Thursday, January 31, 2008

In praise of decoupling

A kindler, gentler look at decoupling but I remain unconvinced.

Basically there are two huge drivers to global growth right now, US and China, both are at the center of an ecosystem of other economies feeding into them.

And here's the kicker, China relies on the US.

Here's the money quote:

Diversification will only go so far, however, particularly if US consumption nosedives, says Mr Sheard. “Asia, centred on China, has become even more interlinked into the global economy, the driving impetus of which has been the US,” he said. It is hard to be global and decoupled at the same time.

Next bubble?

Looks like we're deep in a GreenTech one... with agriculture quickly gaining ground?

Wednesday, January 30, 2008

The new paradigm: Bubbles

Basically this is MarketPlace article on an upcoming Harper's article relates back to what I said here, about a new bubble paradigm overtaking the economy.

While the Asimov and Frankenstein references in the article point to a woeful misunderstanding of great sci-fi literature, the point is clear... we're entering into a fast and loose economy of blowing bubbles, rather than sustainably creating wealth.

The price of cheap money (see Fed cut) to fuel unreasonable growth (see past dot-com, housing bubbles), is an economy that will continually run through rabid big bang and big crunch phases, sort of like viewing the entire history of the universe in fast forward at a Kagillion time speed.

Hepped up on goof-goof

ok.. fantatic, markets are shooting up. I hope the crash doesn't hurt so hard when the high from the interest rate cut wears off....

BBC NEWS | Business | US rates cut to avoid recession

Now They Tell Us -

Ummmm... isn't the ability to evaluate risk kinda important? If we just throw our hands up and say we can't do it, doesn't that make investing a tad more difficult?

Now They Tell Us -

Foreign Demand Aids Durable Goods -

This is one of the more interesting articles I've come across and I think gives some hints as to what is going on in the economy:

1) This is a consumer lead downturn

2) From a US business perspective, it is financial institutions that are in trouble. Sure, financial institutions are important but when we talk about an economic slow-down, is it really impacting US businesses across the board or is it focused on one (admittedly large) segment of US enterprise?

3) US manufacturers like the low dollar. That is good in the short term but what happens when/if the dollar goes back up?

4) I still equate low-dollar with the inevitability of higher inflation... it is out there, somewhere.

Foreign Demand Aids Durable Goods -

Thursday, January 24, 2008

We Need Their Money

Not a great interview here, but an important bottom line. We can whine and complain all we want about sovereign wealth funds (not that I think we should), but the bottom line here is "we need their money."

To my mind, I think it is better SWFs invest in US assets than try to sell US currency for something of higher value (not that they would, of course, because doing so would probably harm their own currencies that are pegged to the dollar.)

Here's a great (rhetorical) question, how did they get all this money to begin with? US savings.... anyone....?

We Need Their Money - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

Wednesday, January 23, 2008

Market’s Wild Ride Ends With Dow at 15-Month Low - New York Times

My new phrase of the day: "American contagion".

I think US/global decoupling was a nice theory, but clearly it doesn't hold. When you think about it, it is also counter-intuitive... in a globalized market all economies are being increasingly "coupled", right?

Market’s Wild Ride Ends With Dow at 15-Month Low - New York Times

Fed and a new paradigm?

As usual, the Big Picture succinctly puts into words what many of us may be thinking... is it really the Fed's job to be bailing out the markets? I'm hurting as much as the next guy with the markets tumbling, but it strikes me that much of the cause of the current pain is due to too much meddling in the past (excessive policies on both the monetary and fiscal fronts). Therefore, I'd be willing to go through some pain now to ensure smoother, more sustainable growth in the future.

We're had at least two bubbles in less than a decade... tech and housing (and I suppose an emerging market bubble that is biting me in the ass right now). So maybe this is the new paradigm; in search of increasingly more rapid growth, we need to also be prepared for more frequent bubbles and their subsequent bursts.

The Big Picture | Is the Fed a Paper Tiger?

Tuesday, January 22, 2008

The Fear Is Palpable. Time To Buy. - Seeking Alpha

Sage advice...In a nutshell... don't worry, be happy.

In a little less flippant way, unless you feel there is something fundamentally wrong with your current portfolio or the capital markets in general, the average investor shouldn't make moves to try to avoid or out-think the market.

So Much for the Decoupling . . . .

wait... that is what I just said.

The Big Picture | So Much for the Decoupling . . . .

The bears are having their day it seems, but I would be suspicious of too much kodiak chest-thumping. If you claim anything long enough (like the economy is about to tank) it is bound to come true sooner or later.

Monday, January 21, 2008

World stocks routed on fears for economy - Yahoo! News

"Risk aversion is widespread as the market thinks (the economic downturn) is not just a U.S. centric story," said Paul Robson, currency strategist at RBS Global Banking.

oh well... so much for the oft told theory of the "decoupling" of the world economy and the US economy.

World stocks routed on fears for economy - Yahoo! News

Friday, January 18, 2008

Time to re-enter the market?

Two views from Big Picture.... maybe yes.... or... maybe maybe...

Bernanke Backs Calls for Quick Action

Federal Reserve Chairman Ben Bernanke threw his support behind quick and temporary tax breaks, combined with the possibility of "substantive" rate cuts, in testimony before Congress.

Isn't that the formula that got us into this mess to begin with? If previous growth wasn't sustainable, with this new "stimulus package" aren't we just starting down a new path of unsustainable growth?

Bernanke Backs Calls for Quick Action

Thursday, January 17, 2008

American recession, global inflation?

I heard from an economist the other day that the world may be heading towards both a US and China slow-down. The US slow-down (recession) he argued will be relatively mild and not have a great impact outside the US. A China slow-down would hurt emerging countries (because China buys all of their commodities) but will have little impact on the West.

But what about a US recession and continuing strength in China? Economic growth slows domestically and the dollar drops, but global prices remain high and even climb?

The US faces recession from within, and inflation from without. That could greatly exacerbate what may otherwise be a mild US slow-down.

The economy | A delicate condition |

Friday, January 04, 2008

Inflation vs. Recession

What scares you more, inflation or recession?

Me....I'm more afraid of inflation so I say "boo" to agressive rate cuts.

Fed's Inflation Fears Might Trump Calls for Another Big Rate Cut -