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  • Europe on the Brink

    We have avoided Armageddon, at least for now. The cost to the US taxpayer has been a few trillion. Some in the media are loudly announcing the end of the recession. But we are not out of the woods yet. There are a few more bumps in the road. Actually, some of them are quite steep hills. As big as the subprime problem? Maybe.

    When asked a few weeks ago what was my biggest short-term concern, I quickly replied, 'European banks have the potential to create significant risk for the entire worldwide system.' This week we will glance "over the pond" to see what gives me cause for concern. Then we briefly look at a few of the bumps I mentioned, which are likely to stretch out any recovery, and maybe even dip us back into recession.

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  • Time for a Reality Check

    It is not just the US that is in recession. The world is slowing down, and rapidly. This week we quickly survey the rest of the world, and then come back to the US. We follow up with the implications for corporate earnings worldwide, and specifically address my speculations about earnings forecasts for 2009. Let's start with some charts from my friend Simon Hunt, out of London. The following chart shows World Merchandise Export Values and World Industrial Production falling off a cliff. This is the worst such period since the end of World War II. And as the data we will examine next indicates, it is likely to get worse....
  • The Financial Fire Trucks Are Gathering Again

    The economic news just continues to be bad. New unemployment claims were over 529,000 on a seasonally adjusted basis. The "real" number was 606,877 lost jobs. New home sales were off by another 5% and down 40% from a year ago, as builders slash inventories. The Chicago Purchasing Manager index came in at 33.8, the weakest number since the serious recession of 1982. The national number due next Monday will be just as ugly, as durable goods were down far more than expected, by a negative 6.2%. But it is Thanksgiving weekend, and not a time for gloom. In this week's letter I am going to talk about why we should be optimistic about the future. Things will turn around. I will also make a few comments about the latest stimulus package....