We hope your Holiday weekend was a good one.  

With the general negative sentiment and outlook surrounding the world markets over the past several weeks and months, we have to wonder how many “sellers” remain.  If we go back to the basic underpinnings of what a market represents-a structure for exchange, dictated by constantly-changing supply and demand-what else would need to be “priced in” for more shares in various companies to be sold?  That’s correct, companies with value and individual merits, as opposed to just index numbers.  We have a tendency to forget this relationship as well as the one that strong pessimism and market troughs on a graph tend to appear together.  The centuries-old “buy when you see blood in the streets” adage has been effective, although it doesn’t feel so positive at the time.  Read more

Call us old fashioned, but we think fundamentals still count. Yes, this is like part IV of our rant about stock markets versus a market of stocks. Fundamentals are the revenues, earnings, dividends of companies that allow us to separate the wheat from the chaff in stocks. We recently read an article that quoted a dire prediction that the US stock market will have to go below 1000 (Dow points) before it completes some super-duper cycle target based on what the market did back in 1871 (or was it 1873?). Read more

Back In The Good Old Days

Yes, this is another of those “back in the good old days, when men were men” kind of stories from the old guy in the back. We have to report these to you just because it helps give some perspective on what is going on today and how that differs from how things used to be. Read more

John Maynard Keynes lived from the later 19th century until the 1940s. He saw a world that developed right before his eyes. He was a major economic voice during the period immediately after World War I and developed his General Theory of Employment, Interest and Money as he watched the economies of Europe fall into depression in the 1920s. Keynes’ theory was all about demand management (our economist friends will get us for that one). As Keynes saw the world, you could pretty much count on producers producing stuff in the hopes of getting rich. The issues surrounding the post-World War I world were all about demand rather than production. Simplistically, Keynes theorized that when private demand for stuff failed, public demand for stuff should step up and fill that gap. If we were producing too much steel, the government should buy steel so the steel mills will keep operating. If we were producing too much food, the government should buy the excess food to maintain prices. You probably see where this is going. Keynes described the world where we all now live with the government as a major economic actor. Read more

European package – if you can’t fix it, smother it with money. The IMF, the ECB, the member states of the European Union are all throwing money at the problem of the miscreant states of southern Europe. The package of loan guarantees, liquidity tools, austerity packages and such that was assembled is supposed to buy the PIIGS enough time to tighten their belts and learn to live within their means. Well, not really within their means, but at least close to their means. Perennial deficits of up to 3% of GDP are perfectly okay with the ECB and EU. We can’t recall a single European government that has run a surplus in their fiscal budget lately, maybe the Norwegians during the height of their energy boom. (Keynes is probably rolling in his grave.)

Read more