Where Are We?

By | 2013-12-31T11:05:33+00:00 December 31st, 2013|Global Market Update|

As 2013 ends, how is the economy doing? There are many ways to answer that question, but one the clearest is to compare employment, economic activity, and the market. Since the Financial Crisis, both the market and the economy have recovered and hit record levels, while employment is still below its 2007 peak. This gap—sometimes call the output gap—is a big source of concern for economists and analysts. The economy is now producing $850 billion more in inflation-adjusted output with 2 million fewer workers [...]

On Dasher, On Dancer …

By | 2013-12-24T11:24:26+00:00 December 24th, 2013|Global Market Update|

Is the EPA going to play Scrooge? A team of researchers at the Oregon State University has noted that with all the concern about the effect of carbon emissions on the global climate, a major greenhouse gas is being overlooked: methane. And methane is over 20-times more powerful than carbon dioxide in trapping heat. Cows, sheep, goats, and other ruminants produce tons of methane in their digestive systems. Over the past 50 years the population of these animals has risen from 2.4 to 3.6 [...]

100 Years Ago …

By | 2017-07-17T12:34:24+00:00 December 23rd, 2013|Global Market Update|

Happy Birthday, Federal Reserve! 100 years ago Woodrow Wilson signed the Federal Reserve Act, the culmination of a legislative effort that began seven years earlier. In 1906 the San Francisco earthquake had far-reaching effects. Insurance payments from London insurers were massive, and money was in short supply. Interest rates soared, and a monetary panic ensued. Stock markets collapsed. The panic didn’t end until J.P. Morgan famously locked 40 top banking officials in his library on a Saturday night and didn’t let them out until [...]

Ho Ho Hold Onto Your Credit-Card!

By | 2017-07-17T12:34:24+00:00 December 20th, 2013|Global Market Update|

Looks like Target is getting a big lump of coal in its stocking this Christmas. The big-box retailer disclosed yesterday that some 40 million credit and debit-card accounts had been compromised in a data breach that ran from November 27th until December 15th. Apart from jokes about “don’t be a Target” for cyber-crime and their having their logo—the big, red bull’s-eye—painted on their corporate backs, what can we learn from this? First, technology is vulnerable to fraud and abuse—especially outdated technology. Charge-cards are the [...]

Christmas Economics

By | 2013-12-19T10:00:30+00:00 December 19th, 2013|Global Market Update|

Does America run on Christmas? Christmas is the retail event of the year. Stores begin stocking up in September, finalizing marketing plans in October, and the period from Thanksgiving to Christmas is one nonstop retail rush to electronics stores and grocery stores and clothing stores and big-box retailers. It’s common knowledge that 70% of America’s economy is driven by consumer demand, and that about half the economy is related to retail and wholesale trade. With anywhere from a third to a half of all [...]

Public Promises and Pensions

By | 2013-12-18T12:14:58+00:00 December 18th, 2013|Global Market Update|

What’s wrong our public pensions? On the face of it, the promises are too big and the funds are too small. We’ve underfunded our pensions because contributing a dollar today requires taxes today, taxes that have to be approved by politicians who can be punished at the ballot box. At the same time, pension benefits promise a dollar tomorrow, dollars that earn worker loyalty and union support today. A tax today is penalized; a future payment is rewarded. But it goes deeper. There’s a [...]

Success and Failure

By | 2013-12-17T11:41:55+00:00 December 17th, 2013|Global Market Update|

Loehmann’s is filing for bankruptcy. Are the bad times coming back? Probably not. While the 92-year old New York discount clothing chain is an icon in the Northeast, it has been a regular visitor to the bankruptcy court. They might even want to get a frequent-filer card. The firm filed Chapter 11twice before: in 1999 and 2010. It’s hard for small chains—Loehmann’s has just 39 stores—to keep up with behemoths like Target or TJX, which has 3200 stores. In addition, lots of retailers have [...]

Growing Old, Growing Smart?

By | 2013-12-15T22:02:12+00:00 December 15th, 2013|Global Market Update|

Are our employers responsible when we mess up? That’s the question before the Supreme Court in a dispute between Fifth Third Bank and some of its employees. The workers invested in the company’s 401(k) program. Like many companies, Fifth Third had lots of options—stocks, bonds, cash, and company stock. During the Financial Crisis, Fifth Third’s stock fell 97%--from $40 per share in June of 2007 to a dollar in February of 2009. Since then, the stock has come back about half way, to $20. [...]

Expectation Nation

By | 2013-12-13T14:32:44+00:00 December 13th, 2013|Global Market Update|

What do you think the market will do? I get that question all the time, especially this time of year. And it’s reasonable to ask someone who makes his living dealing with the ups and downs of the Dow and interest rates whether he thinks next year’s markets will behave like Santa Clause or the Grinch. In the long-run, markets are moderately predictable. Bonds are actually very predictable. If you buy a 10-year Treasury bond at a yield to maturity of 2.9%, you can [...]

Fed Follies?

By | 2013-12-11T11:59:11+00:00 December 11th, 2013|Global Market Update|

Has the Fed lost its way? The Federal Reserve System celebrates its 100th birthday this year. Rather than hold a self-congratulatory party, the Philadelphia Fed convened a policy forum that looked at current policy in an historical context, asking what the Fed is doing wrong and whether it is straying from established principles of sound central banking. While there was some criticism of the Fed’s role in the Financial Crisis and evocations of Walter Bagehot, the focus was more on what the Fed is [...]