economy?
Right now the evidence is mounting that companies and individuals alike are not making big decisions about money. Corporate spending on durable goods has fallen. Business cash balances have risen. Cash on hand at active managers of mutual funds and pension plans is running close to all-time highs.
Cash-equivalent investments are popular with the public: Total assets under management with money-market funds have risen to almost 10% of US GDP.
2012-11-27
A friend of mine was recently in the market to rent an apartment. He made four appointments to see the properties, and all four appointments were cancelled. The apartments had been rented. All four within a day.
The rental market is hot. This is the first indication of the end of the housing crisis. Monthly rent payments in the United States now exceed the monthly cost of owning a single-family home. This drives house sales. Why rent when you can own on a cheaper per month basis? That calculation is going on across the whole United States. Furthermore, the age group that forms families continues to grow. This suggests pent-up demand. Folks have been living with their relatives, and the group that is most prone to buying houses — the 24-to 42-year-old age bracket — has grown relative to the overall population. In addition, the whole population has grown since the housing market peaked in the fall of 2006.
Renting an apartment
A friend of mine was recently in the market to rent an apartment. He made four appointments to see the properties, and all four appointments were cancelled. The apartments had been rented. All four within a day.
The rental market is hot. This is the first indication of the end of the housing crisis. Monthly rent payments in the United States now exceed the monthly cost of owning a single-family home. This drives house sales. Why rent when you can own on a cheaper per month basis? That calculation is going on across the whole United States. Furthermore, the age group that forms families continues to grow. This suggests pent-up demand. Folks have been living with their relatives, and the group that is most prone to buying houses — the 24-to 42-year-old age bracket — has grown relative to the overall population. In addition, the whole population has grown since the housing market peaked in the fall of 2006.
2012-11-13
One of several concerns I have heading into 2013 is the seeming damage done to public confidence in US financial markets done by the rise of high-frequency trading. I recently read two new financial books that shed some light on this mysteriously complicated world of algorithms that match buyers and sellers under the radar of the human eye.
Both Dark Pools and Broken Markets* call this type of trading one of the greatest threats to the global financial system. The books describe how high-frequency trading firms have taken a bigger share of the trading volume of the market. This has happened while the usual reliance on exchanges has diminished and the role played by specialists or market makers of supplying capital and transactions to the market has waned.
2013: A Space Odyssey
One of several concerns I have heading into 2013 is the seeming damage done to public confidence in US financial markets done by the rise of high-frequency trading. I recently read two new financial books that shed some light on this mysteriously complicated world of algorithms that match buyers and sellers under the radar of the human eye.
Both Dark Pools and Broken Markets* call this type of trading one of the greatest threats to the global financial system. The books describe how high-frequency trading firms have taken a bigger share of the trading volume of the market. This has happened while the usual reliance on exchanges has diminished and the role played by specialists or market makers of supplying capital and transactions to the market has waned.
2012-11-08
Well, the US elections are over and President Obama has been re-elected. But all of the economic uncertainty has not gone away.
It really wasn’t the election after all. Markets are still bound by a knot of unanswered questions.
And, alas, as we look again at what will happen if the US economy goes over that fiscal cliff, let me break it down once more. If all the tax increases and spending cuts get enacted, the United States will see a hit to GDP of roughly 4.5%. Right now the United States is growing at a 2% real rate. So if Washington policymakers do nothing, the US economy is going to land in recession.
The dip at the end of the road
Well, the US elections are over and President Obama has been re-elected. But all of the economic uncertainty has not gone away.
It really wasn’t the election after all. Markets are still bound by a knot of unanswered questions.
And, alas, as we look again at what will happen if the US economy goes over that fiscal cliff, let me break it down once more. If all the tax increases and spending cuts get enacted, the United States will see a hit to GDP of roughly 4.5%. Right now the United States is growing at a 2% real rate. So if Washington policymakers do nothing, the US economy is going to land in recession.
2012-11-07
I for one am glad that the advertising blitz of the 2012 election campaign is now over. But investors still have to grapple with the outcome of the election.
On one level, it has been historically proven that the market prefers Democratic presidents in the fourth year of the presidential cycle, and the market goes up even more if a Democrat is in the White house while the House of Representatives is under Republican control. That is where we stand now.
Election in rearview mirror...now what?
I for one am glad that the advertising blitz of the 2012 election campaign is now over. But investors still have to grapple with the outcome of the election.
On one level, it has been historically proven that the market prefers Democratic presidents in the fourth year of the presidential cycle, and the market goes up even more if a Democrat is in the White house while the House of Representatives is under Republican control. That is where we stand now.
2012-11-06
Election Day is finally here in the United States. It seems like the presidential and senate races have been going on forever. For US citizens there is a lot at stake. The candidates represent vastly different interpretations of what a social contract with America should look like. When you strip the candidates’ platforms to the bare bones, Mitt Romney wants less government and President Barack Obama wants more. But their differences may play out more on method than ideology. In other words, each will seek to decide how the role of government will be financed — through a broader tax base? With more taxes on the wealthy? This election represents a defining moment for the way forward in the United States, but for investors, it means very little.
Until the next election cycle begins...a break
Election Day is finally here in the United States. It seems like the presidential and senate races have been going on forever. For US citizens there is a lot at stake. The candidates represent vastly different interpretations of what a social contract with America should look like. When you strip the candidates’ platforms to the bare bones, Mitt Romney wants less government and President Barack Obama wants more. But their differences may play out more on method than ideology. In other words, each will seek to decide how the role of government will be financed — through a broader tax base? With more taxes on the wealthy? This election represents a defining moment for the way forward in the United States, but for investors, it means very little.
2012-11-01
Just the other day, I was asked to compare the late ‘60s, ‘70s and ‘80s to the present in relation to the US debt load, interest rates, stock performance and inflation, and comment on whether the history of these decades could be used as a guide for today. The truth is, we can always compare what was then and what is now, but in reality the United States is experiencing some very new phenomena with regard to its fiscal and monetary policies.
US debt burden will slow, not kill, growth
Just the other day, I was asked to compare the late ‘60s, ‘70s and ‘80s to the present in relation to the US debt load, interest rates, stock performance and inflation, and comment on whether the history of these decades could be used as a guide for today. The truth is, we can always compare what was then and what is now, but in reality the United States is experiencing some very new phenomena with regard to its fiscal and monetary policies.
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