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Posted by Larry Doyle on December 27th, 2009 7:52 AM |
Although the American consumer is much more accustomed to inflation and the threat of inflation, I am increasingly convinced that the threat of deflation remains the greater challenge. This battle between macroeconomic deflationary forces versus governmental supported inflationary programs is THE ultimate issue facing our economy in 2010 and beyond.
We hear very little about deflation from Bernanke, Geithner, or other central bankers here in the United States. Why not? If they were to even bring attention to it, I think they would cause a stir and legitimize the underlying deflationary forces at work in our economy. What do we hear? Continuous platitudes about how inflation is under control. Remember that the primary mandate of the Federal Reserve is to work to achieve stable prices. How is it going about that currently? Massive federal programs including ballooning the Fed’s balance sheet to prop the economy and prices from the weight of deflationary forces. How and why have these deflationary forces developed? Excessive debt throughout large sectors of our economy. (more…)
Christmas 1919
Posted by Larry Doyle on December 25th, 2009 8:28 AM |
This story made such an impact on me last year, it is only fitting to run it again.
Merry Christmas, Happy Hanukkah, Happy Kwanza, or however you celebrate, Happy Holidays!!
LD
A Christmas Tale — 1919, The Wall Street Journal, December 2008
By HANS VON SPAKOVSKY
It’s easy to complain in the midst of a stressful holiday season. But my family has a unique remedy: We remember one special Christmas in 1919 that gave us the freedom and liberty we enjoy today. This will be the 89th anniversary of the year my father celebrated Christmas Eve deep in the snow-laden woods of Russia as he fled the Communist takeover of his homeland.
When I tell people that my father was an officer in the White Army who fought the Bolsheviks in the Russian civil war, they usually look at me with disbelief, because I am only 49. But he married and started a family later in life, after he lived through both world wars.
He had been an officer in the Russian Army in World War I; after the Bolshevik putsch he ended up fighting against them in the far north of Russia. In 1919 he was close to the Arctic Circle in the port city of Arkhangelsk, where at the beginning of the year, six feet of snow fell and the temperature was regularly 30 degrees below zero. (more…)
What Do You Hope to Find in Your Stocking?
Posted by Larry Doyle on December 24th, 2009 10:01 AM |
Christmas morning in the Doyle home in the ’60s and ’70s was priceless. With seven siblings (six brothers and one sister), the living room was quickly turned into a scene which could only be compared to a mini-earthquake. Throwing gift boxes across the room, quickly playing with games and toys, screaming for joy. The memories are precious.
The knitted stockings hung by the fireplace remain a prized possession. The gifts in the stockings may have been the smallest in size, but often they brought the greatest pleasure. Tickets to a college sporting event were always a hit.
After the bedlam had settled, typically around 7am, we would make a mad dash for the kitchen and Mom’s donut muffins. Pure sugar and truly awesome.
As the kid in all of us anticipates waking up on Christmas morning, I send best wishes to all the readers of Sense on Cents.
What do you hope to find in your stocking?
LD
Health Care Payoffs
Posted by Larry Doyle on December 23rd, 2009 12:26 PM |
Washington may think the “payoff politics as usual” is justified under the guise of working toward goals, but I would beg to differ. In my opinion, the payoffs garnered by Senators Ben Nelson (D-NE), Chris Dodd (D-CT), and Mary Landrieu (D-LA) are emblematic of the broken political process in America.
Why is it that citizens of some states are not required to pay the same freight as citizens of all other states? Why is it that citizens of some states garner ‘special’ benefits and advantages not accorded to citizens of all other states?
I do not doubt for a second that this ‘payoff politics’ has been going on for a lot longer than we may appreciate. I would also maintain that a significant portion of our fiscal and moral deficits are generated from this very approach.
The fact that representatives hold out for these payoffs and then promote them as benefiting their states should be more widely broadcast as unpatriotic and divisive.
The fact that administrations from both sides of the aisle have chosen the ‘payoff’ style of politics is merely an indication as to the lack of character, courage, and political intellect needed to craft real legislative reforms.
When the ‘for sale’ sign is constantly out, that lowest common denominator will always be reached.
If this ‘payoff politics’ is the best America has to offer, then I am increasingly concerned that our collective future will be far less than it ought to be.
Where are the real statesmen?
LD
The Best of Wall Street
Posted by Larry Doyle on December 23rd, 2009 9:39 AM |
Regular readers of Sense on Cents are well aware that I have not been bashful to call out the financial industry whenever or wherever I thought it was deficient. Those deficiencies have been on the regulatory front, investor protection, abusive sales practices, questionable accounting, and more. Although these shortcomings have been highlighted in the midst of the recent economic crisis, the fact is many of them have been prevalent for a protracted period. In light of that, I am often asked the question as to why I pursued a career on Wall Street? How could I reconcile working within an industry that perpetuated such shortcomings?
My answer to those who ask such questions is the following:
1. In the course of day to day activities, the rank and file on Wall Street are not truly impacted by the overarching financial regulatory system. That system clearly has a major influence on the industry, but for those who kept their nose clean the regulators were a non-event.
From my current perch, I have a dramatically different view of the regulators and am happy to expose their shortcomings.
2. I loved the challenge of the industry! How could I utilize my intellect along with my instincts to assess how the market would move? This challenge was a daily event and was unbelievably stimulating.
3. The single greatest factor which drove my career and why I loved working on Wall Street was the competition. Regardless of where I was working at the time, I so badly wanted to compete and beat my counterparts at the other shops. How did this competition play out? I wanted to develop relationships with institutional customers so that whenever they had business to transact, they felt compelled to engage me. The competition was the daily adrenaline. There was nothing like it. The competition and results were only rewarding from the standpoint that my core values of honesty and integrity were never compromised.
I loved it.
LD
All That Glitters Is Not Gold
Posted by Larry Doyle on December 22nd, 2009 12:45 PM |
The recent spike higher in the U.S. Dollar Index is having a dramatic impact on a variety of markets, but none more than gold.
Gold traded over $1200/oz. a mere few weeks ago, but it has retraced 10% from that level and is now trading at approximately $1080/oz. Many long term prognosticators forecast that our greenback will continue its trend lower. As such, commodities in general and gold specifically should benefit.
That said, I remain concerned about getting heavily involved in commodities, especially gold, because of the fact that there are many short term speculators involved in this sector. What happens given the preponderance of those market participants? Excessive volatility in the price action.
With gold dropping off the face of the cliff as pictured below, it is highly likely to fall into the $1050/oz range. Why that level? $1050 represents an approximate 50% retracement of gold’s move on the year.
Unless you are the type thrilled and skilled at skiing black diamonds, I recommend keeping gold plays to a small percentage of an overall portfolio.
LD
Mortgage Meltdown Continues
Posted by Larry Doyle on December 21st, 2009 1:22 PM |
While the equity market continues its ascent into the heavens, our housing market continues its descent into hell.
How long can these two indicators continue their contradictory movements? It is extremely hard to believe that the price actions and underlying dynamics in these indices can continue for an extended period. While Uncle Sam’s liquidity has been phenomenal in generating support for the equity markets, it has been decidedly less supportive to the housing market.
The Wall Street Journal addresses the ongoing meltdown in the housing and mortgage markets in writing, Mortgage Markets Continued to Falter in 3rd Quarter:
The U.S. housing market continued to deteriorate in the third quarter as even the most credit-worthy borrowers increasingly fell behind on their mortgages, highlighting the problems policy makers have faced in trying to address the problem.
A new report from the Office of Thrift Supervision and Office of the Comptroller of the Currency found that the percentage of current and performing mortgages dropped for the sixth consecutive quarter, as foreclosures in process topped 1 million mortgages at the end of September. The report covers roughly 34 million loans totaling $6 trillion in principal balances, or approximately 65% of the U.S. mortgage market.
The regulators said that serious delinquencies, loans that are at least 60 days past due, increased across all loan categories and climbed to 6.2% of the loans in the portfolio during the third quarter. The report said that just 67.7% of option adjustable-rate mortgages were considered current at the end of the third quarter, while 27.9% were either seriously delinquent or in the process of foreclosure. (more…)
