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Monthly Archives: November 2009

China Update

The last time we had strong signals from the Chinese central government regarding a link between banking and stock markets, we sold our China ETF and then watched the Chinese stock market lose 60% of its value. That was 2007-2008. What’s got the Chinese spooked now is a warning for banks to tighten their lending practices further. Data Chinese banks have sprayed money around […] Read the rest of this entry »

Debt Avalanche Comes

In order to ensure that large banks did not fail earlier this year, banks were told to repair their balance sheets. They were: -          Force fed money from the feds to ensure their balance sheets showed a solvent bank. -          Told to raise equity (issue more shares) -          Told to raise money from bond issuances. In so doing, we dodged a bullet. But the […] Read the rest of this entry »

US Housing update

Monday saw the release of a headline “ Existing Home Sales Reach Highest Level in 2.5 years”. That is good news, and very exciting. That headline and the NABE (see previous article) about their prediction on unemployment only getting worse for another 5 months sent markets up 1.5% early in the day.  But read the data on housing sales. The rate with which existing […] Read the rest of this entry »

Unemployment data

While at a conference for CPAs, I had the opportunity to listen to someone from the Federal Reserve Bank System speak. He indicated that the Fed sees unemployment peaking in 1Q 2010. Unfortunately he showed a graph that was put together 2 months ago that showed projected unemployment rates for September and October that were considerably lower than where we are in reality. So […] Read the rest of this entry »

Goldman Sachs update

What are our friends up to at Goldman these days. Let’s see.  They’re busy making money in an environment where a large portion of their competition no longer exists. Fair enough. Capitalism at work.  The weak perish, and the strong get stronger. But what of employee compensation? They’re busy rewarding themselves at the expense of the business owners (shareholders). There are a few things […] Read the rest of this entry »

Why are there no “Sell” ratings?

This article serves to explain the following – via a real-world example: • why we mistrust most of what we read in the financial press / on TV. Why you should as well. • why we don’t get excited about roaring stock markets when they are not based on evidence that is rational or defensible. • how investment policy is implemented. It has always been […] Read the rest of this entry »

USA = Japan version 2.0

The Japanese economy went through 15 years of stagnation and 4 years of near zero growth since its peak in 1990. Since the reasons for their economic melt-down and ours are very similar, we can learn from their efforts to right their economy. What Happened in Japan: • The world’s 2nd largest economy was expanding at an unsustainable rate from a ballooning credit market. […] Read the rest of this entry »

2009 compared to 1983

There are talking heads in the financial media hyping a message that 2009 is the beginning of the next great bull market for US stocks – just like 1983 was. As usual, this is coming from industry insiders that benefit if the market goes up i.e., mutual fund and other money managers (Known as the sell side because they have stuff to sell. Hey, […] Read the rest of this entry »

Score 100 for US

What happens when countries score a perfect 100% ? By that we mean achieve public debt to GDP ratios of 100% (yes, that’s a bad thing). It happened in Canada and in Sweden in the 1990s. Because it is coming to the US within the next 10 years, let’s see what happened and how they (Canada & Sweden) dug themselves out… First, before any […] Read the rest of this entry »

US Business Hoards Cash

It is not news that large US banks are hoarding cash. But US businesses (non-banks) are now hoarding cash at an unprecedented rate. The 500 largest nonfinancial companies in the US now hold almost $1T in cash and short term liquid securities on their balance sheets. This is almost 10% of the assets on their balance sheets. They are also paying off debt as […] Read the rest of this entry »