In a sweeping piece in The Wall Street Journal, Jim Grant likens the actions of Fed Chairman Jerome Powell to those of a drug dealer, feeding highly addictive monetary drugs to the market, with no regard for the side effects. In the piece, Grant notes that like the portfolio managers of CalPERS who are California Dreamin', Powell explains his actions as necessary. But is that really true? Grant writes: If Federal Reserve Chairman Jerome Powell were selling a prescription drug instead of a monetary policy, the Food and Drug Administration would likely want a word with him. “What we’re … [Read more...]
Archives for June 2020
What’s Up with the Economy?
Unemployment is running at over 13%, but much of the economic data is coming in better than economists have been forecasting. And the stock market is down only modestly for the year in the face of what looks like a dire economic situation. What’s driving the disconnect? The personal income statistics from the Bureau of Economic Analysis may shed some light. The chart below shows the level of after-tax personal income for the U.S. In most recessions, after-tax income falls or if there isn’t an outright decline, there is a significant slowing in the rate of growth. But not in … [Read more...]
Life Changes Fast: Need a Boost? Here’s Why I Did
Coronavirus Infects Stock Market: Part LXI You know, as Your Survival Guy, I'm the guy who gets into tough situations only to discover how ill-prepared I am. You know, like when my backyard almost burned down when a tree landed on telephone wires, breaking the pole at the top, sending the distribution transformer, aka "pole pig" (filled with coils and oil ) crashing to the ground right next to one of our prehistoric trees about the size of King Kong that was ready to burn like the torch on the Statue of Liberty. As the fire department descended upon our property, Your Survival Guy quickly … [Read more...]
A Plan to “Slay” Apple
Andy Kessler explains in the WSJ's opinion section, how he would go forward in an effort to take down Apple. He writes: When Apple announced last week that it will soon replace Intel processors with its own, I had a flashback to 1993. Morgan Stanley’s technology investment banker Frank Quattrone called me in New York: “John Sculley”—CEO of Apple—“wants to meet with you Friday,” he said. It was Thursday morning. “About what?” I asked. “I don’t know, do your virtual thing.” I booked the 9 p.m. to San Francisco and the redeye home. Meanwhile, I was on the phone all day with the banking team … [Read more...]
COVID-19, Riots, Accelerate the Escape from the City to Small Town, USA
Americans living in big cities in states where governors have gone wild with shutdowns, but allowed riots to rule the streets, are trying to escape. The COVID-19 pandemic--and the rioting that has followed it--have accelerated the exodus from the big tax cities. Americans were already trying to flee the big city blues. Now they're really looking to escape. They're seeking some shelter away from it all. Many of them are heading to the suburbs or the exurbs, but many of them are also heading to the lower cost, smaller cities in the South, and West that were already popular … [Read more...]
Option Trading Surges Among New Investors: What Could Go Wrong?
When I was at Babson, I had a part-time job as a phone rep at Wall Street Games—a stock market contest that used options to boost returns. It was also a training ground for stockbrokers to try out their strategies. My job was to put (pun intended) their strategies in place and let ‘em ride. It was a training ground for me too, giving me a front-row seat in how big money was lost. Now, as new investors pile into the stock market, whether out of boredom or desperation from losing their jobs to COVID-19 shutdowns, the Wall Street Journal reports they are betting big in the options market. What … [Read more...]
What Comes after Capitalism?
At the Financial Times, Henry Kaufman suggests an answer to the question, "what comes after capitalism?" He writes: American capitalism is rapidly disappearing. Its demise has been under way for some time and the economic devastation wrought by the Covid-19 pandemic is the latest blow to our political economy. Adam Smith remains a useful guide to the hallmarks of capitalism. In 1776’s The Wealth of Nations, he argued that humans innately strive for material progress and the best way to get there is through unfettered competition, the division of labour and free trade. Smith wrote that … [Read more...]
What Crisis is the Stock Market Living In? And You?
Coronavirus Infects Stock Market: Part LX You really need to follow the bouncing ball in this time of crisis. Looking at the way stocks are trading, you have to wonder: what crisis is the stock market living in? Seems to me like no one has a clue. You and I know there’s a crisis. Go downtown and look around. How many businesses are struggling or will never be the same? Who do we have to thank for this? China. The China virus traveled to the U.S. via Europe, and now Europe wants to keep us out—yet is opening flights from China. You really can’t make this stuff up. No one has a … [Read more...]
If You Had a Million Dollars
If you had a million dollars, would you let a robot do the investing for you? You probably wouldn’t. But that’s the direction companies are taking, including Vanguard. When you invest a single penny of your hard-earned money, you need to think about it as if it were a million dollars. That’s the mindset you want to have at all times when you invest. There is NO SUCH THING as a "small loss," or money that doesn’t matter because "it’s too small to worry about." Once you get into the mindset of growing your money, you become a serious investor and not a speculator. Leaving this work … [Read more...]
Why Is This Professor so Terrified of Low Cost Online University?
Michael D. Smith, a professor at Carnegie Mellon University, shares in The Atlantic, why he is both afraid and invigorated by America's recent experiment with online learning. He writes: I need no convincing of the value of campus life and in-classroom education. I recognize that online platforms can’t perfectly replace what we deliver on campus. But they can fulfill key pieces of our core mission and reach many more students, of all ages and economic backgrounds, at a far lower cost. What online services lack in quality, they make up for in convenience—and as they get more popular, they’re … [Read more...]
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