Archive for February, 2011

The Chinese Dynasty? Not Exactly…

Friday, February 18th, 2011

I saw an article this week in USA Today.  It was based on a recent Gallup poll asking the following question:  Who is the world’s leading economic power, America or China?  The poll was conducted earlier this month.  The findings:  52% of Americans said that China was the leading economy and 32% said the United States was.  WHAT?!  Are you serious?  Come on people, this question is a first rounder on “Are You Smarter Than a 5th Grader?”

 If you do your homework, you’ll see that the U.S. is definitely still the lead dog in the global economy.  Last year our GDP (the total of all goods and services we produce) totalled $14.6 trillion versus China’s $5.75 trillion.

 Will China catch and eventually pass the U.S.’s GDP number?  Sure, they will.  This will probably take place between 2020 & 2027.  Just this week, China passed Japan to become the world’s second largest economy in the world.  However, what the media (financial journalists in particular), aren’t bringing up is the fact that China’s GDP per-capita, which is the only true measure of a nation’s prosperity will still only be a quarter to a third of the United States.

 Of course, the major problem for China is its fake capitalist regime.  The rulers are repressive and cruel.  The economy isn’t free and neither are the citizens.  I believe eventually India will surpass China and emerge as the true number two in the world.  My judgement is based on its freedom, democracy, and rule of law.  India is much farther along than China in these matters.

 That brings me to a question for all Americans.  What made America great?

Do you realize that no other country in the history of the world has operated off of one document?  The document, of course, is the Constitution.  No other country can come close.  Now, why has it worked so well?  The answers lie in the moral fabric of our founding fathers.  The link between the Constitution and the Bible has proved to be the most solid foundation that a country and/or government has been built on.

 Our current problem (for the last 30 years, really), is the lack of truth when it comes to our nation’s history and our founding fathers.  There are many, in the media and behind the scenes, who are determined to bring a wrecking ball to our great country’s foundation.

 This will be our undoing if we allow it to happen.  We must teach our children and grandchildren the truth.

Enter “Voices of America” video contest!

Wednesday, February 16th, 2011

The Committee For a Responsible Federal Budget has announced the launch of the “Voices of America” video contest for people across the country to tell the budget experts in Washington D.C. their ideas on ways to fix America’s fiscal house!  The goal of the contest is to broaden the national conversation over our national debt problem.  The U.S. government’s debt just topped $14trillion dollars – it’s at its highest point since the ending of WWII. 

The top two winners will receive $1000 each and the top ten videos will be posted on the CRFB’s website.  I’m definitely entering this contest and encourage all of you to do the same and voice your opinions and ideas to fix this huge problem.  To enter the contest, click here.

The economy – a look back at 2010 and looking forward for 2011 – this week on Your Financial Editor.

Friday, February 11th, 2011

How did the economy shape up for 2010?  What can we expect for 2011? This is Chris Murray, Host of Your Financial Editor – join me this week and I’ll be talking to Ted Theodore, Chairman and CIO of Avatar Associates in New York. 

Join us this this Saturday morning at 8am on AM 930 WFMD, or listen from anywhere on your pc by logging onto www.wfmd.com and clicking the listen live button.

Ted Theodore, CFA,Chairman and Chief Investment Officer
Ted leads Avatar’s investment process and quantitative research team, and manages the firm’s asset allocation models. Ted has 45 years of experience as both an investment strategist and portfolio manager. Prior to joining the firm in 1989, Ted served as Strategist/Portfolio Manager at Morgan Stanley Asset Management, and as Director of Equity Strategy at Citibank.  Mr. Theodore earned his M.B.A. in Finance and B.A. in Economics from the University of Michigan. A Chartered Financial Analyst, Mr. Theodore is a member of the New York Society of Security Analysts and the CFA Institute.

I told you Al Gore may be the next bubble…

Friday, February 11th, 2011

Green this, green that, go green yourself!  Sometimes it just isn’t fun being right.  Over the last 6+ years, I have warned about a green bubble and even questioned some of my highly regarded guests about the subject.  Mos of them defended the “industry” as they pledged allegiance to it.  The reason I brought up Al Gore’s finances so many times was so you, the astute listener, could always see the forest for the green pine trees (pun intended).

You see, when Al Gore left the White House after his failed presidential campaign, he went on a mission to catapult his wealth.  For the record, he did grow a beard, become overweight, and teach at Columbia University prior to setting out on this journey.  Anyway, along with some very smart planning and production from people around him (including money management partner, David Blood from Goldman Sachs), he went from a net worth in 2000 of around $2 million to over $100 million.  So, while he was running around the country with his dog & pony show on global warming, and creating as much hysteria as he possibly could, he was benefiting on the back end as he pumped his investments in “green” companies along the way.  I do have to say that I don’t feel sorry one bit for the herd that followed that circus.  Fast forward to today.  For the last couple of years, we have continued to hear from the current administration that green jobs are the economy’s way out of the ditch and back to growth.  That continues to be untrue, and you know what?  I’m not going to tell you why.  I’ll let this article in the New York Times…that’s right, you read it right, The New York Times (don’t worry it’s just as hard for me to write the name as it probably is for you to read it).  Let me say just one more time before you click on the link…I told you Albert Arnold Gore, born March 31, 1948 was, and maybe still is, focused on his own bottom line and could probably give a good hoot about the environment!  Article “Why Green Energy Can’t Power a Job Engine?”.

Bernanke Part Deux

Friday, February 11th, 2011

Last week when I wrote about Chairman Bernanke addressing our luncheon at the National Press Club, I thought for a moment that I may have been too hard on him.  It’s true that towards the end of my post, I busted his chops about commenting on the stock market indices and making comparisons about the Fed’s actions and the stock markets response.  That is just very bad karma, no matter how you slice it.  I also dogged his security detail or lack thereof.  By the way, I did send an email to the Federal Reserve about the lax security at the  luncheon, but have not received any type of response yet.  What’s your guess?  1.) They don’t care or 2.) They’re too embarrassed to write back?

Anyway, my post was nothing compared to the posting I came across this week on the American Family Association’s website.  The blog is called Rightly Concerned, and the post rips into Mr. Bernanke like no-body’s business.  The title gives a good indication…”Is Ben Bernanke a Liar, a Lunatic, or is He Just Completely and Totally Incompetent”?.

200 Countries, 200 Years, 4 Minutes

Thursday, February 10th, 2011

Check out this video by Hans Rosling (The Joy of Stats – BBC).

Bernanke Barking Up the Wrong Tree?

Monday, February 7th, 2011

I’m a member of the National Press Club, and last Thursday, Mr. Ben Bernanke rolled into the room and addressed the cuts to us over lunch. 

Let me set the room for you:

The room holds about 150 people I’d say, give or take.  There was a noticeable difference since Mr. Bernanke was our guest – there were about 20 cameras in the room.  All of the national media was there, both foreign and domestic.  It was a lot like it was a few years ago when we had Richmond Federal Reserve Bank President Jeffrey Lacker at our economic symposium at Frederick Community College.  Of course the chairman draws a serious crowd because he is the top-dog, so not only were the cameras there, but also many of the talking heads you see on t.v.  Along with the Chairman, there were about 10 other people at the head table.  They were from the government and the private sector.

Before I get into what happened at the luncheon and where I think the Chairman is making a big mistake, let me first say that he has a great success story.  Mr. Bernanke was born and raised in Dillon, South Carolina.  One of few Jewish families in the area, his father was a pharmacist and his mother was an elementary school teacher.  He worked in his father and uncle’s drug store, as well as waiting tables the famous South of the Border landmark. From South Carolina he journeyed to Harvard where he received his B.A. in economics and then received his PhD from M.I.T.  He was a professor at Stanford, NYU, and Princeton.  President George W. Bush named him as a member of the Federal Reserve Board of Governors, and he was subsequently named Chairman of President Bush’s Council of Economic Advisers.  After Alan Greenspan’s departure in 2006, Mr. Bernanke was chosen to take the helm at the Federal Reserve. 

Mr. Bernanke was well received at our luncheon.  What I did appreciate was that at the very beginning of his talk, he emphasized the importance of the media delivering accurate economic information to the American public, and citizens around the world for that matter, who don’t have the time to truly understand what is going on in the world of finance.  In my opinion, in a way he took a shot at the talking heads who sensationalize the news to get ratings and sell advertising.  It was a good start to his speech. 

Mr. Bernanke then started into his prepared remarks and touched on the recent improvements in the health of the economy.  He also qualified those statements by saying that “Even though the data has improved, the recovery has not fully taken hold”.  So he was basically doing two things.  He was letting us know that the U.S. and global economies are still fragile and vulnerable…and that the Federal Reserve doesn’t have any near-term plans to halt the $600 billion asset purchase program to try and stabilize and unfreeze the credit markets.  This, of course, comes after the Fed ballooned its balance sheet by $1.7 trillion prior to the current $600 billion campaign.

He was also forthright about the jobs market.  The Chairman addressed the weakness with employment.  He said that it will take several years for the labor market to return to good health.  This will weigh on the economy as the unemployment remains “stubbornly” above full employment.  One thing that I really enjoyed hearing from Chairman Bernanke was when he started in on the subject of the bloated federal budget.  He took a swing at the administration and Congress about the fact that there is not way that we can avoid a disaster for the country if we sustain the current spending path we’re on.

He also touched on the issue of entitlements having to be addressed; Social Security costs due to our rising population age, rising health-care cost, etc.  These subjects must continue to be pressed or we’re going to end up looking like a bunch of idiots rioting in the streets like Europe because our “nanny” state type plan didn’t work out.  Chairman Bernanke touched on the Middle East and what is going on in Egypt.  He reminded everyone that food inflation is part of the reason that some societies are rebelling.  As countries transition into more middle class scenarios, one of the first things they change are their diets.  The whole supply and demand thing comes into play, and hence you get the food inflation problem.  This is something that will continue to pop up as emerging markets deal with food and other lifestyle issues.  

So far, everything I was hearing at the luncheon was on target and I agreed with.

However, there was one thing that almost made me levitate up from my table.  Mr. Bernanke said that since the asset purchase program the Fed initiated, the S&P 500 stock index had risen from around 600 to its current 1,300.  Now this is the second time in less than a month that he has referenced the stock markets.  A few weeks ago, I told you that he was out of the Federal Reserve’s element.  Here’s why I say that:

The Federal Reserve’s mandate is “To promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long-term interest rates”.  So, in any of that did you hear me say the Federal Reserve should interfer or incluence the stock markets…or even comment on the equity markets?!?  No – that’s because the Fed has NO business doing so!

If the Federal Reserve, and Chairman Bernanke or any of the Fed Governors or bank presidents are going to pat themselves on the back and take credit for the markets going up based on their actions, they better be ready to take the blame for the markets falling.  This is not a game they want to play.  The stock market should not be a main concern for the Fed – which is why I titled this blog what I did. 

In summary, I felt that Chairman Bernanke’s talk was pretty accurate and on target…with the strong exception of his stock market comments.

Ben Bernanke, Chairman of the Federal Reserve, this week on Your Financial Editor.

Thursday, February 3rd, 2011

Ben Bernanke, the chairman of the Federal Reserve, will address the National Press Club at a luncheon on February 3, 2011. The head of the Federal Reserve is often called the “second most powerful position in the country.” Bernanke has steered the economy through the greatest economic crisis since the Great Depression and will discuss the burgeoning economic recovery.  Chris will be attending the luncheon and will cover Mr. Bernanke’s remarks on this week’s Your Financial Editor.

Join us this this Saturday morning at 8am on AM 930 WFMD, or listen from anywhere on your pc by logging onto www.wfmd.com and clicking the listen live button.

Two Out of Three Ain’t Bad!

Tuesday, February 1st, 2011

I’m a member of the New York Association for Business Economics and our latest meeting was January 27th at the Consulate General of Canada in Manhattan.  It was our January forecasting meeting and three accomplished economists were our guest speakers:  Dean Maki, Chief Economist for Barclays Capital, Dominic Wilson, Head of Global Markets Research for Goldman Sachs, and Ethan Harris, Chief Economist for Bank of America.

Here’s how their presentation highlights broke down:

Ethan Harris (Bank of America):

  • The administration has done a full reversal
  • The economy is experiencing a huge amount of stimulus from the Federal Reserve
  • There is no exit plan for the U.S. budget spending problems
  • Banks are only halfway recovered
  • There is no end in site for foreclosures
  • Savings rates are still below historical averages

Dean Maki (Barclays Capital):

  • Feels U. S. growth will come in between 3% and 3 1/2 % in 2011.  That’s above trend estimates.
  • Business spending is strong and will show continued strength the rest of the years.
  • Predicts unemployment rate will fall to 8.6% in 2011
  • Believes the Federal Reserve is on hold until August 2012

Dominic Wilson (Goldman Sachs):

  • U.S. markets will be strong in 2011 and 2012
  • The acceleration point where things start to get better is here for the U.S.
  • The markets for equities and commodities will be strong in 2011
  • Food inflation is currently trumping energy inflation
  • Greece, Ireland, and Portugal economies are weak.

So there you have it, straight from the horse’s mouth.  Barclays and Goldman had a fairly upbeat assessment for this year, while Bank of America has a more guarded outlook.  Hence my 2-for-3 title.  As admitted by one of the economist to us – they only have to try to correctly forecast in 6 month blocks.  In the real world, we realize that our goals and planning span decades.