(Un)Healthy Results (Part 1)

By | 2014-09-03T19:05:14+00:00 May 30th, 2008|Global Market Update|

What should we do about health care? This political football has been around for a while. Ever since the IRS exempted employer contributions to health insurance, health care has been a child of the Federal Government. Now Medicare transfer payments are often the largest line item in State budgets. And an inefficient health care system threatens our economic vitality. One solution is to nationalize, like Canada or France. Many call this the “single payer plan.” But most people don’t think a Federal Health Service [...]

Newspaper Stories

By | 2014-09-03T19:01:36+00:00 May 29th, 2008|Global Market Update|

Why are there newspapers anymore? Everyone gets their news off the web, right? I mean, just fire up your computer, surf to your favorite sites, get your Google Alerts, and update your RSS aggregator. Doesn’t everyone do this? Or not. What I just described is a lot of trendy new-speak. The newspaper business is still huge. Last year it had over $45 billion in total revenues. That’s more than Google and Yahoo combined.  But because the number of subscribers is falling, many observers have [...]

That ‘70s Show

By | 2014-09-03T18:59:58+00:00 May 28th, 2008|Global Market Update|

Is it 1970 all over again? Energy price increases, negative real interest rates, and a slowing economy have many people making the comparison. Add in the froth of Dow 14,000 as compared to the “Nifty Fifty” of yesteryear and the similarities seem a cinch. But let’s look at some details. In the early ‘70s credit was pretty easy to get. With the sub-prime crisis, banks have tightened underwriting standards. In the ‘70s we lived in a bipolar world, with an ascendant Communist block buoyed [...]

Airline Economics

By | 2014-09-03T18:58:53+00:00 May 27th, 2008|Global Market Update|

What is it with airlines? Why are they always in financial trouble? For as long as I can remember, the airlines have reminded me of everybody’s poor uncle, always in debt and down on his luck. Whether it’s price wars, mechanic strikes, or terrorism, the industry seems to live under one of those dark clouds that storms and rains just on the main character. Currently the pressures are immense: soaring jet-fuel prices, serious maintenance issues, unprecedented flight delays, and cutthroat competition are combining with [...]

The Backyard Effect

By | 2014-09-03T18:57:47+00:00 May 23rd, 2008|Global Market Update|

In the ski business, it’s been said that an inch of snow in New York is worth a foot in the mountains. People often decide whether to go skiing based on how things look out the window, not on the latest snow reports A similar thing seems to be happening in the economy. The sub-prime debacle has a lot of financial firms reeling. Thousands of professionals have been laid off as a result. And one long-time analyst told me that the employment picture is [...]

Goldman’s Digger

By | 2014-09-03T18:56:10+00:00 May 22nd, 2008|Global Market Update|

Recently Goldman Sachs predicted that oil will reach $200 / bbl. I don’t know how they came up with that number, but I don’t think we’ll get there from here without some major supply disruptions. The last couple times we saw big increases in oil prices—in the mid and late 70s—we had oil embargos and a coal strike. The energy price increases were a major part of the subsequent recessions. Supply disruptions are painful. And prices crashed afterwards. Given enough time and high prices, [...]

Slicing Through a Bubble

By | 2014-09-03T18:54:38+00:00 May 21st, 2008|Global Market Update|

We’ve popped the internet and the housing bubbles. So what comes next? Many people think that the next bubble to burst will be oil. But are we really in a bubble? Oil prices have gone up in recent years even as production has risen. That means that the price is going up because demand is increasing.. That marginal demand is mainly coming from China, India, and the rest of the developing world. If we were in a bubble, there would be extra production and [...]

Earning with a Smile

By | 2014-09-03T18:53:24+00:00 May 20th, 2008|Global Market Update|

So what’s going on with the economy? Inquiring minds want to know. One way to look at how the economy is doing is to look at much companies are earning. We’re fortunate in the US because our largest employers need to report how they’re doing four times a year. We’re almost through earnings season. How’d we do? The headline doesn’t look great. With three fourths of US companies reporting, earnings are down about 12%. But if you exclude banks and brokerages, earnings are up [...]

Going Postal

By | 2014-09-03T18:51:25+00:00 May 19th, 2008|Global Market Update|

Last week first class postage increased from 41 to 42 cents. Surprised? Most people I talk to are unhappy but resigned about the increase. Why expect efficiency from a legally protected monopoly? Realistically, many costs have fallen. So why are rates rising? We all know about energy prices. But that’s just a recent issue. One real answer is that the Postal Service has finally been ordered to fund its benefit packages. And mail volume isn’t growing fast enough—owing especially to email—to keep the Postal [...]

$3 Gas!

By | 2014-09-03T18:50:13+00:00 May 16th, 2008|Global Market Update|

Chrysler has a new marketing deal Buy one of their cars and get guarantee of $3 gas for three years. A lot of people are excited about this. At least, a lot of economists. They read about consumer angst regarding higher oil prices and they think, “Wow! Another way that the car companies are fooling those ignorant consumers.” You see, the gas price doesn’t affect the average household budget all that much. If someone drives 15,000 miles per year, they may use 600 to [...]