Blog

25 Jan 2008

Posted at 16:15h in The Friday Brief by
There comes a point in market downturns when investors throw in the towel and begin dumping stocks at any price, just to get out and end the pain. These events typically come after longer and deeper routs, but Tuesday’s rout felt a lot like capitulation. It had many of the characteristics of a turning point. One thing is certain in equity investing and that is nothing is certain. Historical studies of market corrections are helpful to understand their general framework, but there is no magical formula to trigger getting out or in.

11 Jan 2008

Posted at 16:18h in The Friday Brief by
The recession camp is growing as many large brokerage and bank economists toss their hats into the ring. Goldman Sacs yesterday joined Merrill Lynch and Morgan Stanley in projecting a possible recession in theUS. Goldman's economists predicted the economy will shrink 1% in the next six months and grow 0.8% for the year as the economy did in the last recession of 2001.

04 Jan 2008

Posted at 16:21h in The Friday Brief by
Call it a slump, a slowdown, or a recession, whatever you want, but its here. The last shoe has dropped – employment. Today’s government report of hiring slowing faster than forecast and unemployment rising to a two-year high, employment one of the last strengths of the economy is faltering.

21 Dec 2007

Posted at 16:24h in The Friday Brief by
As economists grapple with where this economy is going the American consumer continues to surprise and amaze. The latest government figures, released today show that consumer spending rose considerably more than forecast in November. Purchases gained 1.1% in November, well ahead of .7% estimate. That is the highest rate of increase since the 1.2% increase in May 2004. It helps allay fears that the economy is falling so fast it cannot avoid recession.

14 Dec 2007

Posted at 16:28h in The Friday Brief by
TheUSeconomy will have to gut it out from here without additional help from the Fed or the government. Today’s inflation report shows that the Federal Reserve had little flexibility to lower beyond the quarter of a percent they announced on Wednesday fearing inflation and a falling dollar. As to government actions; early signs are that credit bailout efforts will fall short of easing tight credit. InWashington, political wrestling has already stalled and likely killed relief from the alternative minimum tax. There appears scant hope that a Democratically controlled House and Senate will continue Bush’s tax cuts. So the combined prospects of higher taxes, tighter credit, already high gasoline, falling house prices, slowing consumer demand, and higher prices on everything else if inflation takes hold, almost surely will be enough to stall theUSeconomy.

30 Nov 2007

Posted at 15:56h in The Friday Brief by
The economy is drifting very close to the edge now and what would have taken a gale force wind a few months ago might well be accomplished with little more than a wisp now. You might remember that in last weeks’ Brief we posed the question as to whether the Fed had lowered rates enough to sustain economic expansion. We noted that future reductions might be constrained because of growing threats of inflation as well as a dramatically sinking dollar. But without them, we noted the odds were greater that the economy would falter. The past several weeks’ revelations of worsening banking and credit problems, combined with a host of economic releases showing deterioration have changed the tone of the Fed dramatically.

16 Nov 2007

Posted at 16:02h in The Friday Brief by
Since Greenspan made his comment in February of this year that theUScould be in recession by the end of this year investors and economists have largely taken the rosier view; that is until the last few of weeks. Oil flirting with $100, the dollar in freefall, anemic retail sales, housing in the depths, and a sub-prime mess, the extent of which is still unknown, have seemingly aligned forces against this economy. The majority view remains on the favorable side, but comments from the minority have grown louder and bolder.

19 Oct 2007

Posted at 16:09h in The Friday Brief by
This Friday marks the 20th anniversary of “Black Monday,” which sent the Dow Jones Industrial Average spiraling down 508 points or 23% in a day. The panic was sparked by investors realizing that Fed Chairman Paul Volker was wringing money out of the economy without apparent regard for its near-term health. His aim was to irradiate the prolonged and excessively high inflation of the time. The market drop was the second largest inUS history, second only to the first trading day after shutdown following the outbreak of WWI on 12/12/1914.

12 Oct 2007

Posted at 16:14h in The Friday Brief by
The week’s economic data was positive on balance. Given that the economy is largely consumer-driven investors are keenly interested in the health and intentions of the US consumer. The data on his health is largely positive. Wal-Mart and Costco were upbeat in their projections for the next quarter earlier this week. Today, the Commerce Department reported that retail sales increased 0.6% in September, more than forecast, following a 0.3% gain the prior month.