2013-01-29
Japan has joined the worldwide trend toward easy money. And in doing so, the country’s leadership is hoping to boost the rate of inflation and lower the value of the yen. A cheaper currency would make Japan’s exports more competitive in the world export market, and that is something that Japan desperately needs.
But Japan’s move has raised some eyebrows in the world of international trade. A currency’s value plays a large role in the competitiveness of a country’s products. A weak currency provides a competitive advantage. But intentionally manipulating a currency can start currency or trade wars.
A zero-sum game
Japan has joined the worldwide trend toward easy money. And in doing so, the country’s leadership is hoping to boost the rate of inflation and lower the value of the yen. A cheaper currency would make Japan’s exports more competitive in the world export market, and that is something that Japan desperately needs.
But Japan’s move has raised some eyebrows in the world of international trade. A currency’s value plays a large role in the competitiveness of a country’s products. A weak currency provides a competitive advantage. But intentionally manipulating a currency can start currency or trade wars.
2013-01-25
As we near the end of the first month of 2013, I am seeing some significant changes in how equity markets are moving and operating.
Macroeconomic concerns fading: The risk on/risk off approach of these markets, characterized by rapid in-and-out moves by hedge funds and aggressive money managers, seems to be abating. This change comes as worries about the eurozone and its potential breakup recede. Concern seems to have eased after the European Central Bank assured investors that it will continue to bolster Europe’s banks. Germany’s agreement to work adroitly to support a smooth transfer to a more stringent eurozone fiscal union also helped assuage investors. In the United States, the idea that "only macro matters" receded after the US Congress managed to avoid a broad-based income tax increase.
Strategist's Corner: Market looks past fear and toward future
As we near the end of the first month of 2013, I am seeing some significant changes in how equity markets are moving and operating.
Macroeconomic concerns fading: The risk on/risk off approach of these markets, characterized by rapid in-and-out moves by hedge funds and aggressive money managers, seems to be abating. This change comes as worries about the eurozone and its potential breakup recede. Concern seems to have eased after the European Central Bank assured investors that it will continue to bolster Europe’s banks. Germany’s agreement to work adroitly to support a smooth transfer to a more stringent eurozone fiscal union also helped assuage investors. In the United States, the idea that "only macro matters" receded after the US Congress managed to avoid a broad-based income tax increase.
2013-01-17
I typically study five areas of the US economy to find clues to the future direction of corporate profits and the economy in general. These are the five key fundamental building blocks I have used to construct my view of the economy over the last few years. Using these tools has helped me to weed out the politics and rhetoric from the basics of the business cycle. Here's a fresh look at where we are now.
Swanson's Scorecard January 2013
I typically study five areas of the US economy to find clues to the future direction of corporate profits and the economy in general. These are the five key fundamental building blocks I have used to construct my view of the economy over the last few years. Using these tools has helped me to weed out the politics and rhetoric from the basics of the business cycle. Here's a fresh look at where we are now.
2013-01-15
I am walking about in the central German city of Cologne on a drizzly January night. In talking to the Germans on the street, it becomes clear to me that they admire Chancellor Angela Merkel. She has remained firm on her demand that the eurozone rest intact and that countries with high debt-to-GDP ratios bring down those burdens as dictated by the Maastricht Treaty, which was signed by eurozone members in 1992.
Merkel is likable and free of scandal. But will this visible and powerful woman be reelected by a population increasingly impatient with the spending behavior of countries like Italy and Greece? The German people as well as the government have been opposed to offering too much help to their southern neighbors, who have opted for shorter work weeks, longer vacations, more job security and other entitlements that have left their national balance sheets in disarray. Why should the Germans, who have lived more conservatively and within their means, be obligated to pay for the excess of the others?
An explosive brew
I am walking about in the central German city of Cologne on a drizzly January night. In talking to the Germans on the street, it becomes clear to me that they admire Chancellor Angela Merkel. She has remained firm on her demand that the eurozone rest intact and that countries with high debt-to-GDP ratios bring down those burdens as dictated by the Maastricht Treaty, which was signed by eurozone members in 1992.
Merkel is likable and free of scandal. But will this visible and powerful woman be reelected by a population increasingly impatient with the spending behavior of countries like Italy and Greece? The German people as well as the government have been opposed to offering too much help to their southern neighbors, who have opted for shorter work weeks, longer vacations, more job security and other entitlements that have left their national balance sheets in disarray. Why should the Germans, who have lived more conservatively and within their means, be obligated to pay for the excess of the others?
2013-01-10
I am currently on a fact-finding trip in Europe. January is a perfect time to see London, meet with business leaders and get around without a phalanx of tourists slowing travel. What has struck me most, however, is the cost of real estate. Here in London, prices are far higher than in many other global capitals.
Almost everywhere you go in the western world, real estate is still recovering from the deleveraging that began in the last recession. Not so in London.
This week, I had dinner in picture–perfect Hampstead. I asked about a recently completed real estate transaction in the area. Practically in front of me, down a stone-cobbled street, was a modest four-story, but narrow, home with wooden doors and one parking space. The house, I was told, had just sold for £8 million pounds, or $12.9 million.
London calling
I am currently on a fact-finding trip in Europe. January is a perfect time to see London, meet with business leaders and get around without a phalanx of tourists slowing travel. What has struck me most, however, is the cost of real estate. Here in London, prices are far higher than in many other global capitals.
Almost everywhere you go in the western world, real estate is still recovering from the deleveraging that began in the last recession. Not so in London.
This week, I had dinner in picture–perfect Hampstead. I asked about a recently completed real estate transaction in the area. Practically in front of me, down a stone-cobbled street, was a modest four-story, but narrow, home with wooden doors and one parking space. The house, I was told, had just sold for £8 million pounds, or $12.9 million.
2013-01-08
The last time I was in Europe, it was Spain’s miners who were protesting government austerity measures that would help Madrid cut €65 billion from its budget by 2015. Today the protest is on the tax side of the aisle. French film icon Gérard Depardieu — in protest over the 75% income tax he must pay — sought and was granted Russian citizenship.
The UK and European papers are covered with the story that the Depardieu has taken exile in Russia. He is the flip side of the saga of the tax hikes and spending cuts that citizens of the United Kingdom and Europe will have to endure as their governments dig their way out of the mountains of debt. The Spanish miners were mad that they would face wage and benefit cuts. Depardieu has left his native France to avoid paying France’s progressive income tax under which the top marginal rate is 75%.
To Russia with love and tax receipts
The last time I was in Europe, it was Spain’s miners who were protesting government austerity measures that would help Madrid cut €65 billion from its budget by 2015. Today the protest is on the tax side of the aisle. French film icon Gérard Depardieu — in protest over the 75% income tax he must pay — sought and was granted Russian citizenship.
The UK and European papers are covered with the story that the Depardieu has taken exile in Russia. He is the flip side of the saga of the tax hikes and spending cuts that citizens of the United Kingdom and Europe will have to endure as their governments dig their way out of the mountains of debt. The Spanish miners were mad that they would face wage and benefit cuts. Depardieu has left his native France to avoid paying France’s progressive income tax under which the top marginal rate is 75%.
2013-01-03
A politically induced recession has been averted. On January 1 the US Congress managed to cobble together compromise legislation strong enough to avert a fiscal cliff that threatened to send the US economy into recession. The bill blocked most broad-based tax increases on the middle class while increasing taxes on top earners, capital gains and stock dividends. While the outcome could have been far worse, the Congress has done little to solve the longer-term US budgetary problem, which is the cost of health care.
Of cliffs, bumps and cycles
A politically induced recession has been averted. On January 1 the US Congress managed to cobble together compromise legislation strong enough to avert a fiscal cliff that threatened to send the US economy into recession. The bill blocked most broad-based tax increases on the middle class while increasing taxes on top earners, capital gains and stock dividends. While the outcome could have been far worse, the Congress has done little to solve the longer-term US budgetary problem, which is the cost of health care.
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