Freshwater Economics

Thu, 2009/09/17 - 1:47pm | Your editor

Paul Krugman wrote a blog about the reaction to his NY Times Magazine article about what he styled "freshwater" macro-economists, numbers-mad non-east- or west-coast USA-heartland ec or biz school profs who do not study or teach Maynard Keynes' ideas and reject his theories. Because this is feeding into the virulently anti-government mood of some Americans going in for tea parties, Krugman is worth quoting. These guys criticize not just Obamanomics, TARP, bailouts, and viciously oppose Obama-care. Some also want to abolish the Fed and social security:

"The freshwater outrage over finding their own point of view criticized is, you might think, a classic case of people who can dish it out but can’t take it. Read more »

Do You Seriously Want to Be Rich?

Wed, 2009/09/16 - 2:59pm | Your editor

“Do you seriously want to be rich?” was what Bernie Cornfeld used to ask potential investors in his Swiss-based IOS, operator of funds of funds and generator of huge commissions for Bernie and and his salesmen who signed up US servicemen in Europe. It was a con. Bernie went to jail.

Now after a hiatus based on the Bernie episode, you can again buy a fund of funds in the U.S. Today Advisor Shares Dent Tactical, an exchange-traded fund was launched by Dent, under the ticker symbol DENT, on the NYSE ARCA. It will invest in whatever ETFs, excahnge-traded notes, exchange-traded currency trusts, or exchange traded commodity pools its managers think will pay off. It tracks no index and follows no allocation rules.

(When I reported from Paris for the London Sunday Times in the 1970s I contributed notes for a book the paper produced about l'Affaire Cornfeld entitled Do You Seriously Want To Be Rich?) Read more »

Be Careful What You Wish For

Tue, 2009/09/15 - 4:41pm | Your editor

    Be careful what you wish for. A year ago, a major UK bank was not allowed to acquire Lehman Brothers which wound up in bankruptcy. The British Chancellor of the Exchequeur told his US counterpart, Treasury Secy. Paulson, “we do not want to import your cancer.”

    Perhaps in revenge, the bank in turn refused to accept British government bailout money, instead turning to shareholders and fatcats from the Middle East and Asia to build up its capital cushion. Most rival banks in the US and Britain did not dare say no the way our choice bank did. Read more »

Asia for a Down Day

Mon, 2009/09/14 - 2:41pm | Your editor

Today we will report on China and gold because that is where the headlines are. But we will also report on Portugal and Japan where they are not. And we have a huge money-saving deal for subscribers in Thailand.

China will allow some foreign companies to list in Shanghai and we already figured that banks active in China will grab slots in the market, among them Asia hands like HSBC and Standard & Chartered. Read more »

Anniversaries

Fri, 2009/09/11 - 2:30pm | Your editor

  Today is the 8th anniversary of the murderous Taliban attack on my native city's financial center. And the financial center is busy ignoring the date, helped by amnesia worldwide.

     Europe rose for a 7th day in a row and Asia hit an 11-mo high based on good Chinese retail, production, and industrial output growth data which apparently offset a reduced Japanese Q2 growth figure.

     Like many observers, I take Chinese economic data with a grain of salt. With a command economy, Beijing gets the statistics it wants from the local Communist officials around the country. The numbers may not jibe with reality. Read more »

Prof. Robini and Rabbi Hillel

Wed, 2009/09/09 - 5:53pm | Your editor

    NYU Economics Professor Nouriel Roubini, AKA super-bear, wrote today a note about oil and natural resources which I have permission to share with you. Prof. Roubini famously predicted the economic crisis we are now in:
 
    Last week’s announcement of new rules governing deep-sea oil deposits off the Brazil coast  reignited debate over resource nationalism. Deposits in the pre-salt layer deep beneath Brazil’s seabed are one of the more promising, if expensive, sources of new supply globally. Pres. Lula unveiled the new rules on what he called an 'Independence Day for Brazil.' Among other things, they suggest that Petrobras, the publicly traded but state-run oil company, have a majority stake in any new developments of deep-sea oil. The move, which marks a change to the country’s profit-sharing agreement, would not apply retroactively. Brazil also wants to create a new social fund, channeling some of the profits into social and infrastructure spending—-potentially narrowing extreme income divides. Read more »

China Coupon Clippers and the Non-Open Door

Tue, 2009/09/08 - 1:59pm | Your editor

       The December gold future price has risen to over $1000 and this may mean that the precious metal will again trade in quadruple digits on spot markets, as it did half a year ago, however briefly. This reflects the moves by the world's biggest coupon clipper, China.

   There are various theories around the price of gold, most of them conspiratorial nonsense. Believing in plots is a tempting way to handle world complexity. You get a simple answer to why things do not work out as you think they should, with a ready-made if vague villain. Now that the Cold War is over, evil puppeteers range from Pres. Obama to the Bilderberg Group, from central banks to the ghost of J.P. Morgan. The opposite side in the Gold War... Read more »

The Friedmanite View

Fri, 2009/09/04 - 1:34pm | Your editor

      Nearly 20 years ago, Milton Friedman and Rose Friedman reviewed the Socialist Party platform of 1928 and were appalled to discover that most of the labor reforms it called for had been enacted by the USA: public unemployment insurance and job agencies; health and accident insurance; old-age pensions; laws limiting child labor; and shorter work hours. The Socialists also called for a national flood control program; reforestation; irrigation; and land reclamation.

     Milton Friedman believed that economic freedom and political freedom are inextricably linked, a key tenet of his Chicago School. So had the U.S. become socialist, abandoning capitalism? Have we given up our economic and political liberty for flood control and unemployment insurance?

  Read more »

Sell on Rosh Hashanah

Thu, 2009/09/03 - 7:20pm | Your editor

     You want a forecast, here is a forecast. Jeffrey A. Hirsch, the 2nd generation guru of Almanac Investment, says to always sell on Rosh Hashanah and buy on Yom Kippur. This year that won’t work as Rosh Hashanah falls on a Saturday when markets are closed. You could try selling the day before, Sept. 18. Yom Kippur is a working day, Sept. 28. There will be no newsletter that day. Nor on Monday the 7th, which is Labor Day and the last day before my younger granddaughter Sophie starts school.

     Leave it to me to write a piece bullish on the dollar on the very day when it proceeds to fall against the euro and the yen. And to be bearish on gold on a day when it hits a 5-mo high. Read more »

Fearless Forecasts Time

Wed, 2009/09/02 - 3:13pm | Your editor

  It's fearless forecasts time. The problem is not September. The problem is that various black holes in the stock markets of the globe have gobbled up perfectly viable neighboring bits.

 

     The first one is the Yellow Submarine. That is my marginally racist name for the isolated Chinese markets of Shanghai and Shenzhen, submarines they are totally cut off from the rest of the world by Chinese exchange controls. They are thus at the mercy of the Chinese speculator and his money.

  Read more »