My World and Welcome To It

By | 2014-09-03T21:17:46+00:00 September 30th, 2008|Global Market Update|

Boy, has this been a quarter. After yesterday’s action the markets are down about 13%. That’s the worst quarterly return since 2002. Indeed, over the last 70 years, the market has declined more than this only 13 times. That’s a telling statistic. Because while declines of this magnitude are unsettling, they’re not unprecedented. In fact, they happen every 5 years or so. Make no mistake: the current downturn is a made-in-Washington affair, with politics trumping policy and radically mixed signals confusing the markets. Add [...]

Stayin’ Alive

By | 2014-09-03T21:16:33+00:00 September 29th, 2008|Global Market Update|

So will it help, or not? The global markets seem to think that the Paulson plan will be a good thing. Since the idea was first proposed, global financial stocks have appreciated by about 900 billion dollars. While that’s still a long way from the 3 trillion or so that has been lost since last summer, it’s still a pretty good piece of change. So on first blush,  the plan is a success. It’s big enough, and systematic enough, to make a real difference. [...]

Fast Forward

By | 2014-09-03T21:15:40+00:00 September 26th, 2008|Global Market Update|

What’s unique about this crisis? Speed. Every 10 years or so we have a financial crisis that wags say “ends the nature of capitalism as we know it.” Indeed, ever since Marx predicted capitalism’s succession by communism, every recession or panic has been heralded as the forerunner of the revolution. This latest downturn isn’t that complex. It’s simply the bursting of a housing bubble and attendant write-offs by leveraged financial institutions. This threatens the professional courtesy that banks and their cousins usually extend to [...]

The Upside of Contagion

By | 2014-09-03T21:14:48+00:00 September 25th, 2008|Global Market Update|

Every cloud has its silver lining. That was my thought when I looked at a little-known side effect of global financial crisis. Because it has given the Russian market a wicked cross-check. From their treatment of BP employees to the recent Georgian invasion, Russian behavior has been pretty aggressive. Moscow’s estimate of the Golden Rule—whoever has the gold, makes the rules—meant that they felt their immense oil wealth made them immune to world opinion. But with falling oil prices, the Kremlin’s recent actions, and [...]

America, Inc.?

By | 2014-09-03T21:13:52+00:00 September 24th, 2008|Global Market Update|

So the government is now in the banking and insurance business. Are autos and imports next? Through the stimulus plan and interventions in the markets the government is now the lender, spender, and investor of last resort. In order to keep the financial gears greased the Fed has been manning the pumps. But I hope that somebody over there has studied their history, because all this government intervention is starting to remind me of Japan, Inc. In the ‘80s, the Japanese government was an [...]

Terrible Tuesday

By | 2014-09-03T21:12:38+00:00 September 23rd, 2008|Global Market Update|

Everybody keeps comparing our current financial mess to the Great Depression. But for my money, it looks and feels like October of 1987. On Black Monday the market fell over 20% in one day. That was pretty bad. Mind you, the market had rallied over 30% early in the year, and essentially gave it all back from August through October. But the volatility was a killer. On Tuesday many of the specialists on the New York Stock Exchange had had their equity wiped out. [...]

Back From the Brink

By | 2014-09-03T21:11:40+00:00 September 22nd, 2008|Global Market Update|

Last week we looked into the abyss. And pulled back. On Monday Lehman failed. Tuesday AIG scrambled for financing. On Wednesday AIG was propped up. Thursday was a day of general panic. And Friday the Treasury rode to the rescue. In years to come, I think Thursday will be remembered as the day we pulled back from the brink. Gold had shot up over $100. The Dow had fallen 1000 points. And Treasury Bills yielded less than one tenth of one percent. Several major [...]

A Few Questions

By | 2014-09-03T21:10:26+00:00 September 19th, 2008|Global Market Update|

As the politicians play the blame game, I have a few questions: For Barack Obama: you say that the current financial mess is a result of the failed policies of the Bush administration. Fair enough--which ones? What would you change? How will increased regulation stop our global financial giants from making bad investments? For John McCain: you bemoan the use of taxpayer funds to bail out Wall Street, while Main Street is left to pay the bill. Good point. But if Wall Street collapses, [...]

The Dissent that Wasn’t Voiced

By | 2014-09-03T21:09:18+00:00 September 18th, 2008|Global Market Update|

“The most curious incident is the dog that didn’t bark.” In Silver Blaze Sherlock Holmes noticed that a guard dog didn’t bark as expected, and this clue helped him solve the crime. Similarly, the most curious aspect of the latest Fed meeting is the governor who didn’t dissent. Unlike the Greenspan era, in Bernake’s Fed dissent is a way of life. For the past year, one governor or two has disagreed with every Committee decision--and it’s been both hawks and doves. This is a [...]

The Road Ahead

By | 2014-09-03T21:08:28+00:00 September 17th, 2008|Global Market Update|

Are we looking at a replay of the Great Depression’s banking crises? Whether the Feds come to the aid of AIG, this is the kind of environment we see around market bottoms. Panicked investors hear breathless reports of a financial meltdown and wonder if their money is safe. The short answer is that nothing is absolutely safe. The longer answer is that the health of any portfolio is tied to the health of the economy. And while the economy is slowing, it’s not collapsing. [...]