Bloomberg.com – Anders Aslund: Why Austerity Works and Fiscal Stimulus Doesn’t After five years of financial crisis, the European record is in: Northern Europe is sound, thanks to austerity, while southern Europe is hurting because of half- hearted austerity or, worse, fiscal stimulus. The predominant Keynesian thinking has been tested, and it has failed spectacularly.… Continue reading Stimulus vs Austerity
MSN/Money – Bill Fleckenstein: Brand-new year, same old saga The worlds of money and politics echo with sound and fury but in the end show little progress toward the solutions we need. That does bode well for gold. “In any event, as the year ended, the stage was set for a potent rally in the… Continue reading Bull For Gold
Bloomberg.com – William Pesek: Do Credit Ratings Matter? We Will Soon Find Out There’s a school of thought that the odd sovereign downgrade doesn’t matter. Just ask Timothy Geithner, the Treasury secretary on whose watch the U.S. lost its AAA rating. All S&P did was unleash a bull market in U.S. debt. Investors can’t get… Continue reading Credit Ratings
The Wall Street Journal – ‘Joke’ Solution to Debt Clash Gets Serious Study Under the proposal, the U.S. Treasury would use an obscure commemorative-coin law to mint at least one platinum coin and deposit it at the Federal Reserve, giving the government breathing space as it bumps up against the $16.4 trillion borrowing limit. Rep.… Continue reading More On The “Joke” Of The Trillion Dollar Coin
Bloomberg.com – Obama Said Close to Choosing Lew for Treasury Secretary President Barack Obama may choose White House Chief of Staff Jack Lew to replace Treasury Secretary Timothy F. Geithner as soon as this week, according to two people familiar with the matter. The selection of Lew would trigger a White House shuffle for Obama’s… Continue reading The Next Treasury Secretary
The Financial Times – Mohamed El-Erian: Beware the ‘central bank put’ Mohamed El-Erian on the split between prices and fundamentals Several asset classes now have highly manipulated prices due to experimental central bank activities, both actual and signalled. The more this happens, the more investors come under pressure to migrate to higher risk investments in… Continue reading Manipulated Asset Classes
<Click on chart for larger image> Comment The blue line above shows Hedge Fund Resources’ (HFR) equity market neutral index and serves as a decent proxy for quant fund returns. The red line shows the S&P 500. While this is conceptually the same as the Newedge measure detailed below, there are some differences. Quant funds’… Continue reading More On Money Management’s Terrible Year
The Financial Times – Abe prepares fresh stimulus measures Japan is readying an extra budget expected to be the largest since the aftermath of the Lehman crisis, as its new government borrows to boost growth in the sluggish, deflation-prone economy. The government is expected to confirm on Friday that it will fund extra spending worth… Continue reading Japan Stimulates
The Wall Street Journal – Berlusconi Forms Alliance in Comeback Bid Silvio Berlusconi on Monday said he has forged an alliance with the Northern League party, a partnership likely to put the debate over how much more austerity Italians should endure to comply with European Union fiscal rules into sharper focus. Pledging to abolish a… Continue reading Silvio’s Coming Back!
Alea – Worst Forecast of All Times Yhe CBO 2001 10-year forecast of $5.6 trillion surplus turning into an actual 2011 $6.1 trillion deficit for the period. Comment Keep this chart in mind when you read stories about the debt ceiling fight over spending cuts and the recent tax hikes. Many will speak authoritatively about… Continue reading The Worst Forecast of All Times
None Today
Comment Volume 1 of hyperventilation that the bond market was going to crash came last week. This is a regular running theme we have highlighted for years. Wall Street’s best and brightest constantly warn that the bond market is the worst investment one could possibly make. But, as the next chart shows, bonds continue to outperform stocks.… Continue reading Everyone Hates Bonds, 2013 Edition Volume 2