Yesterday I wrote to you about a risky change classifying municipal bonds as "high quality liquid assets." That change, though simple, could lead to increased spending by states and cities. This is obviously a danger given many states' indebted status, take for example the state of Illinois. A spiral of debt and taxes is driving residents out of the state, which in turn is worsening the state's revenue problem. Ben Bradley reports for WGN9 news from Chicago: 33,703. That’s how many residents left Illinois last year. People leave the state for a variety of reasons from weather to career … [Read more...]
Archives for May 2018
Can Barnes & Noble Rediscover What Made it a Great Store?
Writing in The American Conservative, Gracy Olmstead laments the changes that have happened as Barnes & Noble fights for relevance. She suggests B&N emulate the changes at independent book stores, such as more book signings and readings, rather than the course B&N has chosen. She writes: But as it is, everything that Barnes & Noble does today is done as well or better by someone else. You could go to its café and get a Starbucks coffee and croissant—or you could go to the nearest indie coffee shop and get higher-quality versions of the same things. Nearly every café and coffee … [Read more...]
A Risky Addition to an Otherwise Decent Dodd-Frank Reform
Despite passing a major reform to the Obama-era Dodd-Frank financial regulation, Congress has unfortunately added a few unnecessary, and even risky, clauses to the bill. The one that worries me most classifies investment-grade muni bonds as "high quality liquid assets." Some, repeat some, muni bonds are high quality assets. Many are not, even some of those that hold investment-grade ratings. What's worse is that few muni bonds are very liquid. They typically aren't large enough to create the kind of investor pool necessary for high levels of liquidity. The editorial board at The Wall … [Read more...]
America Records Fastest Home Price Inflation Since 2006
Despite the Federal Reserve's intimation that a bit of inflation is just fine, Americans are being hammered with home price inflation at the fastest rates since the housing bubble in 2006. In April, home prices increased by 8.7%, the fastest rate since June 2006 which saw a 9% rise. Alexandre Tanzi reports at Bloomberg: San Jose home values appreciated 26 percent year-over-year. Las Vegas, Seattle, Dallas-Fort Worth, San Francisco, Tampa, Atlanta, Charlotte and Orlando all saw double digit growth. “The spring home shopping season has been a perfect storm of strong demand and tight supply,” … [Read more...]
Millennials Still Aren’t Forming Families
Writing at Bloomberg, Peter Coy examines why, despite the second-longest economic expansion on record, Millennials, whose family formation was suppressed by the Financial Crisis, still aren't forming families. Coy writes: One possible explanation is that the economy’s good health masks continued hard times for men and women in their 20s and early 30s, who are responsible for most baby-making. “This young generation, millennials, I think they still feel pretty uncertain, as if they can’t afford to make this big long-term commitment” to raising a family, says Karen Guzzo, a sociologist at … [Read more...]
A Warning for the Global Economy
The WSJ Logistics Report raises the red flag on a major warning sign for the global economy. Copper, known as Dr. Copper for having a Ph.D. in economics, has begun falling in price, even while other commodities are rising. Another early indicator of the direction of the world economy, the Baltic Dry Index, has plummeted as well. See my charts below on both. The WSJ reports: Warning signs for the global economy are being drawn in copper. After hitting a high of nearly four years in 2017, copper prices have slumped this year even as prices for other commodities have been rising. That’s a … [Read more...]
If You Had to Choose, Cell Phone or Car?
Apparently U.S. consumers would rather keep their cell phones than their automobiles. Consumers who are struggling financially are prioritizing payments on their latest iPhone instead of their automobiles. Bloomberg has more below and the full story here. U.S. consumers are more devoted to their mobile phones than their automobiles. The sea change has taken place over the last few years as mobile devices become an integral tool not just for communication with loved ones or employers, but also everything from banking to dating to watching TV and listening to music. As cars grow … [Read more...]
What Does Growing Chaos in Venezuela Mean for its Economy?
After Nicolas Maduro's win in the recent Venezuelan "election," The Wall Street Journal examines what that could mean for the nation facing growing chaos. The election, which drew the lowest turnout for a Venezuelan presidential vote since the 1950s, leaves Mr. Maduro with little legitimacy, particularly as hyperinflation hollows out the economy and an estimated 5,000 Venezuelans flee the country every day. The U.N. expects up to 1.8 million people to leave by year-end, swamping Colombia, Brazil and other neighbors and creating South America’s worst refugee crisis in modern times. For many … [Read more...]
Wealth Shock! “All of a Sudden Their Wealth is Gone”
You simply cannot afford to take heavy losses in or near retirement. From a financial standpoint the arithmetic of losses is devastating—lose half your portfolio and you need a 100% gain (not likely) to get back to even. Now, a study has been done to show the impact of losing money on one’s health. And it’s not good. “Published last month in the Journal of the American Medical Association, [Lindsay Pool of Northwestern University] investigated how losing one’s life savings in the short term might curtail one’s lifespan in the long term,” writes the WSJ’s Susan Pinker. Every two … [Read more...]
Old Industries Reinvented with Ad-Tech
At their fundamental level, Google and Facebook are engines for serving ads to users. The technology they develop is being used by older companies as a gateway to marketing in the 21st century. Ford discussed its use of Facebook and Google tools for advertising with John Stoll of The Wall Street Journal. In a Q&A with Stoll, here's how Ford's president of global markets, Jim Farley, explained the automaker's use of the new advertising tools. WSJ: How do you change the way you sell in a business that is more than 100 years old? MR. FARLEY: Digital advertising. And talking to people. We … [Read more...]
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