Wednesday, October 22, 2014

View From THE Vampire

The excellent Research Department of the once-excellent Goldman Sachs has released their latest projections.  Here is a sampling:

1.  The U.S. economy is the economic engine of the world again.   (Agreed!)
2.  Our economic recovery still has room to run.  (Agreed!)
3.  GDP growth next year was reduced to 3.1%, which is still good.
4.  Unemployment will end 2015 at only 5.4%, which would be great.
5.  Inflation this year & next year will remain less than 2%.  (Agreed!)
6.  Ten-year-Treasury yields will end this year at 3.0% and next at 3.5%.  (Disagree!)
7.  The S&P 500 will end this year at 2,050 and next year at 2,100.
8.  Gold will end this year at $1,050 but rise to $1,200 next year.  (It's about $1,240 now.)
9.  The dollar will continue to appreciate through next year.

I do wish they would discuss how long monetary policy can propel this country alone, with no help from fiscal policy.  However long that period is, it is getting shorter every day.

Monday, October 20, 2014

Don't Ask Me Why

Despite being born and raised in the South and despite being named to play "Uncle Remus" in an elementary play due to my strong southern accent, I have never considered myself to be a "southern boy" or "good ole boy" of any type.  But, it troubles me that employment data from the South is less clear than employment data from the rest of the country.

Generally speaking, the rate of unemployment has been dropping all across the country since 2009.  But, in the last six months or so, it has risen in three southern states, i.e., Georgia, Tennessee, and Louisiana.  The predictable political response from the three Republican governors was that the Democratic administration was "fudging the numbers" for political purposes.  Of course, that not only assumes set-for-life-bureaucrats will choose to become criminals but also begs the question of why fudge the numbers for those three states and not other states with Republican governors, such as Texas.

Digging deeper, the other employment indicators, such as new unemployment filings, home purchases corporate hiring, etc., don't support the higher unemployment rates in those three states.  The economy in each of those three states is definitely growing.  The most common belief is that the labor force participation rate is increasing.  In other words, people in those three states are now more optimistic about getting a job and returning to the labor force but at a faster rate than they are being hired or absorbed into the labor force.

Digging still deeper, the unemployment rate is a blend of two survey techniques, i.e., the payroll survey and the household survey.  Now, the payroll survey is based on payroll taxes paid, supplemented by phone calls.  That survey shows continued job growth and falling unemployment in those three states.  On the other hand, the household survey is conducted by calling random phone numbers and asking how many people in that household are looking for work or have jobs.  It is the household survey that is driving up the unemployment rate in those three states.

Does that mean the phone canvassers have called disreputable random numbers for six straight months?  That is a remote mathematical possibility -- very remote.  Or, does it mean that random households in those three states hate the government so much that they lie as a matter o f principle?  But, why only those three states?  I don't know . . . 

Friday, October 17, 2014

Bull and Bull Markets

One of the rumors on the Street is that the reason stocks have been falling so much in October is that hedge funds have generally done poorly this year, under-performing mutual funds.  Feeling some financial pressure as individuals, they took a look at the 20% of profits that they keep and decided to take all the profits they could right now and sit out the rest of the year in cash.  This is Bull!  Most of them don't have any investment profits to take 20% from.  Plus, any firm that lets investor's money sit in cash, while they charge annual fees of 2%, will see investors run away from them.

Another rumor is probably true.  The strong rise in the dollar over the summer was due to foreign demand for dollars.  In August alone, foreigners bought $25.7 billion in U.S. Treasuries and $52.1 billion in corporate bonds.  Since you cannot buy U.S. bonds of any type with Euros or Yen or anything else, they had to sell those currencies to buy dollars, creating a bull market for the dollar.

Rumors come with all degrees of truth but some smell worse than others.

Thursday, October 16, 2014

Asking the Unknowable

For well over a year, I've been writing that stock market corrections of 10% or more are perfectly normal in the short run and even healthy for the stock market in the long run.  I've also written that the longer we go between 10% corrections, the more likely it will be a 15% correction, and we are almost two years overdue for a correction.

I expect this correction still has legs to run.  (The S&P is down 8% at this point.  Small cap stocks are already down 11.6%)  This is a fairly normal correction, reflecting slowing global growth, not a global financial crisis.  The sky is NOT falling.  Buying opportunities are coming up!

Still, this correction is more interesting than a plain vanilla correction, because nobody knows the emotional impact of Ebola on investors.  Instead of a normal 10-15% correction, does the fear of Ebola guarantee the correction will be 15-20%.  Nobody knows, but it happened at a very unfortunate time, compounding a normal correction.

Since you don't have a choice, just enjoy the ride down, secure in the knowledge there will be a ride back up.

Tuesday, October 14, 2014

Facts vs. Fears

The United States is producing well over 200 thousand jobs each month.  ISIS!  The latest survey of small business shows the highest level of firms saying now is a good time to expand.  Putin!  Lending to business is up 6.3% over last year.  Ebola!  The stock market hasn't had a 10% correction in 31 months.  Worry!  Oil prices are falling, with gas falling under $3/gallon.  Fret!  The dollar is once again strong and getting stronger.  Oh, No!  The annual Federal budget deficit has dropped over 50%.  Anxiety!  There is absolutely no evidence of inflation on the horizon.  The End Is Near!  Manufacturing is up 4.1% over last year.  We're All Going To Die!  Interest rates will not be going up for at least another 6-12 months.  Is It Too Late To Attend Church?  Corporate earnings are now at the all-time high.  That's It -- SELL, SELL, SELL . . . After all, you can always review the facts later???

Sunday, October 12, 2014

$700 TRILLION Stent

Jim Fixx was never a great runner, but he was the father of the running movement during the 1970's and 1980's, with the release of his best-selling The Complete Book of Running.  Although he was a fairly good runner, with a lean runner's physique, he nonetheless dropped dead from a heart attack during a normal daily run in 1984.  He had one fatal weakness, i.e., his heart.

The world financial system in general and the U.S. financial system in particular have been steadily improving since the global financial crisis.  This has allowed our economy to turn around and grow significantly.  However, even though our economy is running well, there is one fatal weakness, i.e., derivatives.

But, there is reason to celebrate . . . cautiously.  The International Swaps and Derivatives Association (ISDA) has just agreed with the 18 major banks dominating 90% of the worldwide derivatives trade to give regulators the power to suspend contracts for 48 hours.  I know, I know . . . it doesn't sound like any big deal, and it may not be, but it just might give regulators enough time to hopefully preclude another collapse like Lehman Brothers in 2008, by temporarily de-linking the contracts from the institutions.

It is not a complete lifestyle change of diet and exercise.  It is just another stent in a weak heart, because it does nothing to shine sunlight on the level of contracts outstanding, nor who is holding what exposure to whom.  But, it is a welcome step in the right direction.  With it, the world of finance just got a little bit safer.

Q3 Column

My latest column for Inside Business has been published and can be found at:

http://insidebiz.com/news/2014s-3rd-quarter-performance-beats-odds 

Unfortunately, the online edition does not contain the graph found in the newspaper edition.  Therefore, I encourage you to buy a copy.  It does make it easier to see the change in the velocity of money.    

Thursday, October 9, 2014

Muscle Imbalance

Most every person struggles with internal conflicts.  One of the most common is that conflict between mind and heart or between the rational and the emotional.  A common assumption is that one is good and the other is not-so-good.  Therefore, it logically follows that the good one should be strengthened and the not-so-good one weakened.

Believing the mind is just another muscle that demands continual exercise, I have searched for both more information and more understanding all my life.  If anything, that search is stronger now than at any point in my life.  Believing the heart was an overly-strong muscle already, the Army helped me greatly to compartmentalize, coarsen, and control the emotional side.  It has demanded little effort since then.

But muscle groups need to be in balance.

Yesterday, I visited a dying client.  He must have mere weeks left.  A big, strong guy before, I could lift him with one arm now.  With a booming voice before, I struggled to understand his gasps now.  I must say he has accepted and respected his fate with both courage and grace.  I salute him!

Having done it many times, I know what to do, from a financial standpoint, after he is gone.  As is common, the kids suspect the trusted financial advisor is there to somehow cheat them of their inheritance, but I know how to educate them, while reassuring the widow.  I know what to do for them.

Maybe, it is because I'm getting older or because I've seen so much death or because my emotional muscle group needs to go back into the Army, but the burden of sadness seems to be getting heavier.

One of the most important concepts to economists is that of "opportunity cost."  What else could be purchased with this money?  For example, the cost of a new aircraft carrier is not one billion dollars, but is two hospitals and one medical school.  The opportunity cost of watching talented people die and take that talent to the grave with them is a cost beyond measure.  Oddly, in ways I cannot explain, economics helps me to somehow carry the sadness.

Wednesday, October 8, 2014

272 Points

Yesterday, I was reading the weekly commentary of my favorite sage, old Wharton professor, Dr. Jeremy Siegel.  It was written last Friday, and it concluded "from a technical standpoint, the rebound in the Russell 2000 Index from its May bottom was encouraging, but it may retest these levels.  It is not certain that, despite today's (Friday's) strong payroll number, a short term correction is not at hand."

In other words, he was predicting a technical but only short term correction.  Then, I looked at CNBC to see the Dow was down 272 points and wished the good professor was here.  I'm sure he would remind us that 272 points when the Dow is near 17,000 is trivial, compared to the 272 points when the Dow was only 8,000 points in 2009.  Then, I expect he would remind us that periodic 5-10 percent corrections are actually good for the stock market in the long run.  Lastly, he would remind us that he expects the S&P to end the year at 2,050 at least, compared to 1,935 now or up 5.9%.

And, I would remind you that he was the singular most accurate forecaster last year, missing it by a mere two points!

Tuesday, October 7, 2014

Quarterly Column

Readers know I write a column for Inside Business, which I submitted yesterday.  Here is the opening:

The sensitivity of stock markets to geopolitical events varies over time.  Since the global financial crisis of 2008/9, our market has been extremely sensitive to them.  But, over the last quarter, we have seen more Russian aggression against the Ukraine, practically assuring another recession in both Russia and Europe.  A virtually unknown “JayVee” terrorist group has drawn us back into Iraq, and it even immortalized its own barbarism by publishing videos of their war crimes.  Of course, Asia is not immune to geopolitical unrest, drawing closer to another “Tiananmen Square” in Hong Kong, which will unleash even more trade sanctions.  And, the horror of Ebola suddenly popped up in America’s heartland, further rattling our faith in government.


Yet, the S&P 500 rose 0.6 percent, and the Dow rose 1.3 percent during Q3.  This decrease in sensitivity to geopolitical events is simply breathtaking!  

Friday, October 3, 2014

Supreme Help . . . Please!

The pundit class is upset because the Supreme Court has declined to review any cases on same-sex marriage for this upcoming term.  Lost in their consternation, nobody has noticed the Court did take up two cases on redistricting, which I believe is the source of all political evil and far more important than same-sex marriage.

First, they will review whether the new Alabama redistricting plan discriminates against African-Americans.  While that is certainly understandable, how about discrimination against political moderates who lose their voice when their districts are skewed either to the left or the right in order to protect some politician?

Second, they will review whether Arizona can take redistricting responsibility away from politicians and give it to an independent commission, as has been proposed in Virginia.  Politicians are opposed to this, as they will lose the ability to pick which areas get to vote for them.  They argue that redistricting is the people's business, which should be done by their elected officials.  This is no different than arguing that only the foxes can guard the chicken coup.

Progress in Washington cannot be achieved until moderates have a chance to return, which will take many years at best.  The Supreme Court could help . . . please!

Thursday, October 2, 2014

Just One More Scare ?

Yesterday's frightening drop in the stock market was just that -- just another frightening drop in the stock market.  Rejoice -- we've been needing a 5-10% drop for a long time now.  Such temporary drops are essential for the long-term health of the market.  In fact, small-cap stocks are already in correction territory, and it looks like mid-cap stocks are rolling over as well.  Good!

Some fear it is the "October Effect," thinking the market always drops during that month, which isn't true.  Since 1929, October has been an up-month 60% of the time.  But, it has been more frightening.  Since 1929, there have been 91 days when the market rose or fell more than 6% in one day, but 23 of those 91 days have been in October.  I think we are still traumatized by the Great Crash in October of 1929 and the Minor Crash in October of 1987, when the Dow dropped "only" twenty percent that day.

I think yesterday's drop reflected our knee-jerk horror of an Ebola pandemic in the United States.  No question, that would be horrific, but we are not exactly defenseless against it.  Would it hurt the economy?  Absolutely . . . for awhile!  Would it crush the stock market?  Yes . . . for awhile!

If anything, the failure of the Dallas hospital to connect the dots only makes it less likely to happen again in the future.  I remain much more concerned about the Russia/Europe problem than the ISIS problem, or the Secret Service problem, or even the Ebola problem.  My darkest fear remains a financial collapse from derivatives, and that has nothing to do with Ebola!

Wednesday, October 1, 2014

Interesting Projections From Goldman

Analysts who work for firms that sell stocks are often called "sell-side" analysts.  Not surprising, they always have stock they recommend that YOU buy.  Investment managers are usually "buy-side" analysts and are bearish as often as bullish.  Normally, you listen to buy-side analysts and take sell-side analysts more lightly.

Goldman Sachs is both a seller of stocks, as well as an investment manager.  They tend to be bullish but can also turn bearish.  And, I do respect their investment research during both the ups and the downs in the stock market.

Their latest projections are this:

1.  They have studied recoveries in 13 developed nations since 1970 and have found that recoveries from housing busts are longer and slower than other recoveries.  Therefore, this anemic recovery which is now 62 months long still has plenty of recovery left in it.

2.  This is a jaw-dropper here -- the Euro will fall to parity, or equal one Euro for each dollar, by the end of 2017.  Companies that sell to the Eurozone will become un-competitive price-wise, but it will get cheaper for Americans to vacation in Europe.  That should also bring a good deal of investment dollars into the U.S. from abroad, which is good for the stock market.

3.  The tendency to think the sky will fall when the Fed starts raising interest rates is misplaced.  "Equity returns initially stagnate over the first few months of a policy-rate-hike cycle . . . then quickly resume their upward trejectory."  And, those interest rate increases are not expected until 2015.

4.  The unemployment rate will fall to 5.4% by the end of next year.

5.  Inflation remains modest through the end of 2015.

6.  The S&P 500 will end this year at 2,050.  It is about 1,955 now.

7.  Commodities like gold and oil will continue to trend lower, primarily to the strengthening dollar.

So, does that make Goldman Sachs a bear or a bull or a . . . just another "vampire squid," as they were described in Rolling Stone magazine?

Ripples In The Maternity Pond ?

Wouldn't it be great if all young people got a college education, along with the resulting good job, and then got married and bought  a home?  That was the notion when Congress greatly expanded lending to college students in the 1990's.   As we encouraged them to do, they promptly went to college, mostly brand-new, for-profit private "colleges" and received semi-useless degrees, which got them no job or an unexpectedly low-level job.  College debt now exceeds all credit card debt.  As I've written before, the heavy college debt makes them unqualified for the now-stricter mortgage approvals, and that is hurting home sales, which also prevents your home from rising in value more rapidly.

But, there is another perspective.  There has been "a massive new study" finding that, of the 9 million women who were in their early 20's during the Great Recession, about 151 thousand of them will defer having babies until they are at least age 40.  The stated reason for this is "economic insecurity," but I cannot help wondering how much of that insecurity results from the burdensome college debt we encouraged them to take.

One can argue that the best of intentions in the 1990's will result in 151,000 fewer Americans.

Monday, September 29, 2014

Staying Focused

The most interesting travel experience I've ever had was in 1987, when I happened to be in Hong Kong on the day the British government announced the handover of Hong Kong to Red China.  Immediately, the vibrant exciting city become moribund.  There was no traffic on the formerly crowded streets.  The stores didn't open.  The parks were deserted.  The people of Hong Kong had been betrayed and sold out.  Of course, China had a good PR spin, promising "one government, two systems," which meant capitalism would be permitted in Hong Kong but not democracy.

You don't understand China if you don't appreciate their greatest fear is a public uprising.  For the last two nights, demonstrators have taken to the streets in Hong Kong, rattling stock markets around the world.  Today, the Dow lost 160 points at the open, and it is going to get worse.

There is zero possibility that this demonstration will accomplish anything more than getting some demonstrators killed.  (Remember Tiananmen Square in 1989?)  When the shooting starts, world stock markets will nosedive again.  Then, they will stabilize and resume their upward climb.

If you really want to lose sleep about something, then worry about Russia's ambitions.  The media is carpet-bombing us with stories about IS or ISIS or ISIL or whatever.  With only 35-40,000 soldiers, they are insignificant compared to Russia, where their economy is sinking quickly into recession.  Their stock market has crashed, and the Ruble is at a multi-year low.  The best way to divert the Russian people from their own economic woes is to whip-up some saber-rattling war-talk.

If Putin cuts off natural gas to Europe, then Europe is immediately in recession.  This would greatly hurt U.S. growth, reducing our stock appreciation for awhile, affecting your retirement.  And, why wouldn't he cut off the gas?

Forget Hong Kong, even forget ISIS, but stay focused on Russia!

Friday, September 26, 2014

Lawful Discrimation

Everybody knows that a rowboat operates better with two oars than one.  The same is true for economic policy – it works better with BOTH monetary policy and fiscal policy.  Monetary policy is controlled by the Fed, which has done the heavy lifting to get the economy out of recession.  Fiscal policy is controlled by Congress, which has done nothing.  If the opening page to your internet connection is not set to www.usdebtclock.org – why isn’t it?

Dr. Hyman Minsky was a Keynesian (think: Democratic) economist from Washington University who popularized the very Classical (think: Republican) economic belief in the “Minsky Moment.”  He argued that debt will keep expanding until such time it cannot, when the debt markets will then collapse suddenly.  The problem is that nobody knows when that moment will be.  I do know that moment will be ever-closer -- as long as Congress remains useless.  (It should be illegal for any elected official to say “if only the other side would work with us!”)


The borders of political districts are redrawn ever ten years, based on the latest census data.  The current practice is to allow elected politicians draw the borders to include their likely voters and exclude others.  Thus, elected Republicans run in purified districts that are safe for Republicans.  The same is true for Democrats.  The problem is that pure districts discriminate against moderates of both parties who can accomplish things and favor purists (think: extremists) who can obstruct things.  This means Congress will remain useless until the next census in 2020 at least.  The question is whether the Minsky Moment will occur before then?

Discrimination against moderates is not prohibited by the Constitution.  

Neither is the Minsky Moment!

Thursday, September 25, 2014

Worrisome Sign

The conventional wisdom on the stock of smaller companies or small-cap stocks is that they produce higher returns over the long run because they are more risky than large-cap companies.  After all, the risk-return ratio seems to justify that, doesn't it?

If that relationship starts to break down, it suggests problems for the overall stock market.  Take a look at this graph, which tracks the Russell 2000 Index of smaller companies:

Chart of the Day

Since the crash of 2008/9, small-caps have trended upwards within an increasingly narrow band.  Breaking out of that band is a worrisome sign, and it has now broken out!

It seems counter-intuitive that small-caps, which have minimal international trade, would be breaking out of its long-term trend while large-caps, which have 50% sales exposure to international trade, are not breaking out, especially during this period when the U.S. economy is largely out-performing the rest of the world.  That is even more worrisome.

This is probably just a technical breakout and not a panic button, but it is worth watching . . .

Wednesday, September 24, 2014

Semi-Bragging

On January 6th, Inside Business published my 2014 stock market forecast that the Standard & Poor's 500 Index would reach 2,014 in this year.  It was 1,800 at the time.

On September 19th, it happened.  That's the good news!

The bad news is that it was an intra-day high on the same day of the Alibaba IPO.  When the market closed, it was back below 2,014 and has not risen above it since then.

Be patient -- I still think the S&P 500 will end the year at 2,014 or above.  Bumpy market conditions like one normally finds during wartime are unsettling and annoying but nothing more.  Think long term if you can -- increase cash if you cannot.

Saturday, September 20, 2014

Is Brazil is"getting an American" ??

Typical of their sophomoric humor, the current joke circulating among economic students is that President Obama "needs a Brazilian."

Normally, an improving job market reflects an improving economy.  If you can make GDP increase, then you can make unemployment decrease.  Right now, the Brazilian economy is slowing down, from 2.1% to 1.0%.  Job creation has decreased from 2.1 million per year to only 536 thousand.  Yet, unemployment just hit a record low of 5.2%  The president, Dilma Rousseff, is enjoying rising popularity, despite a falling GDP.  Jobs matter more!

In the U.S., the economy has certainly been improving, growing over 4% last quarter. Regular unemployment has decreased but is nowhere near a record low, while the long-term employed has remained stubbornly high.  Economic students say President Obama should increase student aid as well.  That would be "getting a Brazilian."

How does this apparent inconsistency exist?  President Rousseff took a page from President Clinton's playbook in the 1990s, i.e., making massive student loans possible, which takes young people out of the unemployed.  It is estimated that 9.6% of the workforce between the ages of 15-24 have gone back for higher education.  That worked well for holding down U.S. unemployment during the 1990s.

Unfortunately, the best of intentions can lead to hell, and that is the case for the U.S.  Easy financing
fueled the rise of for-profit "failure factories," producing graduates with questionable degrees who cannot find work.  To make it even worse, they have to repay loans taken to earn these questionable degrees.  There is now more total student debt than credit card debt in this country!  This is also making young people ineligible for mortgages to buy their first home, especially hurting the housing industry.

At some point, Congress will have to deal with this debt that is crushing the economy, such as 50% discounts for students becoming firemen or nurses or relocate somewhere.  However, with ISIS, the Ukraine, Ebola, China, climate change, and the $17.7 trillion national debt, the plight of those, who believed a college degree leads to good things, will suffer from a lack of attention.  I hope Brazilian students are spared the plight of American students.

Friday, September 19, 2014

Enjoy The Show

Most people find it boring and tedious to watch the stock market all day, and I understand that, but consider today, Friday, September 19th.

First, it is a Friday, always the most unpredictable day of the week.

Second, Scotland wisely voted to remain in the United Kingdom, saving the pound from dropping and saving the dollar from spiking up too much, hurting our exporters.  That should produce a relief rally!

Third, it is a triple-witching day, when futures, forwards, and options all reset.  This can sometimes produce unpredictable volatility.

Fourth, it is the day that Chinese giant Alibaba goes public.  As an extremely hot IPO, the animal spirits or dollar-lust will be hot and heavy on the NYSE floor today.  Remember Facebook's IPO?  This usually creates a rally -- another plus!

It is not a good day to enter trades.  It is a good day to lean back and enjoy the show.

Wednesday, September 17, 2014

"Considerable" Angst

Outgoing Fed Head Ben Bernanke did not want to be remembered solely as the Fed Head who greatly expanded the economic power of the Fed.  Last year, he.announced that his program to stimulate the economy known as Quantitative Easing (QE) would begin tapering, i.e., slowly decreasing monthly purchases of Treasury bonds and mortgage-backed bonds from $85 billion per month.  It is expected to end completely next month.

Wall Street immediately jumped to the next question -- not when will QE end, but when will interest rates begin to increase?  At her first press conference in January, incoming Fed Head Janet Yellen was asked that question and replied "Oh, six months or so," which she quickly came to regret.  The bond market convulsed as bondholders sold bonds maturing in more than six months, as those bonds would decrease in value once the announcement to increase interest rates were made.

She eventually recovered by changing her statement to -- it would be "a considerable period" between the end of QE and the first interest rate increase.  The bond market calmed down.

Two things have happened since then.  First, the end of QE is now upon us, and, two, the economic data has been strong enough to suggest that the economy no longer needs the "training wheels" of low interest rates.  Speculation has been increasing that the next meeting of the Federal Reserve Board, which ends today, would change the language, removing the word "considerable."

Yesterday, the market rallied strongly on rumors the Fed would stand pat, without dropping "considerable."  Today at 2:00 PM, the minutes will be released, and we will know.  If the word stays, I expect a modest rally.  If it is dropped, I expect a modest sell-off.

But, more importantly, don't watch the stock market reaction -- watch the bond market! 

Tuesday, September 16, 2014

Drinking From A Fire Hose

I just watched the monthly video of economic conditions from Wells Fargo.  They foresee continued GDP growth of roughly 3% thru the end of 2016.  If so, this would be the best two-year GDP expansion in a decade.  They also consider the disappointing Jobs Report earlier this month of only 142 thousand jobs to be an anomaly and expect it to return to a more normal 200 thousand level.  Importantly, they see the greatest risk to their forecast as being the Russia-Ukraine crisis.  An embargo of natural gas from Russia to Europe would have painful economic consequences to the West.  It was an excellent and timely video update, as usual.

However, while watching it, I kept thinking about the house guests from California that we enjoyed last weekend.  They're dear friends that we've known for many years, and I thought they understood my profession better.  But, then they asked how I could compete against the stockbrokers who have whole research departments.

I was flabbergasted!

A stockbroker only has access to the research of his employer and, whether he believes it or not, is required to follow that research.  An independent NAPFA-Registered financial advisor has access to more research than can be consumed.  It is truly like "drinking from a fire hose."  Plus, we can follow the research that makes sense to us, not solely whatever makes sense to the head of the research department.

I study the research from Wells Fargo, Goldman Sachs, several mutual fund companies, as well as Bloomberg, and the National Association of Business Economists.

I'm drowning in research!

Monday, September 15, 2014

The First Nihilistic Nation

The seemingly sudden arrival of the Islamic State upon the world's stage is disturbing in a number of ways.  After all, it even televises and broadcasts its atrocities and war crimes.  It truly celebrates a culture of death.  I suspect it is the first truly nihilistic nation - one that sees life as a mere waiting room for "nothingness."

Nihilism has been defined as moral and spiritual bankruptcy.  ISIL labels itself as guardians of Islam, but is it?  I know Islam as a religion of peace.  (Of course, like all religions, it has its radicals, but Islam has more trouble marginalizing its radicals, and I don't know why?)  ISIL is proud to be the deliverer of death, not peace.  That sounds like moral and spiritual bankruptcy to me.

The original nihilist was the Greek Gorgias (483-378 BCE) who said "Nothing exists. If anything did exist it could not be known. If it was known, the knowledge of it would be incommunicable."  The word is derived from the Latin word for nothing, and it was popularized by the Russian novelist Ivan Turgenev in the mid-nineteenth century.  The video for the hugely popular 1986 song by the Swedish band Europe entitled The Final Countdown showed crowds of young people joyfully awaiting the nuclear holocaust, which is the final step toward nothingness.  Many religious ministers have warned against the impact of nihilism on our culture.

But, ISIL is more than a nihilistic culture, it is the first nihilistic state.  It cannot exist without death.  When it runs out of people to kill, it will have to self-immolate.  Our job should be to facilitate them.  Contain them in a perimeter of carpet bombing, cut off their income, . . . and wait for them to achieve nothingness.

Wednesday, September 10, 2014

A Bad Sequel

It is a bad sequel to a great movie.  One can argue that the only good thing Mel Gibson ever did was the 1995 movie Braveheart, which won several Oscars, including Best Picture.  It shows the subjugation of Scotland by the English beginning in 1280.  That was a long time ago, but tribal memories are even longer.  The Scots still want to be independent, unfortunately.

With the markets focused on the Ukraine, Syria, ISIS, ebola, and so forth, nobody noticed that the Scots are finally getting to vote next week on whether they want to be part of Great Britain, ending 307 years of economic and political integration.  Nobody thought Scotland would really vote to succeed, but the first poll indicating the Scots would vote Yes to succeed was Saturday.  The second poll was Monday.  Suddenly, Great Britain is terrified, and the English Pound has started falling.

There are so many imponderables about this.  Will it be good or bad for the pound in the long run?  Will there be a fight over the oil revenue from the North Sea off Scotland?  Since Scotland is normally Labor (think Democrats) in the English Parliament, does this hand permanent control to the Tories (think Republicans)?  Will Scotland join the European Union?  Will it even be accepted into the EU?  Will it join NATO?  Will this election encourage other tribes to succeed, like Catalonia from Spain?

And, what does increased uncertainty do to stock markets?  It's not good, especially for the English stock market!!

It is an unfortunate coincidence that the current Scottish independence movement was born before England's austerity measures started to pay off.    Sometimes, economics drives politics.



Tuesday, September 9, 2014

A Chilly Similarity ?

My father likes to watch educational, non-fiction DVDs about World War II, which I order and often preview for him.  Last weekend, I watched the two-disc set of Apocalypse Hitler.  The first disc detailed the childhood and early adult years of Hitler.  It was interesting to me that he was such a "Mommie's Boy" and that his much younger niece killed herself to escape living with him.

The second disc, however, was more educational.  It detailed his rise to power.  He was obviously a great political strategist, as well as a great orator.  There was one speech in particular that gave me chills.  He gave it during the election campaign and warned of the evils of compromise -- pronouncing it a sell-out of the people and their values.  Compromise corrupts!  He promised there would be no compromise once he was elected.

Does that remind you of any current political party or partisan?