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  • Meanwhile, Back at the Ranch

    It is simply hard to tear your eyes away from the slow-motion train wreck that is Europe. Historians will be writing about this moment in time for centuries, and with an ever-present media we see it unfold before our eyes. And yes, we need to tear our gaze away from Europe and look around at what is happening in the rest of the world. There is about to be an eerily near-simultaneous ending to the quantitative easing by the four major central banks while global growth is slowing down. And so, while the future of Europe is up for grabs, the true danger to global markets and growth may be elsewhere. But, let’s do start with the seemingly obligatory tour of Europe.

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  • This Time its Different*

    I have often written that the four most dangerous words in the investment world are 'This Time its Different.' If memory serves me, I have written several e-letters disparaging various personages who have uttered those very words, only to find out later that it wasn't different. It almost never is. And yet - and yet! - I am going to make the case over the next few weeks that it really is different this time, with only a lonely asterisk as a caveat. What prompts my probable foolishness to tempt the investing gods in going so far out on a limb is the rather large amount of bad analysis based on unreasonable (dare I say lazy or surface?) readings of statistics that is coming from the main stream investment media and investment types with a built in bias for bullish analysis. Normally, gentle reader, your humble analyst is a paragon of moderate sensibilities, but I have been pushed over a mental edge and need to restore balance. I anticipate that this topic will take several weeks, as trying to cover it all in one sitting would exhaust both of us. It should be fun. But first...

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  • The Paradox of Deficits

    There is something that is bumping around in my worry closet. The bond market is not behaving as if there is deflation in our future, and the dollar is getting weaker. Unemployment keeps rising, but most of all, the US government deficit looks to be spinning out of control. This week we look at all of this and take a tour around the world to see what is happening. There is a lot of interesting material to cover.

    As of this week, total US debt is $11.3 trillion and rising rapidly. The Obama Administration projects that to rise another $1.85 trillion in 2009 (13% of GDP) and yet another $1.4 trillion in 2010. The Congressional Budget Office projects almost $10 trillion in additional debt from 2010 through 2019. Just last January the 2009 deficit was estimated at "only" $1.2 trillion. Things have gone downhill fast.

    But there is reason to be concerned about those estimates, too. The CBO assumes a rather robust recovery in 2010, with growth springing back to 3.8% and then up to 4.5% in 2011. Interestingly, they project unemployment of 8.8% for this year (we are already at 8.9% and rising every month) and that it will rise to 9% next year. It will be a strange recovery indeed where the economy is roaring along at 4% and unemployment isn't falling. (You can see their spreadsheets and all the details if you take your blood pressure medicine first, at www.cbo.gov.)...