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Monthly Archives: February 2011

Is 2011 the time to short Japan’s bond market ?

Here’s where Japan is 21 years after their credit bubble implosion: the stock market is down roughly 75% . real estate prices are down roughly 70% .  Many a fortune has been lost betting that Japanese federal government bonds (JGB) would fall. The fundamentals are terrible: rapidly aging population, overall population beginning to shrink, shrinking workforce, rampant federal gov’t spending, and endless deficits. Yet, JGB continue to maintain […] Read the rest of this entry »

Election in Ireland

Ireland went to the polls on Friday. Results won’t be known until Saturday.  Fianna Fail has been in power for the past 14 years as is expected to see its worst defeat ever. The center-right party - Fine Gael -is expected to win the most votes and either form a parliament via coalition with the Labour party (that’s how Labor is spelled via the Queen’s english), or have sufficient votes to win […] Read the rest of this entry »

German voters dig their heels in

Last week, German Chancellor Angela Merkel’s political party (the CDU) lost heavily in the first of 7 state elections to be held in Germany this year. An overly simplistic (& wrong) conclusion is that Germans disapprove of her latest grand bargain to shoulder yet more PIIGS risk via an expanded bailout fund. Given the party (the SPD) that beat Merkel’s CDU lobbied for more generous support for Greece and is more pro-Europe than the […] Read the rest of this entry »

Q4 2010 GDP Update. 2011 is beginning to look like 2010.

2010 4Q GDP was revised lower on Friday from 3.2% to 2.8%. The room for revision was large, given the size of several key contributing factors last month. US GDP should pick up further in 1Q 2011 based on the weak dollar supporting exports, and because 80%+ of revenue gains from S&P500 companies continue to come from faster growing emerging markets. Our view of GDP growth for 2011 remains that […] Read the rest of this entry »

Weekly Short Economic Stories

Wisconsin has been the front line for state budget conflict for the past 2 weeks. The cheesehead revolution is trying to catch up to us here in NC by limiting state unions to negotiating pay (not benefits). Given the dire condition of state budgets and recent surge in the number of Republican Governors, we can anticipate a year of budget stand offs. Given the scale […] Read the rest of this entry »

Goldman Sachs warns of slowdown. Misses the point.

This week, Goldman Sachs warned that if House Republicans cut $61B from the 2011 federal budget, it would trim 1.5-2% from GDP in Q2 & Q3 this year.      Really?       The feds are going to spend over $4T (Congress + the Fed Reserve) in 2011 — roughly $1.8T more than they’ll collect.  A 1.5% ($61B / $4T) reduction in their spending is going to adversely slow the US Economy?    […] Read the rest of this entry »

$5 gasoline by 2014

Bothered by the high price of gasoline? Last month, regular octane gasoline was roughly $3.10 per gallon here in the US (roughly $0.82 per litre of petrol in the graphic below). It’s a pretty safe bet we’re looking at $4 gas this summer. The following graphic provides perspective. The price paid for oil and gasoline for the US and most European countries is fairly close to the same. The main reason for the price […] Read the rest of this entry »

Europe is fixing the wrong problem…on purpose

Last summer, the Europeans held widely publicized bank stress tests. Let’s call that exercise Sham 1.0.  Almost every bank passed. Only $4B in additional capital was recommended. This was of course a complete fabrication designed to pacify the masses. Shortly after the tests, Ireland’s banking system melted down. These same banks had just been stress tested and shown to be in fine health. Reality is quite a bit […] Read the rest of this entry »

Inflation begins

Inflation is finally rising, thank goodness. We were as close to deflation as we’ve been since 1950. By virtue of a lack of demand, the economy has been too weak to create  inflation. So the Fed has been trying to manufacture some.  It finally has succeeded by virtue of QE weakening the dollar. The weaker dollar is causing obvious food & fuel inflation, but because the weakened dollar makes all […] Read the rest of this entry »

Your own debt canyon

In order to grab your attention I’m going to give away the ending first: your household’s  share of the national debt will cost you $100K per year for the next 25 years. Justifiably so, this issue should have your full attention.  The White House called for Congress to reduce the fiscal deficit by $1.1T over the next 10 years. Clearly the White House is gambling the bond market will […] Read the rest of this entry »