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[30 Oct 2014 | No Comment | ]

Some say we have a Plow Horse Economy because economic growth is always slow after a financial crisis. But the real reason is that politicians from both major parties keep throwing more government “solutions” at problems. This started well before President Obama took office.
The Bush Administration, and a spend-friendly Congress, pushed temporary “stimulus” spending in 2001 and then followed Larry Summers’ Keynesian advice in early 2008 and passed tax credits and even more stimulus. President Bush said, “I’ve abandoned free market principles to save the free market system” in an …

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[4 Oct 2014 | One Comment | ]

The only thing we know for sure is that the Republicans will keep the House.  They already have a majority and the president’s party almost always loses seats in mid-terms. Our best guess is that GOP ends up with an enlarged majority.

The Senate, however, is completely up for grabs.  More Democrats have to defend seats this year.  President Obama’s low popularity, a Plow Horse recovery, scandals, and continued problems in the Middle East, had set up 2014 to be an anti-incumbent election.  It could have been a huge Republican wave.  …

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[25 Sep 2014 | No Comment | ]

Every coin, like every historical (or even not so historical) event, has two sides. You can choose which side to focus on – the positive or the negative.
For example, some choose to view the Initial Public Offering (IPO) of Alibaba – a Chinese company described as eBay, Amazon and PayPal, combined, which serves more than a quarter billion customers – as a negative.

Yes, it’s a Chinese company, which means that foreigners are not allowed direct ownership. Shareholders in the IPO own a Cayman Islands-based holding company that gets the profits …

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[19 Sep 2014 | No Comment | ]

Let’s imagine a college basketball team had a 13-1 record in conference play and was 26-4, overall, going into the NCAA tournament. You might assume it gets a top seed in the tourney and is favored to go deep, maybe even reach the Final Four. But what if we told you the team was Harvard?
They got a 12th seed in the tourney. No one is, or was, knocking Harvard. The Crimson had an awesome team last year, bumping off Cincinnati (a 5th seed) and then holding their own, until finally …

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[29 Aug 2014 | No Comment | ]

World monetary policy leaders (including Fed Chair Janet Yellen and ECB President Mario Draghi) met, and spoke, in Jackson Hole, WY last week. It’s the equivalent of the Emmy Awards for central bankers.
But, what is most interesting about all of this is that the more central bankers talk, the less anyone understands them. Supposedly, all the speeches, minutes, transcripts and press conferences are making the Fed, and other central banks, more transparent. But, in the end, they are making everything more opaque.

The Fed, in particular, is becoming harder to understand. …

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[8 Aug 2014 | No Comment | ]

f you’re an investor looking for a reason to be worried, there are plenty of headlines to light the fuse. Widening war in the Middle East, turmoil in eastern Ukraine (or is that western Russia?), a debt default by Argentina…problems with some Portuguese bank…Ebola…tapering.
It’s not a short list, and equities are down roughly 3% since their peak on July 24th.
Maybe, just maybe, a long-awaited stock-market correction has begun. We can’t confirm or deny that prediction. All we know for certain is that this would be about the 43rd correction analysts …

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[1 Aug 2014 | No Comment | ]

Inversions – a financial deal where a large US company merges with a smaller foreign one and then reorganizes so the US wing of the new firm is the subsidiary and the entity pays a lower foreign corporate tax rate – are the rage these days.
Well, sort of. A few companies have done them, and, according to one lawmaker, maybe 25 more are in the works. The rage is coming from politicians. They argue that inversions are unpatriotic and want to stop them.

There might be some law that could stop …

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[17 Jul 2014 | No Comment | ]
What if the Fed is Wrong?  Working Up to Economic Potential

A key ingredient of monetary policy is the estimate of “potential real GDP growth” – how fast the economy should expand. The Federal Reserve thinks potential is about 2¼% per year. Using this, the Fed estimates GDP is about 8.5% below potential and monetary policy should remain easy.
But what if the Fed is wrong? What if bad policy (tax hikes, spending, and regulation), which started even before the Panic of 2008, but got worse afterward, cut potential to 1.5%?

 
To clarify, we’re not using the word “potential” as a true, inviolable, …

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[10 Jul 2014 | No Comment | ]

There must have been thousands of new jobs created in the past few years just to comb through the minutiae of the employment data looking for negative nuggets. All someone needs is access to the Bureau of Labor Statistics website and a calculator. Then, you go through the jobs data and find some stuff to spin negatively.
The job doesn’t pay that well, unless you have a radio or TV show or website with advertising. But, it’s politically rewarding on both the right and the left to prove how bad the …

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[2 Jul 2014 | No Comment | ]

USA soccer lost to Germany last Thursday, but moved to the Sweet Sixteen of the World Cup anyway because it had previously beat Ghana and tied Portugal. US fans celebrated wildly after the loss to Germany, with some saying US soccer had come of age.
Confusing? Yep!
The same confusion affected many investors and political analysts last week when first quarter real GDP was downwardly revised to a -2.9% annualized growth rate and the stock market moved higher anyway. The bears finally got their data point, but the market didn’t cooperate.
 

There are …