Two top economists (one a Nobel prize winner) provide an excellent analysis of the current financial crisis. While they don’t say it, it also points to a counter-intuitive solution to the problem. Its all in the hands of the American consumer.
Their main hypothesis is that this current meltdown is very similar to the meltdown that led to the Great Depression. Both were caused by massive consumer debt.
“It appears that we’re witnessing the second great consumer debt crash, the end of a massive consumption binge.” Steven Gjerstad and Vernon L. Smith, in The Wall Street Journal.
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This month we moved our Michigan offices into a great new space in Southfield. Its got tons of room and a nice training center. Its perfect for our company.
Aside from the fit with our corporate goals, the space reflects our vision for the changing face of Metro Detroit and its future.
The space is located at the crux between Detroit proper and the suburbs. Its right off of 8 mile road.
The building itself is a mix of dedicated front office and light industrial. Like the location, it is a meeting point of urban and suburban, physical and virtual, industrial space and internet space -and it captures a moment in time.
These days are a fulcrum. These are the times when the citizens of this area can decide what they want to be in the future or let the forces of the past drag them down. No-one is helping. Its up to the people alone. If people don’t step up and move themselves forward, this area will be dragged down further and it won’t be pretty.
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What an amazing game. Super Bowl 43. Players playing their hardest. Doing incredible things. A field full of passion.
And great entertainment. Tons of fun to watch.
Stock full of swag from Mid-Michigan CFUG and MAX.
Ready for an RIA mission.
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The bailout is on track to rack-up another $800 billion. That’s in addition to the original $700 billion, which is in addition to $25 billion here and there to rescue various financial service firms before the $700 billion and the roughly $135 billion of other funding that was attached to the $700 billion.
This brings the total amount to over $1.6 trillion dollars
And people are fussing over $25 billion to the auto industry?
The biggest winner was Barack Obama (though the RIA technologies definitely shined on the news websites).
Every major news site seems to have caught the RIA bug.
Check out http://www.cnn.com and http://www.foxnews.com for some electoral map Flash fun. On Fox News the electoral vote count below the map re-tallies in real team, right before your eyes as the new numbers come in. Can’t tell if its just animation or if its actually counting it up.
NBC News has got the desktop pegged with RIA Widgets they call Newsware Widgets.
Fun stuff.
Since the start of the talk of bailouts, I thought that $700 billion was low. The price tag will likely be around $3 trillion dollars.
Several recent factors appear to lend credence towards that estimate.
1. The US Government appears to be moving towards taking direct stakes in banks;
2. Despite falling gas prices, the pain on US consumer may increase - if so, the government may decide to directly help the consumer and pick up a portion of the consumers mortgages/debt -much like Mexico did after the collapse of the peso in 1994.
Once the full cost of the bailout is known, their might be another short term buying opportunity in the market as retail investors re-evaluate the stability of the market and the US’s ability to pay. But I believe that most institutional investors have already factored in this size of a price tag and would be buyers at lower prices.
Altria (Philip Morris), Diageo, McDonalds and Microsoft.
A long time ago I used to work on Wall Street. For many years, I’ve thought stocks were way too expensive to be an interesting asset class. For better or worse, they are starting to look attractive again and I can’t help but write about some of the stocks I think are worth keeping an eye on. With the market down as far as it is, stock prices are starting to reflect the reality of underlying fundamentals. But keep in mind that the downturn in the market may have a ways to go -driven by people being spooked or needing cash and therefore pulling money out of the market.
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Europe has been unable to put together a comprehensive, continent wide solution to their credit crisis. Each country is acting in their national interests and standing behind their own banks. This makes sense. That’s what those governments were elected to do. However, this could have several important, long ranging consequences -all of which should benefit the US Dollar and the US Economy.
1. Global flight to quality -people will move their money to the banks with the highest amount of credible quarantees on their deposits. These guarantees come from the government. People will be voting with their feet as to which country they believe is most capable of standing behind the quarantees and actually paying out if it becomes necessary.
2. Currency values will reflect people’s perceptions of a country’s ability to pay. Since this is ultimately a measure of the productivity of an economy this should benefit the US Economy. There is still no other country in the world that can match the US’s ability to innovate, create and produce. Nor one with the same track record of doing so over long periods of time and through the troughs and values of brutal economic cycles.
3. European unity and the viability of the Euro could suffer. A single currency makes commerce and travel convenient. But there are two facets to a currency. One is as method of exchange. The other is as a store of value. Not every country in the Union has the same resources to support its banks. This will create tangible differences in the value of a Euro in a German bank versus in a Dutch bank. This should further benefit the US dollar in the long term.
