Is Treasury Secretary Geithner in trouble?
By jrh | March 23, 2009
You have to wonder if all the rumors about Treasury Secretary Geithner’s job is being floated in the press to see if he should go. In this BusinessWeek article, President Obama gives him his approval but how many times in sports has a manager been given approval by management and then is fired?
“Well, I have complete confidence in Tim Geithner and my entire economic team. Understand, as I said before, Tim Geithner didn’t draft these contracts with AIG,” said the President. “He is making all the right moves in terms of playing a bad hand.”
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Rick Santelli rant at CNBC
By jrh | February 20, 2009
You have to love Rick Santelli, here is his rant at CNBC. Unfortunately, bailing out people who have made bad decisions have already started with business so it will just continue.
Topics: credit crisis | No Comments »
House of Cards
By jrh | February 17, 2009
I highly recommend the CNBC show “House of Cards”. The defining moment of the show is when former Fed Chairman Alan Greenspan said, “there was nothing the Fed could do to stop the housing bubble”. This was completely shocking to me that the Fed Chairman would completely admit that there was nothing the Fed could do. This begs the question, “what is the point of the Federal Reserve”? Isn’t the Federal Reserve’s job to smooth the business cycle and keep the boom and bust cycle level? If the Federal Reserve cannot do this, then do we really need them?
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The Celtic Tiger (Ireland) is in trouble
By jrh | February 10, 2009
The credit crisis is world wide. We have seen the financial problems that Iceland is having. Here are a number of links that show the trouble that Ireland is having.
This WSJ article tells about the hard times:
But the property binge and bust has been its undoing. One bank has been nationalized, and the government is negotiating bailouts for two more. Unemployment is projected to zoom close to 10% this year. The central bank forecasts a 4% slump in gross domestic product. Last week, Prime Minister Brian Cowen pledged massive spending cuts to shave €2 billion ($2.59 billion) from a yawning budget gap.
This Los Angeles Times article about the luck running out in Ireland:
The global credit crunch has silenced the construction cranes that transformed Dublin from a sleepy backwater to a major financial center. Yet the Irish are finding they have fewer and fewer ways to get them started again.
In surrendering monetary policy to the European Central Bank and agreeing to meet specific budget targets, Ireland and other EU countries are now handicapped in their ability to craft responses to specific economic challenges.
As a result, economists say, the recession in Europe is likely to be even deeper, and last longer, than the one in the United States, making it more difficult for the global economy to bounce back quickly.
“The structural problems in the United States are on an order of magnitude less than in Europe,” said Constantin Gurdgiev, an economist and research director of NCB Stockbrokers in Dublin. “Ireland is now the litmus test for the European model – a test of whether it will work or whether it won’t.”
This Irish Times article has the leaders talking about tough times:
Taoiseach Brian Cowen and Central Bank Governor John Hurley have issued stark warnings of hard economic times for Ireland next year.
Speaking during a radio interview this morning, Mr Cowen said there had been a “fundamental fracture” in the world’s financial system.
“We are now going to face into a few years where the standard of living will drop,” he said during the interview on the Gerry Ryan show this morning.
“We have a problem. It is a serious problem. Unemployment will go up in the short term, that’s for sure.”
Full-year Exchequer figures due early next month are expected to show an €8 billion hole in the public finances.
“We’re going to take some pretty tough decisions in addition to the ones we have already embarked upon. Our tax revenues are well down,” Mr Cowen added. “The bottom line is we’re spending more than we’re earning. We’re down eight billion on our tax receipts this year. Next year is going to be difficult as well.”
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FDR and the new deal - did it help?
By jrh | January 21, 2009
The below data (from huppi.com) has to make you wonder if the New Deal helped the economy recover during the Great Depression. When the programs were put in place in 1933, GNP was already starting to turn around at a -2.1%. Unemployment never really recovered even in 1939. You have to wonder if TARP or any government spending package will help.
| Year | Unemployment | GNP Growth |
|---|---|---|
| 1929 | 3.2% | N/A |
| 1930 | 8.7% | -9.4% |
| 1931 | 15.9% | -9.4% |
| 1932 | 23.6% | -13.4% |
| 1933 | 24.9% | -2.1% |
| 1934 | 21.7% | +7.7% |
| 1935 | 20.1% | +8.1% |
| 1936 | 16.9% | +14.1% |
| 1937 | 14.3% | +5.0% |
| 1938 | 19.0% | -4.5% |
| 1939 | 17.2% | +7.9% |
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Dow up 900
By jrh | October 14, 2008
The question is:
Is this a bottom or a bear market rally?
I have been going with the theme from the book “Stock Cycles” that this was a bear market rally.
The bear market started in 2000 and this is just another part of the downward trend.
Of course nothing goes straight up or down (even though last week it did go straight down). There are up days in bear markets and down days in bull markets.
Needless to say there is much volatility and you should be very careful with what you are doing.
Topics: Stocks, credit crisis | No Comments »
Trouble with the European Union
By jrh | October 10, 2008
Here is a good video from MarketWatch about the world financial problems are putting pressure on the European Union and the Euro.
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Dow goes below 9000
By jrh | October 10, 2008
The interesting thing about the selling is that most of it happens at the end of the day. People are saying that they do not want to hold stocks overnight. Until the market settles and people are willing to stop selling at the end of the day then a short term bottom will be reached.
It is interesting that the talking heads are saying stay put to there viewers as the hedge funds run for the door.
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World Banks cut rates together
By jrh | October 9, 2008
Are you asking the same question, how bad are things? The governments around the world are trying everything and anything to get the stock markets and the economies around the world going. Each item they try is having no immediate impact; they are actually having a negative impact. Eventually, people are going to say to themselves that things must be really bad. When the population reaches that conclusion, how far down will the market go?
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Will 700B help if 1.8 trillion did not?
By jrh | October 3, 2008
This is a great article from Seeking Alpha about the 1.8 trillion the Fed has put into the economy since December 2007.
The above figure of $1.816 trillion is the amount that the Federal Reserve has committed to no avail. This does not include the many decreases in the discount rate and Fed Funds rates. These rates have fallen as dramatically as the Fed’s tab has increased. Sure, not all of the money went out at the same time and not all of it was evaporated into nothingness. However, $1.816 trillion is the amount that has been holding the hands of weak or hobbling financial companies. Did it stop the bleeding? Of course not. Which is the reason why the Treasury felt the need to step in, bail out AIG, and ask for $700 billion as the first of many more requests for funds to “save” the financial markets?
The markets cannot correct themselves until the bailout efforts stop and the market resolves the problems that we’re experiencing. We as investors can only hope that we’re better than Japan in resolving the exact same problem that they experienced over the last two decades.
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