Sunday, October 31, 2010

Mazi's Link O' the Day

In defense of QE:

http://macromarketmusings.blogspot.com/2010/10/qe-has-worked-before-my-reply-to-paul.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+MacroAndOtherMarketMusings+(Macro+and+Other+Market+Musings)&utm_content=Google+Reader

Friday, October 29, 2010

Now What?

Well, the numbers are out, and things still seem a little gloomy. The U.S. economy grew at a less-than-stellar 2% in the third quarter. For the optimists in the crowd, that's better than the 1.7% growth for the second quarter. For the rest of us, U.S. average quarterly growth from 1947 to 2010 was 3.31% (tradingeconomics.com).

What does this all mean? There's almost certainly going to be another round of quantitative easing (QE2), probably after the midterm elections. The Fed has already purchased $1,725bn of assets during the crisis, and the extent of this next spree is up for debate.

Let's start with the simple fact that QE has only happened once before (during the crisis). QE is when the Fed buys long-term assets in order to push down long-term interest rates. This can only occur when the short-term rate is near 0%, which it is right now. Why am I so certain that QE will happen? As alluded to earlier, 2% growth is not wholly encouraging (in fact, it may be downright discouraging), and it's probably not going to change our 9.6% unemployment rate at all. Also, inflation is still sluggish (CPI is up 0.8% on the year).

Lastly, remember that it's expectations that count. So far, there actually may be some good news there. The difference between 10-yr Treasury bills and inflation protected Treasury bills (TIPS) is about 0.5%. This shows that people expect the Fed's QE will have an tangible effect on prices. These things tend to be self-fulfilling prophesies. The Taylor Rule does, after all, take into effect expected inflation, however, it does feel like we're working backwards now. Instead of expecting high inflation and lowering interest rates, we lowered interest rates and hoped for higher inflation. Christ, my head's starting to hurt...

Mazi's Link O' the Day

Why the dollar is in trouble as the world's reserve currency, and how gold will emerge from the fray:

http://www.bloomberg.com/news/2010-10-29/gold-will-outlive-dollar-once-slaughter-comes-commentary-by-john-hathaway.html

Thursday, October 28, 2010

Mazi's Link O' the Day

Here's a column I wrote for the Miscellany News on currency wars. If you like snarky debates, check out the comments, too:

http://www.miscellanynews.com/2.1577/world-in-standoff-over-weak-dollar-1.2384491

Wednesday, October 27, 2010

Mazi's Link O' the Day

If the Obama administration had been more aggressive fighting unemployment, would the Democrats be in less dire straits this midterm season? Maybe not:

http://www.economist.com/blogs/freeexchange/2010/10/political_economy_1

Tuesday, October 26, 2010

Luke's Link

http://www.politico.com/news/stories/1010/44216.html

No, it isn't Karl Rove who is beating you, Dems. Facts hurt, don't they?

Mazi's Link O' the Day

The burdens of migration:

http://www.econbrowser.com/archives/2010/10/guest_contribut_9.html

Monday, October 25, 2010

TARP, the Republican Master Plan?

We all hate TARP. Whether you are angry about government spending, capitol hill being too cozy with the big bucks on wall street, the very concept of a bailout, or are just yelling because everyone else is, TARP gives everyone a reason to get upset. It stands for everything against which the populist storm that is the Tea Party rages, and it is probably the only thing that everyone can agree on. Upwards of $80 million dollars have been spent this election year disparaging the bailout bill in some way, with $53 million of that coming from Democrats. The thing is, TARP has performed wonderfully.

Originally expected to cost taxpayers $356 billion, TARP is now on track to come in with a cost of around $30 billion after all is said and done. AIG and Citigroup are expected to buy back their assets and "finish" TARP in the coming year. What TARP did, in a nutshell, was stabilize our economic system when it was on the brink of catastrophic failure while costing us little to nothing. It is a testament to the positive power of the government, and probably prevented unemployment figures in the 20s.

So, why all the hate? In a word, self-righteousness fuels the hate directed towards TARP. It has been portrayed as a bill that highlights the cozy relationship between the rich and Congress, and after all, everyone hates rich people. Some of the outrage is justified. Wall Street got bailed out after using risky and volatile banking practices that brought us to the edge. Americans have every right to be upset about that. But going a step further and denouncing TARP is irresponsible. Government is around to help people engage in whatever pursuit they will, provided it does not hinder that right in others. Had the government let the banks collapse, as many have suggested, we would be looking at a much, much deeper crisis.

I guess my message is, hate the derivatives and the greedy and irresponsible men who relied too heavily on them, not the responsible government program which bailed them out. The thing is, that doesn't make for an especially compelling campaign war cry. "It's all Wall Street's fault!" doesn't get either party votes, while a successful portrayal of a Democrat as cozy with the reviled rich makes for a cutting ad in these populist times.

Mazi's Link O' the Day

Thankfully, there are some people who see the harsh, inevitable, answer to the foreclosure crisis:

http://www.latimes.com/news/opinion/la-oe-adv-gelinas-banks-foreclosures-20101024,0,6089148.story?track=rss

Saturday, October 23, 2010

Mazi's Link O' the Day

As you may recall, I posted an article about Sanofi's attempted takeover of Genzyme. Here's how that's going:

http://dealbook.blogs.nytimes.com/2010/10/22/genzyme-makes-case-that-sanofi-bid-is-too-low/

Friday, October 22, 2010

Mazi's Link O' the Day

Paul Krugman drew parallels between Depression-era U.S.A., '90's Japan, and currently fiscally austere Britain. Here's why his comparison is off (according to Free Exchange, that is):

http://www.economist.com/blogs/freeexchange/2010/10/british_austerity

Wednesday, October 20, 2010

100th Post!

It's our 100th post! So, to celebrate this event, let's have a verbal montage of posts 1 through the big 1-0-0.

We talked about the foreclosure crisis, and I proposed a plan (which I no longer support, by the way) to fix it.

Toyota paid (big time) for it's screwy cars.

Overdrafts were, sort of, abolished

*****My Favorite (Maybe)******
I claimed it's time to stop saying "my two cents." Let's adjust for inflation and say "my 24 cents." (I'll have to run those numbers again).

We talked about Goldman's lawsuit. Turns out I was wrong about that. Guilty!!

Mr. Luke Crihfield, of Georgetown University, joined Econstu, and brought us his insights on Afghan minerals and U.N. sanctions

China, kinda, let its currency float again

Luke, kinda, lamented the death of Blockbuster

WE GOT TWITTER

We talked about the "swan."

We talked about pensions, Lehman, and Luke returned to say a brief, but much appreciated, hello before diving back into his studies (presumably)

We had a lot of "Link O'the Days" along the way.

We're the first hit when you Google "econstu," and we're finally showing up on other blog sites


That's all for now. Till the next 100 folks!

Love,
Econstu

Mazi's Link O' the Day

An escape from all the craziness of money, economics, and politics:

http://epicureandealmaker.blogspot.com/2010/10/weekend-interlude.html

Thursday, October 14, 2010

Mazi's Link O' the Day

Some criticism of Ben Bernanke's fast and loose monetary policies:

http://www.atimes.com/atimes/Global_Economy/LJ13Dj02.html

Tuesday, October 12, 2010

Gossip Wire

You've made $8.4 billion in 9 months. You're gonna have a bonus pool of $21 billion by year's end. So, who's complaining!? Looks like CEO of Goldman Sachs, Lloyd Blankfein is (or so they say). Dealbook recently got the eavesdrop on some unnamed Wall Street executive ranting at a restaurant. Who is it?

As I alluded to, the word on the ground is that is probably Mr. Blankfein. What's the evidence? Well, our incognito blabbermouth was quoted as saying, "Geithner is helpless," a sentiment Mr. Blankfein has shown to share. What else? The exec was also heard criticizing the new clearinghouses for derivatives. Guess what? That's a sentiment Mr. Blankfein has shown to share. Lastly, Mr. Blankfein has shown his sharp tongue and wit in the past. Looks like this case is pretty clear, but hey, you never know.

I doubt anybody really cares about this little gossip, even if people do confirm the identity of the speaker. Of course, Blankfein's past may play a role. He had a famed verbal gaff last year where he joked that he was doing "God's work." Personally, I think that's funny, but when you're one of the most hated people in America (let's face it, Lloyd, you probably are), you may wanna watch your words, lest you should be force to eat them. At least he was already at a restaurant...

Mazi's Link O' the Day

Despite its seemingly obvious positive implications, dual-earing households can further increase unemployment problems:

http://www.economist.com/blogs/freeexchange/2010/10/americas_jobless_recovery_0

Sunday, October 10, 2010

Saturday, October 9, 2010

Mazi's Link O' the Day

One of the main snags in M&A deals that people don't realize is how the board of directors at each company meet and work:

http://dealbook.blogs.nytimes.com/2010/10/08/air-products-wins-round-in-battle-with-airgas/

Friday, October 8, 2010

Mazi's Link O' the Day

The unemployment figures for September are out (95,000 jobs shed, 9.6% unemployment rate). Despite some encouraging signs (private sector growth), it's mostly bad news:

http://www.economist.com/blogs/freeexchange/2010/10/americas_jobless_recovery

Wednesday, October 6, 2010

Tuesday, October 5, 2010

Mazi's Link O' the Day

Here's a sentiment you don't usually hear in school or on Wall Street. I don't know if I agree with it, but it's worth getting a new perspective:

http://money.cnn.com/2010/10/04/pf/jobs/business_school_waste.fortune/index.htm

Monday, October 4, 2010

Mazi's Link O' the Day

In honor of the Nobel prize in medicine, which was just given to a Dr. Robert Edwards, here is... a hostile takeover in biotech:

http://dealbook.blogs.nytimes.com/2010/10/04/sanofi-goes-hostile-with-genzyme-bid/