Talk is Cheap

By |2014-09-03T19:43:41+00:00June 16th, 2008|Global Market Update|

Talk is cheap. That’s what I thought when I read Governor Trichet’s speech last week. Just when oil prices started to cool, the European Central Bank President commented on inflation, and how the ECB could raise rates at its next meeting. This caused the Euro to rise, and that sparked another round of oil price speculation. We’re now looking at oil in the 130s. Congratulations, Governor. Our recent stimulus checks are now going into pre-buy programs and gas tanks. This may be enough to [...]

Biking for Dollars

By |2014-09-03T19:29:38+00:00June 13th, 2008|Global Market Update|

Biking to work is fun, healthy, and in Europe it’s subsidized. Really. In Holland, every employer can offer an employee the right to buy a 500 Euro bike every three years with pre-tax dollars. Given marginal tax rates and average income there, that’s the equivalent of an $1000 subsidy from the government. Wow, the Dutch are really doing their part to fight congestion and global warming. But every subsidy has to be paid for. Why do Dutch truckers and taxi drivers have to pay [...]

Farmland Rush

By |2014-09-03T19:16:29+00:00June 12th, 2008|Global Market Update|

Eight months ago, a farmer who signed a contract to sell corn got $3.75 a bushel. Today that same contract would pay $6.43. That’s a difference worth over $400 an acre for the average farm. Farm incomes are up sharply. Last year they rose 37% after expenses. This year they may rise a similar amount. While the ag business has always had its ups and downs, this boom has been longer and stronger than most of those in the past. Stock prices reflect this. [...]

Deficit Doubts

By |2014-09-03T19:14:17+00:00June 11th, 2008|Global Market Update|

The government’s budget should be balanced, just like a family’s. Right? Many people look at it that way. Ever since Keynes suggested that the government run a deficit in lean times and a surplus in good times, people have railed on the government for failing to run a surplus when the economy is strong. But running a surplus means keeping taxes higher than are needed to support current spending. And running a surplus is not like saving for retirement. Unlike individuals, governments don’t retire. [...]

Looking Backwards

By |2014-09-03T19:12:55+00:00June 10th, 2008|Global Market Update|

Irrational Exuberance. Remember the phrase? Twelve years ago Alan Greenspan posed a question: how can we tell the difference between rational expectations and irrational exuberance? For the next three years, the market went up by over 20% per year. Many thought that those prices were irrational. But if you had invested in stocks and held on through the ups and down when Greenspan posed his famous question, you would have earned 6 ½ %, even with the latest pullback. Even for the Maestro, it’s [...]

The Young and the Restless

By |2014-09-03T19:11:30+00:00June 9th, 2008|Global Market Update|

Friday we heard about the labor market. And the news wasn’t good. Payroll employment fell last month by about 50 thousand workers. That’s in-line with the view that we’re in a modest economic slowdown, not a recession. But the unemployment rate rose by half a percent, the largest increase in decades. What gives? When I first saw that number, my initial reaction was panic. What have I gotten wrong, I thought. But when I looked into the details, I became more curious. Unemployment is [...]


By |2014-09-03T19:10:10+00:00June 6th, 2008|Global Market Update|

Sixty-four years ago the world held its breath while Operation Overlord unfolded. Hundreds of thousands of soldiers, sailors, and airmen combined to push the Nazi army out of France. Why do I bring this up in an economic and market discussion? Because people sometimes do uneconomic things because they are the right thing to do. Defending your country and fighting for your buddies are right, no matter what the short term costs. Sometimes economics and market analysis has its limits. Whether it’s the aging [...]

Maple Leaf Blues

By |2014-09-03T19:09:07+00:00June 5th, 2008|Global Market Update|

By now you may know that the US isn’t in a recession, yet. In fact, our economy defied the naysayers and actually grew almost 1% last quarter. But there’s one place that the economy did shrink this winter: Canada. Last quarter the Canadian economy shrank by .1%. The government reported that the economy stalled due to widespread cutbacks in manufacturing, especially cars. How can that be, you ask. Canada pumps all that oil. Well, the oil boom has led to a very strong Canadian [...]

(Un)Healthy Results (Part 4)

By |2014-09-03T19:07:49+00:00June 4th, 2008|Global Market Update|

So, after all, what should we do about health care? Health care is not a perfect market; it’s hard to price-shop for heart surgeons. But markets usually do the best job allocating between quality and quantity for millions of consumers. Our discussion so far has shown that there are many complex issues and trade-offs. What we need to do is make the market more effective. Freeing the system from the employer-benefit link would strengthen the market’s role. Encouraging consumers to access more information would [...]

(Un)Healthy Results (Part 2)

By |2014-09-03T19:03:10+00:00June 2nd, 2008|Global Market Update|

What should we do about health care? Health Care is often described as one eighth of the economy. But without an effective health care system, all workers become unproductive sooner than they need to. And without an efficient system, we devote more resources to keeping workers healthy than we need to. So getting health care right is important. It’s well known that health spending as a percent of the economy is much higher in the US than elsewhere. Much of this difference is due [...]