Much has been written on the fate of Greece and the other PIGS. It is clearly a watershed year for Greece. Jim Rogers predicted years ago that the euro would fail because of the inability of forcing member states to follow the Maastricht treaty and the inability of currencies to adjust to fiscal imprudence. The 2009 recession is the first time the self-restraint of EU member states has been tested. But, as the media often reminds us, at issue with Greece is not just the integrity of the EU and the euro, but the socio-political stability of the whole country.
Monday, February 15, 2010
Saturday, February 13, 2010
The Fed's War on Inflation Expectations
When the Fed more than doubled its balance sheet during the financial crisis, many believed inflation was unavoidable. Since then, the dollar has fallen 15% and gold, other commodities, and commodity-linked currencies have soared. But the inflation expectations that moved markets throughout 2009 were never justified by data, with economic data indicating deflation was the real concern.
Thursday, February 11, 2010
Two Watersheds for the West
Lewis Spellman believes the major trends in financial markets during 2009 will reverse in 2010 because of (1) the Fed's exit and (2) sovereign debt issues. Over the last few weeks, sovereign risk and the Fed's exit strategy have brought uncertainty into markets: the S&P500 is down, the VIX is up, and the dollar is rallying as investors flood back into dollar-denominated assets. Will this reversal continue as Spellman predicts?
Tuesday, February 9, 2010
Goldman Sachs and the Volcker Proposal
Peter Lattman and Kate Kelly report on pg. C1 of the Journal today: "The [Volcker] proposal, debated on Capitol Hill last week, is short on detail. But, should it become law, it could have by far the biggest impact on Goldman [Sachs] ... The firm's private-equity exposure exceeds that of the world's largest buyout firms. Goldman has roughly $14 billion of corporate and real-estate private-equity holdings on its balance sheet ... Under Mr. Obama's proposal, banks would likely be free to manage customer money earmarked for private-equity funds. But Goldman would have to divest its own holdings, a complicated task. One alternative would be to spin out its private-equity arm, according to people familiar with the firm. Goldman could also give up its bank-holding-company license to avoid spinning out the private-equity business."
Monday, February 8, 2010
Female Employment Now Greater than 50% of Workforce
One trend often-cited during the recession is that men have lost their jobs much quicker than women. Over the past 24 months, the number of female payroll employees fell 2.6 million, while the number of men fell 5.8 million. Intuitively, this makes perfect sense since the recession has heavily affected man-intensive manufacturing and construction industries, while also bringing educated women back into the workforce (according to the NYTimes). However, this relative surge in women's employment is not specific to the current recession. In fact, the same effect occurred during past recessions. Economist Casey Mulligan estimates recessions are the only times in recent history when women can significantly gain market share.
Positive NFP Number: Maybe Next Month
As I wrote about last month, economists keep expecting NFP (nonfarm payroll) numbers to come in positive though this has yet to happen (except the paltry 4,000 increase in November but that was a revision and doesn't count). For the NFP January numbers that came out last Friday, analysts at BoA, DB, JPMorgan, Barcap, and MS were predicting in excess of 25,000 new jobs were added during January. Just like in December, NFP numbers have disappointed at -20,000 jobs.
Friday, January 8, 2010
Non-Farm Payrolls
This mornings NFP (non-farm payroll) unemployment numbers were expected to be positive. Consensus was that the report would show an increase of 10,000 jobs. Tyler Durden reports that Stifel Nicholas argued there was a "strong chance of a +100k" increase that could even be as high as +316,000 due to seasonal factors. It is surprising therefore that this morning's NFP number came in at -85,000.
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