RSS Feed
Twitter
Facebook
Email
HomeLooking Back and Looking Forward
Posted by Larry Doyle on February 24th, 2009 2:41 PM |
John Mauldin, one of our Economic All-Stars (see sidebar on left), provides personal insights and perspectives that are truly cutting edge. Additionally, John has relationships that provide real clarity.
John Mauldin recently published commentary from Paul McCulley of Pimco and former Fed chairman Paul Volker. I had the good fortune of working with Mr. McCulley in the late ’90s at Union Bank of Switzerland. He is a true gem. Mr. Volker, like him or not, is regarded as one of the world’s leading central bankers. Their comments are both comprehensive and understandable as we look to navigate the economic landscape!
Mr. McCulley looks backward and reviews the following:
— the basics of our banking system
— a review of the “unregulated” shadow banking system
— the deleveraging process
— questions on the implementation of the government backstops, including the Term Asset-Backed Lending Facility to restart the consumer lending markets, and the public-private partnership. (more…)
Cerberus Revisited
Posted by Larry Doyle on February 23rd, 2009 10:33 AM |
With so many dramatic events happening so quickly in the global economy, it can be daunting to keep things straight. Banking, housing, autos, regulatory structure, global trade, employment. The stream of dramatic developments is breathtaking. In times like these, I think it is critically important to remain very focused and disciplined. The ability to compartmentalize is vitally necessary.
In that vein, I find it very interesting that the lead editorial in today’s New York Times, Why Can’t Cerberus Foot The Bill, addresses the topic I broached on December 11th, Who and What is Cerberus…?.
Private equity is not supposed to benefit from taxpayer bailouts!!
Our public representatives need to work a little harder on the taxpayers’ behalf.
It’s called capitalism. Let it work.
LD
Tune In to Larry Doyle’s “Dollars and Sense” on No Quarter Radio
Posted by Larry Doyle on February 22nd, 2009 5:22 PM |
Please join us this evening from 8:00 to 9:00 p.m. ET on No Quarter Radio for LD’s Dollars and Sense. These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere!
We have two very interesting guests joining us. Lynn Marshall has one of the most unique backgrounds in the world of finance today. How does one develop a background that includes senior level experience in investment banking, agriculture, and community banking? Think Lynn has some amazing perspectives on the economy and markets? Don’t miss him.
Additionally, in light of the developments at Stanford Financial, we are very happy to have John Moynihan return to our show to discuss the dynamics in the world of offshore banking. Find out more than you could ever imagine by talking to these enlightened experts on LD’s Dollars and Sense, starting at 8 p.m. ET.
What are your questions and comments for me? Please share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins!
(more…)
Let’s Get a First Down
Posted by Larry Doyle on February 21st, 2009 9:10 AM |
Football fans know that ball control and time management are two very critical factors in determining outcome. While a coach may at times “go deep” in order to catch the opponent off guard, victory is determined by the hard work in the trenches and grinding out first downs. I know of no team that has ever established a winning discipline by “throwing Hail Mary’s.” The same can be said of investing. In the midst of these challenging markets, do not lose sight of your long range goals and the disciplines necessary to achieve them. Leave the “Hail Mary’s” for the gridiron entertainment.
The Wall Street Journal provides us with an excellent piece on this topic:
Desperate investors do desperate things.
A few months ago, most people were too terrified to do much more than wring their hands while sitting on them. But now, as the stock market takes another bullet every day and the yields on cash dwindle away, some investors seem to be flinging caution to the winds.
You can read the rest of the article at your leisure. Enjoy your weekend. – LD –
As Stock Losses Loom, Don’t Throw a ‘Hail Mary’
by Jason Zweig
illustration by Heath Hinegardner
The Wall Street Journal; February 20, 2009
The Fed Speaks
Posted by Larry Doyle on February 18th, 2009 2:53 PM |
Fed chairman Ben Bernanke spoke at the National Press Club this afternoon and offered revisions for the Fed’s economic statistics for 2009. What do the numbers mean? Here’s a recap:
— the Fed expects GDP for 2009 to end up between -.5% to -1.3%, revised from -.2% to +1.1%. The Fed obviously is expecting a contraction in our economy for all of 2009 and further added it does not see much of a pickup in 2010.
— the Fed is setting a long term inflation target of 2% but does not expect to see a pickup in inflationary pressures for a protracted period.
— increasing its expectation for the unemployment rate in 4th quarter of 2009 to 8.5% to 8.8%.
— the Fed has seen no indication of stability in residential housing markets in January 2009.
— some Fed governors have increased concerns about defaults and foreclosures in the commercial real estate markets.
— the Fed believes long term growth potential for GDP is 2.5% to 2.7%.
— the Fed realizes that at some point it will need to contract the growth in its balance sheet to mitigate chances of increased inflation.
What does all this mean?
In summary, the Fed is publicly acknowledging that the economic recession will be longer, deeper, and more painful. They are also offering that they are determined not to let deflation or the threat of deflation impede the economy.
I see no reason to rush into adding risk assets (equities or speculative credits) on the heels of this report. It is actually very interesting to see that some high profile individuals and institutions have actually been selling assets:
T. Boone Pickens
Pickens Reduces Energy Investments, Holdings Fall 97%
Warren Buffet
Berkshire Reduces J&J Stake, Turns to Fixed-Income
Harvard University
Harvard Retreated From U.S. Stocks as Market Tumbled
LD
An $800 Billion Mistake
Posted by Larry Doyle on February 7th, 2009 4:40 PM |
The American populace knows that the primary architects in the formulation of the Stimulus Plan working its way through Congress are Rahm Emanuel, Nancy Pelosi, and Harry Reid. This contingent, along with President Obama, have not been bashful in stating they view the November election results as effectively a mandate to change policies emanating from Washington. Against that backdrop, the initially proposed Stimulus Plan was so loaded with pork that the Republicans and the American population at large slammed it as more a promotion of the Democratic agenda than a true stimulus plan.
I will give President Obama credit for formulating a Panel to Advise Obama on Economy. This panel will be known as the White House Economic Recovery Advisory Board. The Board will be headed by former Fed chair Paul Volcker. He will be joined by Jeff Immelt of GE, James Owens of Caterpillar, William Donaldson, former SEC chair, Roger Ferguson Jr. of TIAA-CREF, Richard Trumka of AFL-CIO, Anna Burger of SEIU, and Martin Feldstein, renowned Harvard economist. The group will be guided by Austan Goolsbee, an economic adviser to the White House.
Do you think President Obama and his economic team would listen to Mr. Feldstein or is that a “mere courtesy” having him on the board. Let’s review what Mr. Feldstein said about the Stimulus Plan just last week.
Review of Unemployment Report Jan 9, 2009
Posted by Larry Doyle on January 9th, 2009 10:04 AM |
***Meredith Whitney is indicating that despite the fact that banks raised $805 billion in capital in 2008 and had $125 billion injected via the TARP, the banking system will need to raise more capital in 2009. This is a clear signal that losses have not yet been recognized along with the likelihood that new losses are being incurred. A regional investment bank, Friedman Billings, believes the banking system needs $1.2 trillion in FRESH capital.
***It’s purely my speculation, but I would be willing to bet funds from “How Bernie ‘Madoff’ with $50 Billion” may have actually been directed to other hedge funds. If that is, in fact, the case the Ponzi scheme that started at Madoff may in turn spread. The fact that so many funds “put up the gates” which prevented investors from withdrawing funds is a very telling indication that this may have occurred. Some funds may have very legitimately utilized that approach and some may have not.
The widely anticipated employment report was released this morning at 8:30AM. Let’s dive right into the numbers and then decipher them:
Unemployment Rate: increased from 6.7% to 7.2% versus a consensus estimate increase to 7%. One must understand, though, that the actual unemployment rate ONLY tracks people out of work who are looking for work. If we were to incorporate discouraged workers, those out of work who have given up looking, then one of every ten workers in our country are currently unemployed. With a total workforce of approximately 175 million people and projections that the unemployment rate will move up another 1-3%, our economy is likely to lose another 3 million jobs!!
Non-Farm Payroll: (for those who do not traditionally track these stats, the NFP tracks the actual number of jobs gained or lost in the economy): for the month of December 2008, the economy lost 524k jobs versus consensus estimate of 525k. One may think the soothsayers had it right with their estimated call. However, both October’s and November’s NFP numbers were revised downward by 103k and 51k respectively. Thus, over the last three months of 2008 the U.S economy lost a total of 1.431 million jobs!!!
Review of Employment Report and Markets 11/7/08
Posted by Larry Doyle on November 7th, 2008 4:50 PM |
The highly anticipated October employment report came in as follows:
| unemployment rate | 6.5% up from 6.1% |
| non-farm payrolls | -240k jobs vs consensus estimate of -200k |
| September revision | a loss of 284k jobs from initial estimate of 159k! |
| Labor costs | +3.5% year over year |
Jobs were lost in virtually every sector: manufacturing, construction, and especially the service sector, which had been the sector that provided job strength over the last few years.
In summary, there is nothing to like about this report and it is likely to get worse. Estimates on unemployment rate range from 7% to 9% by the middle of 2009.
Read more here on how the “Economy Sheds Jobs.”
Goldman Sachs, which had the most accurate call on the employment report, is now calling for a -3.5% GDP for 4th qtr 2008 and a -2% for 1st qtr 2009. (more…)
