recession

The Incredible Shrinking Middle Class

Filed in BP, Debt, economy, Ford, Gold, GOld juniors, inflation, Lear, o, recession, silver by on February 16, 2011 0 Comments
The Incredible Shrinking Middle Class

Here’s a copy of the chart of the day.As you might have suspected, the rich get richer while everyone else basically gets to tread water. The article that follows once again drives home a point I have been harping on for years now: The Middle Class in a state of terminal decline. And when it vanishes for good, America will be a very different place. If you ask me, in a lot of ways it already is…. From CNNMONEY by Annalyn Censky entitled: How the middle class became the underclass “ Are you better off than your parents? Probably not if you’re in the middle class. Incomes for 90% of Americans have been stuck in neutral, and it’s not just because of the Great Recession. Middle-class incomes have been stagnant for at least a generation, while the wealthiest tier has surged ahead at lighting speed. In 1988, the income of an average American taxpayer was $33,400, adjusted for inflation. Fast forward 20 years, and not much had changed: The average income was still just $33,000 in 2008, according to IRS data. Experts point to some of the usual suspects — like technology and globalization — to explain the widening gap between the haves and have-nots. One major pull on the working man was the decline of unions and other labor protections, said Bill Rodgers, a former chief economist for the Labor Department, now a professor at Rutgers University. International competition is another factor. While globalization has lifted millions out of poverty in developing nations, it hasn’t exactly been a win for middle class workers in the U.S. Factory workers have seen many of their jobs shipped to other countries where labor is cheaper, putting more downward pressure on American wages. “As we became more connected to China, that poses the question of whether our wages are being set in Beijing,” Rodgers said. Finding it harder to compete with cheaper manufacturing costs abroad, the U.S. has emerged as primarily a services-producing economy. That trend has created a cultural shift in the job skills American employers are looking for. As a result, the disparity between the wages for college educated workers versus high school grads has widened significantly since the 1980s. In 1980, workers …

Continue Reading »

Is Warren Buffett Heading for the Exits?

Is Warren Buffett Heading for the Exits?

Nobody ever rings a bell at the top. That’s why sometimes it is instructive to keep an eye on so-called “smart-money”—especially when they make a move towards the door. All of which, strikes me as curious since just a few months ago the grandfatherly Buffett said, “I am a huge bull on this country. We are not going to have a double-dip recession at all. I see our businesses coming back across the board.” Hmmmm…I wonder if he has changed his mind on this one. From Bloomberg by Andrew Frye entitled: Berkshire Exits BofA ‘a Loser’ on Three-Year Holding. “Warren Buffett’s Berkshire Hathaway Inc. sold its stake in Bank of America Corp., ending an investment that spanned three and a half years in which the lender’s stock lost more than two-thirds of its value Buffett’s firm had no shares in the Charlotte, North Carolina-based bank at the end of 2010, compared with 5 million shares three months earlier, Berkshire said late yesterday in a regulatory filing that lists the company’s U.S. stockholdings. Berkshire, where Buffett serves as chief executive officer and head of investments, entered the Bank of America stake with the purchase of 8.7 million shares in the second quarter of 2007. The lender’s CEO at the time, Kenneth Lewis, was expanding through acquisitions and telling investors that the U.S. housing slump would be over within months. “He’s closing out a loser,” said Jeff Matthews, author of “Pilgrimage to Warren Buffett’s Omaha,” whose Ram Partners LP invests in Berkshire and Bank of America. “We bought it during the crisis. But its earnings power coming out the crisis has been reduced.” Berkshire also eliminated its stakes in Nike Inc., Comcast Corp., Nalco Holding Co., Fiserv Inc., Lowe’s Cos. and Becton, Dickinson & Co. in the fourth quarter. In November, Berkshire disclosed that it had sold holdings of Home Depot Inc., trash hauler Republic Services Inc. and Iron Mounta”in Inc., a provider of records management. Buffett’s U.S. portfolio had 25 stocks and a value of about $52.6 billion at the end of December.” Maybe there is nothing to see here, but I don’t think so. You just can’t trust a guy that plays a ukulele. Related Articles: Warren Buffett’s Dividend Stock Strategy The Good Works of Bill Gates and Warren Buffett Ben Graham’s Winning Investment Advice Warren Buffett: The Investor of the Year To learn more about Wealth Daily click here. Advertisement Samurai Super Alloy It was the secret ingredient that turned an ordinary sword into the legendary Samurai Katana— the deadliest weapon before the arrival of modern rifles. Today, it’s crucial to the $987billion/

Continue Reading »

Ben Plans, Food Prices Reach All-Time Highs

Ben Plans, Food Prices Reach All-Time Highs

Don’t you just love the Federal Reserve…? Higher prices have helped to set the world ablaze and Bernanke & Co. continue to insist inflation is a figment of our imagination. You see, despite the obvious fact that commodity prices are skyrocketing……. …the Fed comes out with this nonsense this morning. About inflation the Bernank remarked: “On the inflation front, we have recently seen significant increases in some highly visible prices, notably for gasoline. Indeed, prices of many commodities have risen lately, largely as a result of the very strong demand from fast-growing emerging market economies, coupled, in some cases, with constraints on supply. Nevertheless, overall inflation remains quite low : Over the 12 months ending in December, prices for all the goods and services purchased by households increased by only 1.2 percent, down from 2.4 percent over the prior 12 months. To assess underlying trends in inflation, economists also follow several alternative measures of inflation; one such measure is so-called core inflation, which excludes the more volatile food and energy components and therefore can be a better predictor of where overall inflation is headed. Core inflation was only 0.7 percent in 2010, compared with around 2-1/2 percent in 2007, the year before the recession began.” Meanwhile, the reality is food prices around the world have hit their highest levels EVER… From Breitbart entitled: World food prices hit record high: UN agency “ World food prices reached their highest level ever recorded in January and are set to keep rising for months, the UN food agency said on Thursday, warning that the hardest-hit countries could face turmoil. Rising food prices have been cited among the driving forces behind recent popular revolts in north Africa, including the uprising in Egypt and the toppling …

Continue Reading »

Answering Krugman on Austrian Economic Theory

Answering Krugman on Austrian Economic Theory

I still get the sense that Krugman truly doesn’t understand the Austrian position. For example, he asks, “Why is there overwhelming evidence that when central banks decide to slow the economy, the economy does indeed slow?” But because the Austrian theory says the bust occurs when the central bank backs off and allows interest rates to rise toward their “correct” level, this is hardly a problem. In fact, if central banks couldn’t slow the economy, as an Austrian economist I would be worried about my theory. Krugman also poses questions concerning (price) inflation rates and the connection between nominal and real GDP. But I think he is conflating the Austrian theory with a purely “real” business-cycle theory. Austrians understand that monetary influences can have real effects. To repeat, that is the very essence of the Mises-Hayek theory. Although most of Krugman’s objections are due to his unfamiliarity with the actual Austrian theory, I think one source of confusion came from the particular illustration I used in my article. First let’s set the context by quoting Krugman : “So what is the essence of this Austrian story? Basically, it says that what we call an economic boom is actually something like China’s disastrous Great Leap Forward, which led to a temporary surge in consumption but only at the expense of degradation of the country’s underlying productive capacity. And the unemployment that follows is a result of that degradation: there’s simply nothing useful for the unemployed workers to do. “I like this story, and there are probably other cases besides China 1958–1961 to which it applies. But what reason do we have to think that it has anything to do with the business cycles we actually see in market economies?” First, I should say I’m glad that Krugman at least concedes that (his understanding of) the Austrian explanation both is theoretically possible and actually happens in the real world — coming from the guy who referred to it in 1998 as equivalent to the “phlogiston theory of fire,” this is progress! However, Krugman still doesn’t have quite the right understanding of the Austrian view of the “capital consumption” that occurs during the unsustainable boom. As I said above, on this particular issue the fault lies with the necessarily simplistic “sushi model” I used in the article that Krugman read . In that article, in order to make sure the reader really saw why Krugman (and Tyler Cowen) were overlooking something basic, I had the villagers boost their daily sushi intake even while they developed a new technology to help augment their fishing. So during their “boom,” it would have seemed to a dull villager that both consumption and investment were rising. In my fable, this was physically possible because the villagers neglected the regular maintenance of their boats…

Continue Reading »

Fear the Reaper

Filed in ben bernanke, BP, earnings, economy, Gold, GOld juniors, lead, o, recession, shares, stimulus by on January 24, 2011 0 Comments
Fear the Reaper

It’s been a hell of a run. The economy is back on track. A new survey from the National Association for Business Economics suggested that jobs were coming: The number of economists who saw hiring by their firms increasing over the next six months was 42 percent, compared with 7 percent who expected to lay off workers. The NRI of 35 was the highest in the 12 years that the question has been asked. Some talking heads are suggesting the economy grew 3% in the fourth quarter of 2010. Companies slashed costs, became mean and lean, and drove profitability to record levels. Intel— one of the companies I told you to buy two weeks ago — just said it was buying back $10 billion in shares. Ben Bernanke has been pumping up liquidity to drive the stock market higher. His plan has worked to perfection… The Dow only goes up There is only one trade on right now. Group-think means the trend is your friend. “Don’t fight the Fed” is the mantra bleated by the sheeple. The blind squirrel investors have found their nut and assume there is another one just over there, ready to be eaten. This of course, raises my contrarian hackles. Take a look at this chart… Barry Ritholtz over at ritholtz.com had a great point when he wrote: At 90% gains, this market has run further and faster than any previous rally. Indeed, in just 20 months it has far outpaced every other rally’s 24 month record by some 50%; the next closest gainer was 65.7%. That does raise some cause for concern short term. The market has never gone so far, so fast as it has in the last two years. After a 90% run, which is a more likely scenario— that the Dow goes up another 90%, or that it corrects? Small caps lead Not only do small cap stocks (under $300 million market cap) lead over the long haul, but they also lead the way out of recessions. These are the smaller, quicker companies that are able to adjust to the economic landscape, and fast to roll out new products. T. Rowe Price found that in the 12 months following the previous nine recessions, small-cap stocks gained 24%, versus 17.6% for the S&P 500. Merrill Lynch reported that in the 18 bear markets since the 1930s, small caps gained an average of 41.4% in the 12 months after the end of the decline, compared with a gain of 32.4% for large caps. It has been true with this bounce back, as well. Small caps have been on fire until last week. As of Friday, small caps were down 4% for the week and 1% for the year… No more bailouts to states Another reason to think about taking some profits is that there are no more bailouts coming. The majority of 2008’s stimulus package went to the states. This equals about $400 billion that the states used to keep running…

Continue Reading »

Health Care REIT (HCN): Acquiring Growth

Filed in Bank Gold, dividend, lead, o, recession by on January 24, 2011 0 Comments
Health Care REIT (HCN): Acquiring Growth

Filed under: Newsletters , Stocks to Buy “Health Care REIT ( HCN ) is one of the nation’s leading developers and managers of medical office buildings, outpatient centers, senior living communities and other such facilities,” says Nathan Slaughter. The editor of Street Authority Market Advisor explains, “The firm’s portfolio spans 640 properties in 39 states. Like other real estate investment trusts, HCN dishes out most of its profits in the form of dividend distributions. “Backed by recurring rental income from these facilities, which tend to be recession resistant, HCN has one of the most secure dividend distributions you’ll find. Continue reading Health Care REIT (HCN): Acquiring Growth Health Care REIT (HCN): Acquiring Growth originally appeared on BloggingStocks on Mon, 24 Jan 2011 10:15:00 EST. Please see our terms for use of feeds . Permalink | Email this | Comments

Continue Reading »

Dividend.com Weekend Edition – “Ground and Pound Your Way to Investing Success”

Filed in dividend, Gold, Gold Bullion prices, o, recession, target, ubs by on January 23, 2011 0 Comments

Well it’s finally here and as I wait to watch two big NFL championship games this afternoon, I wanted to write a piece about what it means to be consistent and not slack off if you are going to build your own “championship” nest egg/portfolio or whatever the goals are you’d like to reach. When I was younger and still in school, I was fascinated by successful business people and what they did to build their fortunes. What fascinated me was how many were able to get to unimagined levels without college degrees or family fortunes. Many zeroed in on an area they were passionate about and worked to be the best at what their profession/industry was. They would not be denied! What many people fail to realize is that as an investor you can also achieve tremendous success without needing to worry about not being on the same level financially with Wall Street professionals. The idea of investing in quality dividend stocks is a simple one. You have the beauty of compound interest acting as the “wind at your back” propelling the value of your portfolio higher. There are several things you have to remember to keep doing, including funding your account every month so money can be ready …

Continue Reading »

MGIC (MTG): Mortgage Turnaround?

Filed in Bank Gold, earnings, lead, o, recession by on January 19, 2011 1 Comment
MGIC (MTG): Mortgage Turnaround?

Filed under: Newsletters , Stocks to Buy , Housing , Recession “MGIC ( MTG ) is the leading U.S. private mortgage insurer; in fact, the company claims to have founded the mortgage insurance industry in 1957,” notes turnaround specialist George Putnam . The editor of The Turnaround Letter explains, “After many years of relatively steady earnings, MGIC was forced to sharply increase its reserves beginning in 2007 as more homeowners began defaulting on their mortgages. “As a result, the company posted large losses in each of the last three years, which reduced its capital to a precarious level. Almost all of the other mortgage insurers suffered similar fates, with several competitors being forced out of business. Continue reading MGIC (MTG): Mortgage Turnaround? MGIC (MTG): Mortgage Turnaround? originally appeared on BloggingStocks on Wed, 19 Jan 2011 10:30:00 EST. Please see our terms for use of feeds . Permalink | Email this | Comments

Continue Reading »

Intel’s Impressive Earnings

Filed in BP, Gold Investing, Gold Prices, o, recession, silver by on January 15, 2011 0 Comments

I have been on the Intel (INTC) bandwagon for quite some time now. I felt that the stock had the potential to make money for patient investors.  Intel’s management is doing a great job of guiding the company. Intel was one of the few technology company that emerged from the recession even stronger than before. Buy Like Buffett – Make Money Investing The Warren Buffett Way

Continue Reading »

The Fed Blows a Cupcake Bubble

The number one cupcake play in America is going public. Crumbs Bake Shop operates 34 cupcake stores from New York to California, humorously billing itself as “creator of the gourmet cupcake.” Owners stand to make up to $100m from the IPO, and the deal could price higher, with cupcake-mania hitting a fever pitch. At $100m, investors would be paying about $3 million per cupcake store. Management is betting on aggressive expansion to fuel growth, and plan to open hundreds of new stores. Naturally, growing a chain of stores from 34 to 300 is no easy task. Recall the great donut bubble of 2003… Krispy Kreme (NYSE: KKD) was the darling of Wall Street. Its shares peaked at near $50 from a split-adjusted IPO price of $3.50, giving the donut maker a sky-high valuation of $3b (pdf). Shares trade around $7 today, up from a low of around $1. KKD expanded too fast, took on too much debt, and nearly went bankrupt. They also had some accounting issues, but those likely were probably just a side effect of a business-plan gone bad. Today Krispy Kreme is still muddling along, closing stores opened just a few years back. Expansion is always risky — especially when financed with debt and equity offerings. Hopefully Crumbs can avoid a similar fate, and follow the glorious path of Chipotle instead, which is up 436% since its IPO in 2006. In any case, I wish them well; I’ve heard their cupcakes are delicious. The larger point here is about what this cupcake IPO says about the state of markets. After all, it almost certainly wouldn’t be happening without all that Fed-injected liquidity sloshing around. Back in July 2008, The Onion published a prescient piece titled, “Recession-Plagued Nation Demands New Bubble to Invest In”: What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future. Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act, which would order the Federal Reserve to begin encouraging massive private investment in some fantastical financial scheme in order to get the nation’s false economy back on track . Even Jonathan Swift would have to appreciate satire so pointed. Unfortunately, the bit reads a lot like a Fed policy statement. Change the title to “Encouraging Risk Investment During Recession,” and any good Fed economist would nod along in agreement. The sentiment is identical. Bernanke has often stated that he wants to create a “wealth effect.” Push stocks higher, the theory goes, and people will spend more because they feel richer. Long-term thinking, truly… It’s been two and a half years since the Onion piece was written. Not only did we get one bubble; we got a handful of them. Notably in commodities, metals, food prices, and treasury bonds. Malinvestment and moral hazard ride on in 2011 One of the nastier side effects of “easy money” policies is known as malinvestment . It almost sounds harmless… mal- investment ( mal = bad). After all, everybody has a loser every now and then, right? The problem with easy money is that it inevitably spurs not just bad, but dangerous investments. During the tech bubble, it was countless doomed tech IPOs. In…

Continue Reading »

Big Ben’s Stimulus Party: Only the Top 20% Received an Invite

Big Ben’s Stimulus Party: Only the Top 20% Received an Invite

What if they threw a recovery party and only the top 20% showed up? It looks like we are about to find out….. From the Telegraph by Ambrose Evans-Pritchard entitled: Deepening crisis traps America’s have nots “ The US is drifting from a financial crisis to a deeper and more insidious social crisis. Self-congratulation by the US authorities that they have this time avoided a repeat of the 1930s is premature. There is a telling detail in the US retail chain store data for December. Stephen Lewis from Monument Securities points out that luxury outlets saw an 8.1pc rise from a year ago, but discount stores catering to America’s poorer half rose just 1.2pc. Tiffany’s, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac cars have jumped 35pc, while Porsche’s US sales are up 29pc. Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished. Such is the blighted fruit of Federal Reserve policy. The Fed no longer even denies that the purpose of its latest blast of bond purchases, or QE2, is to drive up Wall Street, perhaps because it has so signally failed to achieve its other purpose of driving down borrowing costs. Yet surely Ben Bernanke’s `trickle down’ strategy risks corroding America’s ethic of solidarity long before it does much to help America’s poor. The retail data can be quirky but…

Continue Reading »

Top Picks 2011: Aeropostale (ARO)

Filed in Bank Gold, earnings, o, recession by on January 8, 2011 0 Comments
Top Picks 2011: Aeropostale (ARO)

Filed under: Newsletters , Stocks to Buy , Best Stocks for 2011 This post is one in a series in which more than 60 newsletter advisors share their Top Stock Picks for 2011 . This special report is courtesy of TheStockAdvisors.com . “A financial crisis, severe recession, a supposedly ‘tapped out’ U.S. consumer — none of it has been enough to derail Aeropostale ( ARO ), the New York City-based teen clothing retailer,” says John Reese . The editor of Validea Hot List Newsletter explains, “While other companies have struggled to survive in the past few years, the mall-based firm upped both earnings and sales in 2007, 2008, and 2009, and it’s on track to do so again in 2010. Continue reading Top Picks 2011: Aeropostale (ARO) Top Picks 2011: Aeropostale (ARO) originally appeared on BloggingStocks on Sat, 08 Jan 2011 13:00:00 EST. Please see our terms for use of feeds . Permalink | Email this | Comments

Continue Reading »