dinarpmkum

Isn't it obvious that the politicians have no idea why the economy is staggering? After the arrogance of January, 2009, when the exuberant victors of the 2008 election proceeded to toss away $ 800 billion in a foolish waste of money known as "the stimulus." The Obama folks assumed that throwing taxpayer money in the direction of Obama political allies (mostly state employee union members) would magically get the economy back on track. Why the Obama folks thought that, no one knows? Then the Obama team began the process of erecting roadblocks (think Dodd Frank, Obamacare, the Credit Card Reform act, stifling regulations from the EPA and the NLRB) that would virtually guarantee that the economy had no real chance of recovery. Now, Obama promises to come up with a new package to deal with the "jobs problem." This would be comical were it not so tragic. Putting up more roadblocks does not remove the original roadblocks. This economy will not get out of its own ...

If cell phones cost $ 10,000 apiece and required $ 1,000 monthly service bills, who would own them? Well, no doubt, Warren Buffett would own one and perhaps Bill Gates and Barrack Obama as well. But, what about the average guy. Would he own a cell phone at those prices? What if the economy was very strong, would most folks get a cell phone, if these were the costs? The answer is pretty obvious. At that price, very few people would be interested. This is the fundamental jobs problem in the US. Because of government mandates, the anticipation of Obamacare, litigation fears, OSHA rules, threat of unionization, a blithering variety of employment taxes, family leave laws, American labor is priced out of the market for most businesses. There are some businesses for which price is not an issue: Wall Street, the movies, professional sports, working at the White House, etc. But, for most private businesses who do the bulk of hiring in the US, labor is just way too expensive thanks to the...

So far, equity markets are down anywhere between 10-20% and bond yields in a number of major markets are reaching historic lows. Although it is difficult and nerve racking, investors should understand some of the forces behind what's creating this volatility and how they're likely to play out in the near term. When will market rebound? Again, we simply cannot answer that million-dollar question. If I know, I won't be writing this article here telling you all stories and facts. We should have a longer term view, especially during volatile times when fears dominating the marketplace. So, what are some of the driving forces behind? If we go back to basics, the 4 components that really drive economic growth are Government, Consumer, Corporate, Import & Export. If we look at each individually, we can do better opinion, by analyzing them. Government : Since 2008, governments have played an increasingly dominant role in the markets that we're familiar with. They are exp...

There are very scary stories out there: 1) a European debt crisis; 2) Incredibly slow economic growth in Western countries; 3) A potential for Asian economic growth to top out. Does this mean stocks cannot do well? Surely "the market" knows what we know. How much worse news is yet to come? Greece will default. Has the market fully factored that in? While the initial shock of a Greek default would likely cause stocks markets to skid, the reality is that a Greek default could be the harbinger of good news to come. The sooner that defaults and workouts become the order of the day in Europe, the sooner Europe can begin to heal its economic woes. Why are defaults and workouts therapeutic for Europe? The reason is that politicians will never be able to reverse the spending and entitlement train. They just won't be able to do it. Instead, a default will let the market itself force the necessary reforms on Europe. It won't be possible for Europe to access debt marke...

Whatever Ben Bernanke has to say on Friday is irrelevant to the grand picture. The American economy is stuck in a quagmire that Ben Bernanke cannot do anything about. He can make things worse, indeed he has already. But, can Bernanke do anything that can help? What can Bernanke can do that will convince a business to shoot itself in the foot by hiring someone in a world of massive regulation, litigation and mandates? Not much. But, I guess the press has to talk about something. So, the Bernanke sideshow continues.

The "Greek Problem" is really no different than what might be called the "California Problem" in the US. The 50 states of the US are in a common currency, yet each state has its own "fiscal policy." This is essentially the same as the situation in Europe wherein European countries (excepting Switzerland) are banded together in a common currency -- the Euro. Each country has its own fiscal policy. Greece (and California) are eventually going to be unable to continue financing their outstanding debt. There is no scenario possible that would permit either Greece or California to fund their outstanding debt over any significant future time period. The only way to postpone a default in either place is for someone to step in and bail them out and let them continue to expand their indebtedness. That's why politicians will soon be clamoring for the US government to bail out California, just as many are pushing the concept of Eurobonds in Europe to bail o...

What we are experiencing now are the fruits of the "too big to fail" mentality. In the US, the crisis of the Fall of 2008 began with the government orchestrating a purchase by JP Morgan of Bear Stearns with a $ 29 billion guarantee by the US government. That was the beginning. Before they were done the politicians had bailed out half the financial system, even those who did not wish to be bailed out. Now the European politicians are doing the same thing. Greece was too big to fail. Now, Spain and Italy are too big to fail. Germany and France are, no doubt, to big to fail too, but there is no one left big enough to bail them out. This is all ridiculous. No one is too big to fail. The world would not have come to an end if the various financial institutions that were liquidity starved had been permitted to fail in 2008 (or provided some orderly form of Chapter 11 bankruptcy). There was absolutely no reason to protect bondholders from the risks that they had assumed. The...