By Steve Maich - Thursday, May 28, 2009 - 3 Comments
The new normal: Call it frugality if you like. We call it sanity.
When will things go back to normal? That is the only question that seems to matter: when will this strange and frightening episode pass? It’s a fair question, but not exactly the right one. What most really mean is: when will my house price begin soaring again? How long before my stocks triple? And when will I feel safe to max out my credit cards again? Over the past 15 years that became “normal,” or at least common. But that isn’t coming back soon.
The reality is, everything we see happening around us is part of the process of returning to normal. For the past decade or so the laws of financial gravity were suspended. Now they are back in force, and those who soared the highest have the furthest to fall.
By Jason Kirby - Friday, May 8, 2009 at 11:55 AM - 4 Comments
The free fall is over, but the comeback will be like nothing we’ve seen before
As Christina Romer settled in to provide the latest economic update for U.S. lawmakers last week, they no doubt braced for another round of brutally frank and frankly chilling discussion on the state of the world’s most powerful engine of wealth. Despite Romer’s clout within President Barack Obama’s inner circle—shortly after the election he asked the Berkeley economics professor and expert on the Great Depression to chart America’s path to recovery—few outside of Beltway policy wonks and Wall Street economists knew much about her. On the surface, her comments seemed to reinforce the grim outlook that’s become so pervasive since the economy went into free fall last autumn. “I’m sorry to say, but in the short run, we are still in for more bad news,” she told the committee members. “We expect to see continued declines in employment and rises in unemployment.” Then came a rare yet welcome but. “We are beginning to see glimmers of hope that the economy is stabilizing.”
Romer’s tone was hardly exuberant, but her comments stood in stark contrast to the utter despair that was de rigueur just weeks ago. What’s more, she’s been joined by a host of sage old voices of the American economy, who together are offering a more reassuring, if cautious, message to the world: we’re not out of the crisis yet, but the worst seems to be behind us. Paul Volcker, the 81-year-old former chairman of the Federal Reserve and the head of Obama’s economic recovery advisory board, last week said the downturn is “levelling off” even if the U.S. economy remains in “intensive care.” Then, over the weekend at the annual Berkshire Hathaway annual meeting in Omaha, Neb., the company’s legendary founder and CEO Warren Buffett tried out another metaphor to convey his sense of cautious optimism. “Our economy, back in September, was like finding a friend of yours in quicksand up to his chest and he’s going down,” Buffett said. The rescue attempt has been painful but necessary. “The important thing was to get out of the quicksand, and we got out.”
By Jason Kirby - Friday, October 24, 2008 at 4:54 PM - 1 Comment
There seems to be quite a bit of demand for levity these days, judging…
There seems to be quite a bit of demand for levity these days, judging by the interest in my previous post about humour amidst the financial crisis. So here are some more jokes and cartoons to help ease the pain.
By Jason Kirby - Friday, October 24, 2008 at 3:20 PM - 1 Comment
As markets continue to fall, analysts have simply started using historical dates to forecast…
As markets continue to fall, analysts have simply started using historical dates to forecast how low we could go. Today Montreal-based BCA Research warned that U.S. equities could fall to levels not seen since 2002. As it is, the last time the S&P 500 was this low was in April 2003:
Panic has returned in full force: equity and commodity prices are gaping lower, while the dollar and yen continue to surge. Investor sentiment has been crushed and despite extremely oversold conditions and appealing valuations, the bleak growth outlook provides little reason to be upbeat.
Bottom line: Stay defensively positioned; a retest of the equity market 2002 lows (at least in U.S. equity prices) seems probable.
That’s gloomy enough. But it gets worse. Continue…
By Jason Kirby - Friday, September 19, 2008 at 12:00 PM - 4 Comments
I can’t believe regulators in Canada are even considering following suit with the U.K….
I can’t believe regulators in Canada are even considering following suit with the U.K. and the U.S. and banning short sellers, but they are, according to the Globe and Mail. It’s “under discussion” says Paul Bourque, senior vice-president of enforcement, policy and registration of the Investment Industry Regulatory Organization of Canada. That would be the self regulatory body made up of many of the financial firms who’s stock prices would benefit from a ban on shorts.
This is astonishing. Canadian financial firms have not been under any of the same pressures that U.S. firms have. And even if they had, banning short sales does nothing but create an artificially-inflated market. Traders and analysts are cheering today’s gains. It’s like watching someone pump a balloon full of helium and cut the string that’s keeping it tethered, and then marveling as it takes flight.
By Steve Maich - Thursday, September 18, 2008 at 4:21 PM - 1 Comment
the panic’s over….For a day at least.
But watching the action on the stock…
the panic’s over….For a day at least.
But watching the action on the stock market today I was reminded of what a smart trader once told me.He said that if you’re looking to find a market bottom, you look for a day of furious back-and-forth trading, in which the market can’t seem to make up its mind on a direction. (Today certainly fit that description.)
He said you’re looking for a swing of around 500 points on the Dow, between the intraday trough and the intra-day peak. (Today’s swing was just shy of 600 points.)
And he said you want to look for a day that ends on a pretty-strong up tick, with a lot of buyers right near the close. (The Dow was up 410 points today, and about 300 of those points came in the final hour of trading.)
I am not calling a bottom here. I’m just passing this along for the sake of interest. It’ll be interesting to see if this guy’s approach to spotting a bottoming market holds up. In my gut I don’t believe this is the bottom. Everyone seems to agree this is the “worst market crisis since the Great Depression”, but the markets have only fallen about 21% from their highs.
By Steve Maich - Wednesday, September 17, 2008 at 11:58 AM - 17 Comments
Last night’s shocking bail out of AIG hasn’t done much to calm the fears…
Last night’s shocking bail out of AIG hasn’t done much to calm the fears roiling through the markets this morning. It has, however, got me to thinking.
Clearly Paulson felt he was in a no-win situation, and made a decision based on the cold calculus of pragmatism. He ahd to decide which was the lesss terrible of two terrible options: