The State of the Recession–a long way to go
February 19, 2010
Going into this holiday weekend, we need to take a little time to reflect on the state of the economy and the financial markets. I certainly don’t want what I write below to sound like a “rosy scenario” but I would like to try and put some perspective on where I think we are and what is ahead of us.
First, as I have written many times, the liquidity problem is behind us. Liquidity problems are of short term nature and require immediate action. The difficulties we now face are related to solvency and the ability to work things through. This takes time and it takes persistence, things that Americans are often impatient with.
ADP: The Single Source Solution
February 13, 2010
Automatic Data Processing, Inc. (ADP) is the leading business outsourcing provider in the human resources, payroll, tax, pension and benefits administration space. ADP also provides industry-specific solutions to automotive, heavy truck, motorcycle, marine and recreational vehicle dealers. The company operates in three segments: Employer Services, Professional Employer Organization (PEO) and dealer services.
The State of the Banking System
February 11, 2010
There are three preliminary indicators that the banking system is coming along on its way to recovery. First, there is the “letting go” of CIT Group, Inc. The government must feel that it does not need to extend itself to help out this institution given its present troubles. (See my recent post on the CIT situation: http://seekingalpha.com/article/148730-cit-s-debt-issues-show-why-the-economy-won-t-be-picking-up-any-time-soon.) We’ll see if they continue this approach with other troubled institutions as additional situations arise.
Deficits and the Declining Value of the Dollar
February 7, 2010
One of the questions that has arisen from the posts I have put up over the last several months has to do with my statement that the international financial community doesn’t like government deficits and tends to believe that a lack of fiscal discipline will result in an increased monetization of the debt. The feeling that the central bank of such a country cannot, in the longer run, overcome the fiscal imprudence of its national government and act independently of that government has resulted, time and again, in a decline in the value of the currency of the country being examined. The dollar is no exception.
Let’s look at the following information.
The Bargin Bin: Cisco Systems
February 1, 2010
Times have surely changed, if we can ask the questions, “Is Cisco Systems CSCO in the bargain bin?” “Is Cisco now a ‘value” stock?” Is it a “value” trap?
Sales for the most recent quarter (MRQ) vs the quarter one ago are down from $9,831 billion to $9,089 billion or 7.5%. Sales, on a trailing twelve month (TTM) basis, are up about 5.2%. Standard and Poors projects a sales decrease of 9% in FY 09 reflecting the weak global economy.
Uncertainty: The King of the Market and what to do about it
January 28, 2010
This is a time that is particularly conducive to impulsive or instinctive behavior. It is a time that behavioral economists love because it proves their case about irrational human behavior. People react and they react on the basis of a gut feeling or a snap judgment.
These researchers tell us that this type of behavior is what has helped the human species survive. However, it is not necessarily the kind of behavior that leads to decisions or actions that are in our best interest when investing. “Relying only on intuition in finance can lead to very bad outcomes, not only for individuals but also for markets.” (This quote comes from David Adler’s new book “Snap Judgment”: see my post that reviews this book, http://seekingalpha.com/article/145660-book-review-snap-judgment-by-david-e-adler.) Yet we humans, individually and collectively continue to perform in this way.
The Future of Monetary Policy: The Exit Strategy
January 12, 2010
The recession seems to be ending. However, many people do not feel that the recovery will be very robust. (See my post “Is the Recession Over?” http://maseportfolio.blogspot.com.)
The crucial claim in the near term though is that the recession seems to be ending.
Because of this the issue that seems on the minds of many people is: how is the Fed going to remove all the bank reserves it has pumped into the banking system over the past ten months? The obvious concern is that the recessionary downdraft would turn into an inflationary nightmare. In other words, these people are asking for an explanation of the “exit strategy” the Federal Reserve plans from its policy of preventing a major economic collapse?
The Banking System Is Sitting On It’s Hands
July 13, 2009
It’s time for another quick look at the United States banking system. Whoops! Nothing happening there. Are they still alive?
Federal Reserve Bank Credit has increased by $1.2 trillion over the past twelve months. What has increased in the banking system? Excess reserves in the commercial banking system have increased by about $800 billion. Tracing this “stuff” a little further, in round figures, the currency in circulation outside of the banking system has increased about $100 billion over the past year, about $100 billion has gone to foreign central banks in liquidity swaps, so there is another $200 or so in funds that the Fed has pumped into the system that is somewhere in Treasury accounts. But who is counting? Read more
A Real Stimulus Plan
June 29, 2009
There’s been a slew of good news lately, including improved consumer sentiment, lower than expected job losses, increasing wages, and a contracting TED spread. The stock market has been up for 12 of the past 14 weeks, and the Dow recently broke even for 2009. Public officials including President Obama and Fed Chairman Bernanke have declared the worst to be over. Read more
Bank of America Dot Gov
June 27, 2009
It is becoming clearer and clearer what it means to have government involved in the affairs of banks and businesses. Where all the initial talk was about the “moral hazard” presented by government bailing out the private sector and how this just means that in the future banks, and other organizations, will just take on more and more risk because they know that if things go bad, the government will be there with a rescue net to save the institution. Read more
