Econophile's blog

We are far enough away from the onset of the Great Recession that another down-wave in the depression (or a new recession if you go by NBER) is either here or due soon.  It may not be a severe downturn, as housing and autos would be falling from first- or second-floor windows in that case, but it would be occurring on the backdrop of a weakened structure, and thus the financial effects could be more severe than the economic effects (which could be severe or mild). Here is what you need to do.

AAPL is well positioned to potentially be a big enough long-term winner to justify the risks, even at its current stock price.  It has a seasoned, motivated management team; a potentially hot product feature to roll out throughout its major product line in Siri, with years of improvements in that technology ahead; unbeatable financial strength; loyal and even super-loyal users;  a focus on secular growth fields; and a low price-earnings ratio based on reasonable earnings estimates.  All this is being said despite being bearish on the stock market as a whole and bearish on the U. S. economy; but AAPL is about as far from the central control of the economy exerted by Washington as can be; it is highly international; and periods such as this recent period of high correlation between stocks have always given way to periods of differentiation.  Looking out to mid-decade or so, there is a significant chance that AAPL can achieve the bifecta of much higher earnings and a nicely higher P/E.  This might yield the world's first trillion dollar market cap company. 

The markets are signaling price declines all over the place.  Platinum is trading about $40/ounce below gold. This is anomalous. MIT's Billion Prices Project reported price declines in the U.S. in August (see final chart). The Economic Cycle Research Institute on Friday took the rare step of commenting in print that the stock market is at a significant risk for a further decline. Dangerously, Markit's CMBX index (or, more precisely, some of their constituent indices) that tracks mortgage-backed securities broke Friday to yet another new multi-year low.

Right now, the only investment opportunities I see that are both relatively attractive vis-a-vis the alternatives and offer a likelihood of growing nominal capital are investment grade municipal bonds.

The Fed announced Operation Twist today. Goldman got it right.

Does anyone seriously believe that the reason we have high unemployment in America is because we have a substandard infrastructure? Apparently the politicians in Washington believe so.

Warren Buffet is at the top of my bloviator list since he and Bill Gates (Sr. and Jr.) have talked about how they are under-taxed, how estate taxes are too low, and how rich people should give all their money away for charitable purposes. Forget the fact that Warren Buffet is a great businessman, or, rather, was a great businessman. The man is a phony. He is a cheerleader for Obama's failed policies. And he has relied on bailouts to make his investments good.

It's hard to tell if the idea that Ron Paul cannot win in 2012 is more ignorant, in its complete lack of historical sophistication, or more arrogant, in its claim to certainty amid all the complexity of 300 million lives and the myriad issues that affect them.

Like many people I have difficulty with thinking about 9-11 because when I do it seems too fresh in my mind. And as we all know that is painful. I go back to a man whom I respect, William Edelen, a Christian minister [I am not religious], an intellectual, a thinker, and very definitely an iconoclast. He wrote the following piece right after 9-11.

This is the Japanese approach to economic recovery. They spent trillions and have a first class wasteful infrastructure and a stagnant economy. Why hasn't the $830 billion Recovery Act spending worked to create jobs? This speech is another liberal fantasy by President Obama. He is clueless and apparently desperate because he cannot come up with anything that works. We are witnesses the failure of Keynesian economics on a grand scale.

It is a sad commentary on conventional economics that their well-intentioned policies will achieve the exact opposite of full employment. Obama's remedies will do nothing but perpetuate long-term high unemployment. And that is a hell of a gift to workers on Labor Day.

Stock markets fell very hard in Europe today, but if even Bloomberg.com doesn’t mention it, does that mean it did not happen or does not matter?

You know those movies with the bomb set to a timer ticking down to øø.øø where the sweaty hero nervously cuts one wire at a time while holding his breath and then at øø.ø1 he stops the bomb? Well Europe is like that except that the bomb goes off and kills everyone.

While Ben Bernanke has tried to exude confidence, he is now clearly discouraged. As well he should, since none of the Fed's "suite of tools" have worked as intended and almost every forecast the Fed has given since the Crash has been wrong. We are forecasting a stagnant economy and come the elections it is likely that unemployment will remain high. Like all Fed Chairmen, it will be hard for Dr. Bernanke to resist calls from politicians to "do something." He will earn his moniker as "Helicopter Ben" and unleash more quantitative easing, a dangerous and regressive policy.

I am crossing Pimco off my list as a credible institution. If Bill Gross and Mohamed el-Erian are running that show, and if you have any money  invested there, I recommend pulling out, fast.

We told you the downgrade was coming, too.