Finance

• European Debt Crisis Now Takes Center Stage

  As US politicians put their debt crisis to bed, for the time being at least, all eyes switch to Europe. The European debt crisis is, in reality, any number of crises depending on which country you are looking at. Collectively it is characterized by the same sense of hopeless political uncertainty, denial and procrastination that is the European political machine. As my favorite MEP Daniel Hannan put so well in his blog this week, European politicians seem incapable of understanding that markets are not like the electorate: they do not do as politicians tell them to do. Even more laughable…

• Here is Where to Watch for the Turn

  What to say about Thursday’s market? The “RISK OFF” trade had its finest hour. The Dow average WAS down 512 points, NASDAQ (QQQ) cratered by 135 points, oil (USO) was off $6, and copper (CU) got smacked for 34 cents. Emerging markets (EEM) quickly morphed into submerging markets. Gold (GLD) provided no refuge today, dropping $45 in hours, and silver (SLV) gave back $4 in the blink of an eye. Only Treasury securities provided a safe haven, with overnight paper briefly showing negative interest rates. The yield on ten year Treasury bonds plummeted to 2.42%, nearly matching its 30 year…

• Putin Calls U.S. Economic Parasite

  Don’t expect to see Russian President Vladimir Putin invited to the White House for a sleepover in the Lincoln Bedroom anytime soon. Vladimir Vladimirovich has committed the unpardonable diplomatic sin of speaking bluntly.Like Sherriff Woody from the Pixar movie “Toy Story,” Putin has declared “there’s a snake in my boot,” only in this case, it’s the U.S., which he labels a “parasite” on the global economy. Addressing a gathering of the pro-Kremlin youth group Nashi at their summer camp near Moscow Putin commented, "They are living beyond their means and shifting a part of the weight of their problems to…

• How Long Can the Spending in Afghanistan Continue?

  With all the debate in the United States over raising its debt ceiling, politicians and lawmakers are once again fighting over national spending. Democrats are sore that the US$2.4 trillion in savings will not include any mandated tax increases, while the Republicans are worried about the US$350 billion cut in the defense budget. Why is the United States perpetually policing the world at the expense of the American people and global markets?The US debt ceiling negotiations kept nations and financial markets on their toes over the course of the past few weeks. As US President Barack Obama said in his…

• What the Markets Are Telling Us

  I spent the morning doing a round robin with hedge fund trader friends of mine trying to figure how we all got this so horribly wrong. I did this as the (SPX) was ticking down to 1249 and bond yields cratered to a one year lows at 2.62%. The uproar of the debt debacle distracted us from what was really driving the markets, the economy. While listening to the hostage drama, where the Tea Party threatened to put a bullet in the head of the world economy unless it got its way, the economic data began a rapid deterioration. Q2…

• The Death of the Bond Vigilantes

  Back in the seventies and eighties, when inflation was soaring well into double digits, the markets were regularly punished by a band of gun slinging traders known as the “bond vigilantes.” Hard asset prices were running amuck, and there was a laser like focus on the growth of the money supply. We have just witnessed the largest expansion of the monetary base in history. The Federal Reserve’s balance sheet has ballooned from $800 million to an incredible $2.8 trillion in a mere three years. Gold is trading at an all-time high, and a whole range of commodities, including, the metals,…

• Jesters, Economics, and American Dollar Supremacy

  The debt debate has been going on all summer, a 2 months and running theatrical experience of court jesters parading about while the United States economy teeters on the edge. On both sides of the aisle have been ridiculous solutions that are showing the world daily, America is willing to sacrifice its citizens for the profits of the corporations. The problem is, why will the rest of the world continue to support American multi-nationals, when they have their own. As dollar supremacy begins to wane, and oil prices rise as the dollar’s value descends, maybe it is time to talk…

• GDP is Another Bucket of Cold Water

  Another bucket of cold water was thrown on financial markets on Friday with the shocking release of Q2 GDP of 1.3%. The whisper number prior to the release was at 1.9%, and even this figure is far short of the Federal Reserve’s GDP forecast for 2011 of 3.0%. Keep in mind that these are backward looking numbers giving us data that is three months old. Some of the drag was caused by a Japanese tsunami slowed car industry, which the Ford earnings this week are telling us is already starting to snap back. That’s why we had a sudden drop…

• Something Extraordinary is Happening in the Russian Federation

  Nine decades after Lenin and his Bolsheviks imposed Communism on the Russian empire and two decades after the implosion of the USSR, some of the country’s largest industrial conglomerates retained by the state are to be privatized. Lenin must be twirling wildly in his mausoleum on Red Square. The government has fulfilled the instruction of Russian Federation President Dmitrii Medvedev and prepared a more extensive privatization plan, with First Vice-Premier Igor Shuvalov sending Medvedev a report with proposals on expanding the country’s privatization program. Shuvalov is proposing to fully privatize 14 state companies and to partially privatize another four by…

• Debt Disagreement and the Need to Transition the Economy to Post Growth Mode

  President Obama and House Speaker Boehner are both right, but they’re both tragically wrong. And unless they can somehow wake up and see why they’re wrong, we all lose—big time. Let me explain. But to do so will require setting three levels of context. The immediate context is of course the fact that Republicans have created a political crisis by refusing to raise the nation’s debt ceiling unless they achieve their priorities of dramatically reducing government spending—primarily on social programs. A larger context is the fact that the U.S. is still reeling from an epic credit crunch. During the past…