Saturday was the tenth anniversary of the 9/11 attacks by al Qaeda on America. We’ve been inundated with reminders of that awful day. Likely everyone can remember where they were and what they were doing when those planes went into those buildings. That was then, this is now.

In those ten years we have seen our lives largely return to normal. The US has not become a terrorist battleground as some feared. We did not turn violently on our neighbors with Middle-Eastern roots. By and large, the world we live in today is unaffected by the events of 9/11. But, there are subtle differences. Read more

Season’s Greetings happy business new year! Now is the business new year, since by the time 2012 actually hits in four months, it will be too late to plan for it. The start to 2012 is now as far as business-types are concerned. Budgets must be created, revised and funded before the new year commences. Now is the time to do that. It is also the new year for the financial markets. 2011 is essentially over as nearly everyone’s focus now shifts to 2012. 2011 is barely half over when it comes to statistical analyses of the numbers, but 2012 will begin to dominate everyone’s thinking. Usually, there is a new year’s celebration of a great start to a better than ever year. However, this year is being greeted with severe caution. Usually, when this happens, the caution has proven unnecessary. Let’s all wish a new year’s wish that this is another time when caution is better saved for when we feel a lot better about the upcoming year. Read more

The Bubble Report: August Edition

World financial history has been characterized by a series of periodic manias. There have been more than two dozen key manic events during the past several centuries (and that only includes those formally recorded—there have been others and for much further back than that, based on anecdotal accounts). Often, bubbles begin with a rational concept, such as high-growth new technologies/industries, real estate in a new area, or some other new/unique asset that suddenly becomes popular (a key example being Holland’s tulip bulb mania of the 1600’s—when plants briefly turned into valuable financial property). Bubbles have also had a tendency to begin as an unintended byproduct of other conditions or policies, such as newfound levels of discretionary wealth or easy borrowing conditions. Read more

Macro is the Greek for large or expansive. Micro is the Greek for small or limited. Macroeconomics deals with big picture stuff like what broad sectors of the economy are doing or what entire economies are doing. Microeconomics is all about what small economic players are doing, like individual companies or consumers taken one by one.

Most of our problems lately have been macro problems. The simple fact that the broad economy hasn’t grown very quickly lately is a macro element. The historical condition that most of Western Europe has a highly evolved but very expensive welfare state is a macro problem. The situation in the US where we have a large block of the electorate that doesn’t want to have higher taxes while at the same time a largely over-lapping group of Americans won’t stand to have services curtailed is a macro issue. Read more

Not all that long ago, back when your pundit was a pup, 100 Dow points was a big deal. 100 Dow points would be more than 10% on the market value of the Dow.

Today, 100 points is 1% of the Dow, almost. 600 points or 500 points aren’t as big as they used to be. In October of 1987, Monday the 19^th to be exact, the Dow lost 508 points in one day. Back then, it was 22% of the Dow’s value the previous day. Don’t even think about what that would take today. Keeping in mind that the Dow at 11000 is a lot different than the Dow at 1000, the trouble a lot of people have is relating to daily changes that are frightening by their size, but really aren’t that unusual. Today’s 300 point change is the same as a 30 point change on one tenth the market price. Read more

Keyness Is Still Dead

Well, they did it. After most pundits were telling anyone who would listen that S&P wouldn’t dare cut the Treasury rating until the ‘super committee’ (see below) had a chance to at least start the discussion of what to cut, they did it as soon as possible (evidently S&P wanted to do it earlier, but a mathematical difference of opinion with the Treasury held the process up for most of Friday). Thankfully, it took until after the market closed on Friday to release the change so everybody but the Japanese had a chance to digest the idea over the weekend (Japan has a short session on Saturday which started a couple of hours after the S&P action).

So, what does it mean to not be AAA/Aaa anymore? Evidently, not a lot. When your pundit went to turn-on the light this morning, the lights went on with the flip of the switch. When we went to turn the faucet to get water, there was water. So, the fabric of our daily lives is unchanged in most respects. What will it mean for the markets? Well, so far this morning it hasn’t really upset the Treasury market at all. In fact, Treasuries are higher in price, lower in yield, while most everything else is falling. So, the Treasury is downgraded by S&P while the market continues to treat Treasuries as the last bastion of safety in a world gone mad. Who’s right and who’s wrong will be answered over the next couple of weeks. Read more