Flying on One Engine

By | 2014-09-11T12:05:03+00:00 May 11th, 2011|Global Market Update|

The Airbus 380 is an ultra-high capacity aircraft that holds over 800 passengers and can fly over 9000 miles. It has four gigantic engines and requires almost 2 miles of runway. Now imagine you’re the pilot at the end of a long flight. You’re low on fuel. You need to put the aircraft down soon, but there are only two airfields available with runways long enough. And one of those runways is under repair. Kind of limits your options, doesn’t it? That’s where the [...]

Slipping on Greece

By | 2014-09-11T11:59:45+00:00 May 10th, 2011|Global Market Update|

It’s not causing a panic this time, but Greece is nearing default. The weakest member of the Euro just had its debt downgraded again. S&P lowered the rating on Greek bonds to B from BB-. Moody’s also has them listed for a downgrade. A year ago in March the IMF announced an aid package for Greece totaling $160 billion dollars, and the European authorities outlined a rescue fund worth over $1 trillion. This calmed market fears at the time. Well, they’ve come back now, [...]

Big, Bold, Bad

By | 2014-09-11T11:58:41+00:00 May 9th, 2011|Global Market Update|

In 2002 a UBS banker wanted to win a competitive muni bond deal with a Rhode Island municipality. Instead of offering the lowest rate, he called his competitor and offered to split his commission if the other guy would back off. The competitor agreed, UBS won the deal, and no one was the wiser. Until now. The Justice Department is in the middle of a significant fraud investigation that is likely to implicate every major municipal finance player before it’s finished. We've already seen [...]

Right Music, Wrong Words

By | 2014-09-11T11:58:09+00:00 May 6th, 2011|Global Market Update|

Just because Meredith Whitney says it doesn’t make it wrong. I’ve been pretty critical of Meredith Whitney. The bank-analyst-turned-municipal-guru predicted that 50-100 major municipalities would default on their debt, leading to hundreds of billions of losses this year. She said this on 60 Minutes last fall, and millions of retail investors have pulled billions of dollars out of the muni market at depressed levels. I think that it was irresponsible of her to make such a claim, and irresponsible of 60 Minutes to air [...]

War is Hell

By | 2014-09-11T11:50:04+00:00 May 3rd, 2011|Global Market Update|

War is not productive. That’s what I thought when I heard that US forces had killed Bin Laden. We’ve spent over $1.2 trillion and lost almost 6000 soldiers in the actions in Iraq and Afghanistan since 9/11—resources that could have been used to build things, not bomb things. Without the wars, we wouldn’t be facing an increase in the federal debt ceiling. Without the wars, we wouldn’t have to put up with extra security measures that are commonplace now. I’m not saying that the [...]

The Problem With China

By | 2017-07-17T12:35:05+00:00 May 2nd, 2011|Global Market Update|

China has a population problem. Not the one that everyone has talked about for decades. For decades China has had a “one child” policy that limited its population growth. The conventional wisdom was that they needed to control this; too many people slicing up the resource pie means that each person gets an ever smaller slice. It was this logic that led Thomas Malthus to predict population growth would eventually outstrip the food supply of a country, leading to widespread famine. Such was the [...]

Who’s Inflating Now?

By | 2017-07-17T12:35:05+00:00 May 1st, 2011|Global Market Update|

The smugness must get annoying. Before Ben Bernanke’s press conference Tuesday there were dozens of blog entries filled with hypothetical questions about Fed policy. Most of the questions had to do with inflation. Typically it challenged the notion of “core” inflation, and noted how oil and crop prices have recently increased, or asked why purchasing power has declined by 60% since 1980. (Here’s a hint: it has to do with math. 3% inflation compounded over 30 years will increase prices 145%.) But most folks [...]