Posts Tagged ‘fiscal deficits’

You Should Be Careful What You Wish For

You Should Be Careful What You Wish For

Courtesy of John Mauldin, Thoughts From The Frontline 

Flat World Earth

Everyone" is upset with the level of fiscal deficits being run by nearly every developed country. And with much justification. The levels of fiscal deficits are unsustainable and threaten to bring many countries to the desperate situation that Greece now finds itself in. We must balance the budget is the cry of fiscal conservatives.

But there are unseen consequences in moving both too fast or too slow in the effort to get the deficits under control. Today we look at them as we explore what a fine mess we have gotten ourselves into. (I am working without internet today so the letter will be shorter with fewer references than normal.)

GDP = C + I + G + (X-M)

We have discussed the above equation before, but let’s look at it again from a different angle. Basically, the equation is another accounting identity. GDP (Gross Domestic Product) for a given country is the total of Consumption (personal and business) plus Investments plus Government spending plus exports minus imports.

The Keynesians argue that when there is a drop in C due to a recession that the G must rise to offset the drop. That was at the heart of the argument for stimulus packages in so many countries. And there is no doubt that stimulus did help keep a very deep recession from turning into an even deeper depression. One can legitimately argue about the size of the stimulus, or about the nature of the spending, but it is difficult to argue that it did not have an effect.

Now, of course, the hope is that a recovery will allow C to begin to rise…
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IS THE ECB ABOUT TO GO NUCLEAR?

IS THE ECB ABOUT TO GO NUCLEAR?

Bikini Bomb

Courtesy of The Pragmatic Capitalist 

The ECB is in a most unenviable position.  As the EMU begins to falter they are confronted with few tools with which to fight this battle.  The market called their bluff yesterday with the Greek bailout and is clearly looking past Greece at Portugal and Spain while daring the ECB to make a move on either country.  The bond “vigilantes” are betting on the fact that the ECB has overplayed their hand with the Greek bailout.  At this point, it looks like the vigilantes are correct.  The ECB put a gun on the table and it turns out to have been nothing more than a water pistol.  Unfortunately for the vigilantes the ECB is not out of tricks.  They have a Hank Paulson like bazooka in their option to buy bonds on the secondary market.  But can they use it?   RBS analysts believe they should not hesitate in acting:

“The ECB should not wait for a renewed deterioration of the periphery before acting. It should regain its leadership in tackling the crisis following a complete communication and coordination failure amongst euro area fiscal authorities around the Greek crisis. Should contagion reappear, there will probably not be enough time to go through a similar backstop facility to that of Greece for the next country. There simply will not be enough time. Better breaking the rule-book than breaking up the euro area!”

Unfortunately, the decision is a bit more complex than the Fed’s decision to buy assets directly from the U.S.banks – what many refer to as “quantitative easing”.  As we’ve previously explained, the Euro is flawed primarily because it is one currency housed under several economies with multiple governments.  They are not truly unified because their economic strategies differ which make their inherent monetary needs different.  Using the same currency for economies as different as Germany and Greece is truly forcing a square peg in a round hole.

Where are the potential roadblocks to QE?   First of all, the program would have to be massive.  Credit Suisse estimates that the cost to bailout Spain, Portgual and Greece could be as high as $600B.  The program would almost certainly have to be as large in order to quell any and all market fears.  But the bigger roadblock is the Maastricht treaty.  Although the ECB could technically…
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Boeing is doing crisis management all wrong - here's what a company needs to do to restore the public's trust

 

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Boeing is doing crisis management all wrong – here's what a company needs to do to restore the public's trust

Courtesy of Kelli Matthews, University of Oregon

In a crisis, time is not on your side.

A crisis creates a vacuum, an informational void that gets filled one way or another. The longer a company or other organization at the center of the crisis waits to communicate, the more likely that void will be filled by critics.

That’s exactly what&...



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Kimble Charting Solutions

Connect Series Webinar March 2018

Courtesy of Chris Kimble.

We cover dominating patterns in major global Indices, sectors, commodities and the metals markets.  We produce chart pattern analysis and empower people to improve entry and exit points.

To become a member of Kimble Charting Solutions, click here.

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Zero Hedge

US Home Price Growth Slowest Since 2012

Courtesy of ZeroHedge. View original post here.

Following disastrous starts and permits data, Case Shiller's home price index was expected to show growth continuing to slow. and it did, considerably worse than expected.

Case-Shiller's 20-City Composite grew at just 3.58% YoY in January (well below the 3.8% YoY expectation and December's 4.14% YoY print). This is the weakest annual growth since September 2012, decelerating for a 10th month in January as buyers held out for more affordable properties.

...



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Insider Scoop

Analyst: Apple's New Credit Card Bodes Well For Green Dot

Courtesy of Benzinga.

Apple Inc. (NASDAQ: AAPL) announced Monday it will launch its own branded credit card called Apple Card and this should be viewed as a positive for Green Dot Corporation (NYSE: GDOT), according t...



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ValueWalk

Tesla's Massive Increase In Delivery Volume In Europe And China

By Jacob Wolinsky. Originally published at ValueWalk.

Whitney Tilson’s email to investors discussing a few good posts on Tesla on the VIC message board about the massive increase in delivery volume in Europe and China.

41 – jcoviedo – 3 days 2 hrs ago

Re: Re: Re: Several bullish points

40

Q4 hedge fund letters, conference, scoops etc

Elon leaked...



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Chart School

Weekly Market Recap Mar 24, 2019

Courtesy of Blain.

It was looking like another week of Federal Reserve Kool Aid and crushing bears .. until Friday.  On the back of bad economic news out Europe, the yield curve inverted on the 3 month vs 10 year bond – before you fall asleep to that news, it is a quite important indicator for the economy (not necessarily the stock market… yet).   More on that in a bit.  As you can see the action in the bond market Friday was quite severe so it will be interesting to see the move in the coming few days.

As for the Federal Reserve:

The Federal Reserve signaled no more increase in interest rates this year and just one in 2020, according to its new ‘dot plot,’ and the bank said it would...



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Biotech

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Reminder: We are available to chat with Members, comments are found below each post.

 

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Assorted cannabis bud strains. Roxana Gonzalez/Shutterstock.com

Courtesy of James David Adams, University of Southern California

Medical marijuana is legal in 33 states as of November 2018. Yet the federal government still insists marijuana has no legal u...



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Digital Currencies

Facebook's cryptocurrency: a financial expert breaks it down

 

Facebook's cryptocurrency: a financial expert breaks it down

Grejak/Shutterstock

Courtesy of Alistair Milne, Loughborough University

Facebook is reportedly preparing to launch its own version of Bitcoin, for use in its messaging applications, WhatsApp, Messenger and Instagram. Could this “Facecoin” be the long-awaited breakthrough by a global technology giant into the lucrative market for retail financial services? Or will...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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