crowding out | Sense on Cents

Posts Tagged ‘crowding out’

Has the Recession Really Ended?

Posted by Larry Doyle on July 26th, 2010 11:25 AM |

In the course of a discussion this past week, I made the point that I do not believe our economy has ever truly come out of the recession which officially began in December 2007. The National Bureau of Economic Research (NBER) is responsible for measuring the start and end dates for economic contractions and expansions. Why is it that the NBER has never officially declared an end to the recession? Interesting, very interesting.

On this topic, a good friend shared with me a fabulous piece which addresses our current economic health and the major hurdles for our future economic growth and prosperity. This piece, Quarterly Review and Outlook by Hoisington Investment Management in Austin, TX, addresses these hurdles in forthright, layman’s fashion. (more…)

Tags: are we out of recession, crowding out, deficit spending, deleveraging, economic contraction, economic expansion, excess capacity, has our recession officially ended, higher taxes, Hoisington Investment Management, Hoisington Quarterly Review and Outlook, Larry Doyle, Multiplier, National Bureau of Economic Research, NBER, recession, velocity of money, what does NBER do, when did we come out of recession, who is the NBER
Posted in General | 2 Comments »

Remaining on Guard…

Posted by Larry Doyle on April 4th, 2009 10:07 AM |

I much prefer a rallying stock market, but I am not a day trader trying to catch moves for quick flips. I look for changes in economic fundamentals (incorporating both private sector and public sector inputs), assess those changes with market technicals (overbought and oversold conditions), and position myself accordingly.

The big wild card in current analysis is the impact of public sector inputs. Many of the maneuvers utilized by the Treasury and Federal Reserve have never been used prior to this economic downturn. Are they working? To what extent? What are the unintended consequences? What is the time delay from implementing a program to measuring its impact on the economy? These questions are the topics of protracted discussions by economists, bankers, analysts, and money managers around the globe. I’d also like to address them here at Sense on Cents.

My market instincts tell me that programs injecting trillions of dollars across wide swaths of the market are not without costs. These costs in the form of “crowding out“, distorted competition, changed behaviors (AIG undercutting insurance rates), moral hazards, and inflation are very real. The challenge is assessing the risks of these long term costs versus the necessity of providing sufficient capital and liquidity backstops to support the economy. (more…)

Tags: crowding out, economic fundamentals, Fibonacci Retracement, moral hazards, more government bailouts, rallying stock market, relaxation of mark to market, technical analysis
Posted in Bailout, Bank Failure, Banking Institutions, Credit Risk, Economic Stimulus, Economy, Equity Markets, Fannie Mae, Freddie Mac, Government funds, Obama Administration, Tim Geithner, Wall Street | 14 Comments »

February 2009 Market Review

Posted by Larry Doyle on February 28th, 2009 10:13 AM |

Prior to going to the comments section of my son’s report card, human nature dictates that I first look at the grades. In that same vein, let’s see how the markets performed for the month of February:

22709-market-changes

Let’s review my specific projections from the January 2009 Recap: (more…)

Tags: Budget, Canadian dollar, commodities, corporate bonds, correlation, crowding out, Deficit, DJIA, Economy, equities, Euro, financial rescue package, flight to quality, foreclosures, gold, Japanese yen, John Mauldin, markets, mortgage bonds, municipal bonds, NASDAQ, Obama Administration, oil, performance, S&P 500, Sense on Cents, sovereign credit risk, U.S. dollar, Washington D.C.
Posted in American Consumers, Australia, Barack Obama, Commerce, Congress, Deficit, Democratic Party, Eastern Europe, Economic Stimulus, Economy, Employment, Equity Markets, General, Global Finance, Government funds, Hedge Funds, Home Loan, Housing Crisis, Money Market Funds, Mortgage Crisis, Mortgages, Obama Administration, Real Estate, Republicans, Reputation, Risk, S&P 500, Stimulus Plan, Unemployment, Wall Street | 8 Comments »

Economic/Market Highlights . . . 12/17: “The Golden Rule”

Posted by Larry Doyle on December 18th, 2008 7:00 AM |

For time immemorial, nations and economies have operated by the Golden Rule. Well, in this economy and this market, that Rule is strong and seemingly getting stronger. While the U.S. dollar sank to a 13yr low vs the Japanese Yen and declined another 2+% vs the Euro, gold moved higher by another 2+% and is now at a 9 week high and up 9% for the year.

In speaking with an investment advisor today, he told me that he has moved almost 20% of his fund into gold in anticipation of continued declines in the value of the dollar.

While gold is increasing in value, we are not seeing other commodities follow its lead. In fact, oil (down 7% on the day) intraday went below $40 per barrel, while copper dropped to a near 4yr low. Through the grapevine, a close friend shared with me today that Goldman is long oil in SIZE from a very large transaction with Mexico. Both commodity moves indicate to me that the market believes the economy will bump along the bottom for the foreseeable future.

What is going to get us to turn the corner on the economy? The Fed has done all it can monetarily, and will clearly utilize “quantitative easing” in buying longer maturity mortgage, consumer, and corporate assets. There is another $350 billion in TARP funds, some of which will likely be directed towards helping homeowners on the brink of foreclosure.

Beyond that, all eyes in Washington and across the country are looking toward a MASSIVE economic stimulus. Obama has already indicated the outlines of his plans with the largest component being infrastructure.

Will this be the “magic bullet” that we all hope? It would be foolhardy to think that $300 billion, if not $500 billion, and perhaps $1 trillion, would not give a serious jolt to our economy. That said, will a package of the size and type being discussed by Obama revolutionize the art of stimulus packages and lead us to a viable and sustainable economic recovery? I think not. Why? (more…)

Tags: crowding out, Fed's quantitative easing, movements in value of gold December 2008, Sense on Cents, Sense on Cents economic/market highlights November 2008
Posted in American Consumers, Auto Industry, Bernie Madoff, Economy | No Comments »