Rising Again?

The best bet for economic growth in the US comes from simply looking around the world. Japan is in a recession, Europe appears hopeless, and China is struggling. Where else can you put your money?

The answer appears to be the developing world, or emerging markets. Granted, whenever someone talks about “emerging markets” they usually wind up focusing on China – which definitely carries a lot of risk in terms of both currency value (fixed by the still communist government) and slowing growth. But throughout the rest of the planet there is opportunity. Lots of it, in fact.

While the US still looks great as a “safe haven” there is plenty of reason for cash to start flowing back to the developing world. But that investment is almost certainly going to be led by US investors given the strength of the US dollar.

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All Politics is … Stupid?

Syrian refugee resettlement in the US has created the political cause of the moment. Dozens of governors immediately lined up to say, “Not in my state” causing many others to say, “We welcome refugees”.  Nevermind that they don’t actually get a say.  Social media has lit up with memes and statements arguing the morality, legality, and practicality of all positions.

This has all the markings of a classic modern American political issue that could actually last into the next election in some form. It’s purely emotional and, more importantly, has absolutely no basis in anything that is actually important in the world.

The question of Syria, long ignored while it burned, has come to us as a feeble cartoon now that there’s the possibility that the situation might vaguely inconvenience us. And that’s all we’ve ever cared about.

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Not so Fast …

It’s been week since a blowout jobs report set fire to financial markets and signaled that everything is about to change. Barataria predicted a good report, if very timidly, and gave everything a week to shake out. So where do we stand a week from the first clear signal liftoff is occurring?

The short answer is that markets have absorbed the reality of a rising Fed Funds Rate. The long answer is that it sure doesn’t look like it for a lot of reasons which are complicated and confusing. In an increasingly smaller world there is nothing that confines money to one “market”, meaning that pressure is on from all directions.

The upshot is that after an initial spike there is reason to believe a rise in interest rates by the Fed may yet trigger a net medium-term fall in interest rates paid by consumers, as predicted. It’s worth explaining further.

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Curtain Rises on Kashkari

Who is the man behind the curtain? The selection of Neel Kashkari as the new President of the Minneapolis Federal Reserve is fascinating for a lot of reasons. It’s especially important to those of us who live in the district, of course, but this is not any ordinary position. Kaskkari is taking over for Kocherlakota, the outgoing President who resigned last June – leaving the Fed with one less relentlessly “dovish” member of the Fed Open Market Committee (FOMC).

Who is this new guy? How was he chosen?

The whole process gives us a peak behind the curtain and raises a series of questions about the new, more politically active Fed. Kashkari also brings a new personality and well documented series of biases as an data-loving engineer who is, by all accounts, a genuinely nice if hard-driving guy.

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Ready for Liftoff?

Another first Friday of the month, another jobs report. By the time you read this the Bureau of Labor Statistics’ (BLS) monthly Employment Situation Summary for October may have been released diligently at 8:30AM Eastern Time on the appointed date. The stock market may be reacting and everyone will turn their attention to the Federal Reserve.

It’s a strange ritual which keeps financial writers busy. But does it mean anything?

If all goes as it should this one should really move the markets. Exactly which direction is hard to tell for a variety of reasons – but that is what will matter more than anything else if this report comes in as “good” (in quotes) as it should be.

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Too Much Credit?

If you’re like most people, you probably think that you can never have too much access to credit. After all, you never know what might go horribly wrong or when an opportunity to really follow your dream might come up. A little scratch ready in the background might be the difference between the good life and something much less.

Then again, a lot of credit has a corrosive effect. In a world saturated with borrowing everything is judged against the expected return if the money was simply loaned out at market rates. It seems reasonable that where a little credit is a good thing a lot of credit, defining everything in the world, is the biggest enemy of both long-term thinking and a society looking to maximize happiness and human potential.

Logic says that where a little credit is good a lot could be bad, meaning there is an optimal point. Where is that? Where are we with respect to a good level of credit? It turns out that train left the station a very long time ago – and this may explain a lot of the problems in this economy.

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Clinton & the Team

It has been a good two weeks for Hillary Clinton. First came the opening debate where she did what she needed to convince the party faithful and the pundits she is the front runner. That leveraged into Vice President Biden announcing he will not run. Finally, she sat down in front of the Benghazi Committee of the House and made a good case that the whiff of scandal was behind her.

But more impressive than all this was how it happened. This was a team effort where the Democratic Party started to rally around her and unite. It’s what it will take to win the election – and today there is little doubt she is the odds-on favorite to be the next president.

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