Today’s Economic News: Woe Is Me

The summer weather and the media’s focus on positive economic news may have you feeling cheerier than usual these days.

Two words: “Bah, humbug.”  Or maybe, “Get real.”

Focus, for a minute, on the cloud, rather than the silver lining; recognize that evaporation has caused the glass to be less than half full (and more than half empty); see the bubble bursting, the interest rates rising and stock prices dropping.  In other words, get realistic about the economy.

In the Keynesian world, the more government spends, the more the economy is “stimulated.” In the real world, more spending means more debt, higher taxes, more regulation and GDP growth well below the historic norm. Chart 1

In the imaginary world, central bankers and government officials can keep the economy growing indefinitely and can boost asset prices to new records forever.  In the real world, asset prices are at artificially induced levels; reality will take hold when the Federal Reserve Board raises interest rates, when China’s stock market tanks (as it has begun to), when Greece is booted out of the Eurozone, or when Iran uses the $150 billion it receives from the lifting of sanctions to further its war against the U.S. and Israel. 

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Worry About China, Not Greece

When’s the last time markets reacted positively to anything happening in Greece?

Last week, just 10 days after Greek voters voted against a resolution that would have required stiffer austerity measures in return for a third Eurozone bailout, the Greek Parliament voted 229 to 64 with six abstentions in favor of harsher austerity measures than would have been required if voters approved the resolution.

As The Economist put it, “Grief, psychiatrists say, has many stages, from denial to acceptance; and Greece seems to have raced through them all.” Shanghai

So Greece needs psychiatric help.  That should have been clear years ago.  These are the folks who elected Alexis Tsipras of the wacky extreme-left Syriza Party as their prime minster.

Tsipras quickly found that his socialist machismo wasn’t very effective, given that his country needs billions of euros just to survive.  So maybe it’s not surprising that he and the Greek Parliament caved so quickly.

Not everyone was pleased. Fellow Syrizan Zoi Konstantopoulou, the parliamentary speaker, called it a “very black day for democracy in Europe.”  Since when does a socialist worry about democracy?

But enough about Greece.  Which country should we be worried about? 

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Big Board Floored

The Big Board is not so big anymore.

A decade ago, it accounted for 80% of stock trades.  Today, it accounts for 20%.  There are also far fewer publicly traded companies in the U.S. – 5,000+ today, compared with 8,000+ in the 1990s.  The NYSE lists about 2,800 of them.

To trade directly on the NYSE, you used to have to buy a “seat.”  In the 1990s, seats sold for as much as $4 million.  Today, you can buy a license to trade on the NYSE for $40,000.

Regardless, when “the leading stock exchange in the world“ shuts down, even for just a few hours, it’s big news.

The NYSE shut down for three-and-a-half hours on Wednesday, which was unprecedented.  Little information has been shared, but the NYSE has blamed the shutdown on a technical glitch.  Call us skeptical, but the odds of a computer glitch shutting down the NYSE, grounding United Continental Holdings planes and bringing down The Wall Street Journal’s website all on the same day are pretty small. Labor Force_1_0

Thanks to Edward Snowden and irresponsible practices by the U.S. Office of Personnel and Management, people who are not our friends now have access to a wealth of information about us.  We’d rather not think about what will happen if Chinese or Iranian hackers disrupt our electrical grid, but it’s something that should concern all of us.  Its impact not only on your investments, but on our national security, would be devastating. 

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How to Retire Early – Part Two

In part one of “How to Retire Early,” we focused on the need to reduce expenses and control debt.  Doing so can create the foundation for a retirement plan by making money available for investment.

What should happen next?  Here are a few suggestions:Retirement 4

Consider all sources of income.  Typically, retirement income comes from a combination of an employer pension, personal savings and Social Security income.  Compare what you are eligible to receive with what you will need.

If you have a shortfall, consider all of your options for making it up before you retire.  You may decide to work part-time.  It you have a marketable skill, you may even be able to develop a base of business that provides you with enough income to meet your needs without dipping into your retirement savings for a few years.  Or maybe you have space you can rent out to produce more income.

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