What Kind of Economic Recovery?
March 12, 2010
For the third month in a row the index of leading economic indicators rose. This is the first time this has occurred since 2004. And, it gives us some sign that maybe the economic recession that we have been in since December 2007 is reaching its climax. James W. Paulson, chief investment strategist at Wells Capital Management, is quoted in the Wall Street Journal as saying “We’ve got tons of information telling us we’ve turned the corner.” Ataman Ozyildirim, an economist at the Conference Board which produces the report, states that “The process of coming out of the recession, although still fragile, may be starting.”
EMCOR GROUP, INC. The Rebuilding Of America
March 11, 2010
President Obama’s stimulus package includes substantial spending on infrastructure projects. One company that stands to gain from the stimulus spending is EMCOR Group, Inc. (NYSE – EME.) EMCOR operates in the engineering and construction space. It is an electrical and mechanical construction and facilities firm with operations in North America, the United Kingdom, and the Middle East.
A Walk on the Supply Side
March 10, 2010
Keynesian demand-side economics still rules the minds of the policy makers in Washington, D. C. Their actions and their analysis continually point to their focus on aggregate demand and the “green shoots” that are expected to accompany an economic recovery based on the stimulus of spending.
For over a year I have been arguing that more attention needs to be given to the supply side of the equation. Yes, the growth rate of real GDP has been going down and the rate of employment has been going up. But, the rate of inflation, as measured by the rate of increase of the GDP price deflator has not declined since the fourth quarter of 2007. If it were just a demand side problem, this would not be the case.
Be Careful What Bandwagon You Jump Onto
March 3, 2010
The Financial Times printed excerpts of an interview with Duncan Niederauer, the Chief Executive of NYSE Euronext. (See “NYSE chief cautious over March rally”, http://www.ft.com/cms/s/0/ae73a390-29e6-11de-9e56-00144feabdc0.html.) In the interview he stated that the recent rally in the stock market was being driven by short-term traders trying to take advantage of the high volatility that currently existed in the financial markets. He continued that the high trading volumes achieved where concentrated in a “handful of stocks.”
What Do The Money Stock Figures Tell Us?
March 3, 2010
The two basic measures of the money stock continue to grow at rapid rates. The broader measure of the money stock has continued to grow at a relatively steady pace. In the fourth quarter of 2008, the M2 measure of the money stock grew at an 8.2% year-over-year rate of increase. (I use non-seasonally adjusted data in all cases relying on year-over-year calculations to take account of seasonal movements in each series. Thus, I don’t rely on the artificial statistical adjustments that produce the seasonally adjusted series.) In the first quarter of 2009 the M2 year-over-year rate of growth was 9.5% but the rate of increase dropped back down to 8.7% in the second quarter.
Are Banks Telling the Truth?
March 2, 2010
On the front page of the Financial Times this morning we read the disconcerting headlines, “’Tarp cop’ to investigate whether banks have ‘cooked their books.’” (See http://www.ft.com/cms/s/0/163c85c4-2789-11de-9b77-00144feabdc0.html.) Neil Barofsky, special investigator-general for the Troubled Asset Relief Program (TARP), is “seeking evidence of wrongdoing on the part of banks receiving help from the fund.”
The game—“institutions applying for TARP money had to show they were fundamentally sound, potentially prompting them to misstate assets and liabilities.” Barofsky is quoted as saying, “I hope we don’t find a single bank that’s cooked its books to try to get money but I don’t think that’s going to be the case.”
Is Treasury’s TARP Debt Already Monetized? Part III
March 1, 2010
The discussion continues for one more post. I ended the last post with these words:
“The hope is that as the banking system works through its problems, TARP funds will be returned and the mortgage-backed securities will mature or be sold back into the market allowing the balance sheet of the Federal Reserve to contract back to where it was in the summer of 2008. The banking system is apparently holding onto reserves to protect itself and that is why they are really not lending. The idea is that if they don’t need these excess reserves they will return them. This is what the Federal Reserve is planning to happen. Let’s hope that they are correct!”
CIT and Getting Out Of This Mess
February 24, 2010
CIT is an example of the kind of problems still facing the economy. CIT has taken on legal counsel in order to determine whether or not it should go into bankruptcy. The problem, the company has $2.7 billion in debt coming due through year end and its credit-rating has been cut “deep into ‘junk’ territory.” (See http://online.wsj.com/article/SB124744080839729811.html#mod=testMod.) It has been seeking liquidity help from the Federal Government but has not received approval yet.
This is not time to own semiconductor stocks
February 22, 2010
This is not time to own semiconductor stocks, either chip makers or equipment manufacturers. According to the Semiconductor Industry Association, worldwide sales of semiconductors were $14.2 billion in February, a decline of 30.4% compared to February 2008 sales of $20.3 billion. This is a continuation of the decline observed from the prior year. Sales were down by $1.1 billion from January 2009 levels of $15.3 billion.
Is Treasury’s TARP Debt Already Monetized?–Part Two
February 20, 2010
My post from Friday June 26 contained the first part of this discussion. Today I would like to continue the discussion and there are two reasons for doing so. The first reason is to understand just what the Federal Reserve has been doing over these last nine months. The second is to understand how likely it might be for the Federal Reserve to “unwind” what it has done over the past nine months and reduce a part of the fear of future inflation. Note, I am not including any discussion of future government deficits and the probability that they will be “monetized.”
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