http://crackerjackfinance.com Crackerjack Finance - Investing A Step Ahead Mon, 23 Apr 2012 12:59:49 +0000 en hourly 1 http://wordpress.org/?v=3.2.1 http://crackerjackfinance.com/2012/04/like-qe-the-ecb%e2%80%99s-long-term-refinancing-operations-will-continue-for-years/?utm_source=rss&utm_medium=rss&utm_campaign=like-qe-the-ecb%25e2%2580%2599s-long-term-refinancing-operations-will-continue-for-years http://crackerjackfinance.com/2012/04/like-qe-the-ecb%e2%80%99s-long-term-refinancing-operations-will-continue-for-years/#comments Mon, 23 Apr 2012 12:59:49 +0000 crackerjack http://crackerjackfinance.com/?p=2224 I came across an article in The Telegraph by Ambrose Evans-Pritchard which does a good job of highlighting the circularity of the ECB’s LTRO and associated bond buying. As banks throughout Europe took advantage of ECB stimulus, which they were de facto encouraged to do by Mario Draghi and the ECB, it is clear that both the stimulus itself as well as ECB sovereign debt purchases will be needed until there is a solid economic recovery throughout the periphery of Europe. With austerity implementation to reduce deficits, economic recovery for many counties in Europe could be years away. With the automatic stabilization mechanisms in peripheral Europe broken as weaker economic growth leads to higher interest rates it will become necessary for Europe to continue to cap interest rates to avoid a crisis. There is simply no choice in this matter. Since the ECB has shown ability to avoid a collapse last year, they will go right back to the same playbook when pressed by the markets. Germany will ultimately lessen resistance to interventionist ECB policies in the future because there is too much to lose. The German economy is very strong relative to the rest of Europe with unemployment at [...]]]> http://crackerjackfinance.com/2012/04/like-qe-the-ecb%e2%80%99s-long-term-refinancing-operations-will-continue-for-years/feed/ 1 http://crackerjackfinance.com/2012/03/bernanke%e2%80%99s-labor-market-speech-%e2%80%93-the-case-for-continued-accommodative-policy/?utm_source=rss&utm_medium=rss&utm_campaign=bernanke%25e2%2580%2599s-labor-market-speech-%25e2%2580%2593-the-case-for-continued-accommodative-policy http://crackerjackfinance.com/2012/03/bernanke%e2%80%99s-labor-market-speech-%e2%80%93-the-case-for-continued-accommodative-policy/#comments Fri, 30 Mar 2012 06:45:22 +0000 crackerjack http://crackerjackfinance.com/?p=2216 Ben Bernanke made a highly referenced speech earlier this week, which was credited with fueling a sharp rally in the stock market. The speech was colorfully titled: “Recent Developments in the Labor Market” and is a worthwhile read for investors and those interested in the US economy. The speech highlights a growing controversy in the labor market regarding the constraints on hiring. The traditional school of economic thought focuses on the cyclical factors which have depressed hiring and constrained labor market improvements. In Fed speak this is described as insufficient “aggregate demand”. A new school of thought is emerging focusing on the bottlenecks in the job market stemming from; the aging of the workforce, globalization, and technological change. Obstacles based on these reasons are described as “structural impediments”. Ben Bernanke’s answer on which factor is muting the pace of hiring relative to past expansions? Drumroll please…….. He doesn’t know. The Fed correctly concludes that the factors constraining the job market could be based on a lack of aggregate demand and “cyclical factors” but they also could be based on “structural forces”.  Don’t expect an answer anytime soon. It will take academic economists many years to determine labor market imbalances and [...]]]> http://crackerjackfinance.com/2012/03/bernanke%e2%80%99s-labor-market-speech-%e2%80%93-the-case-for-continued-accommodative-policy/feed/ 0 http://crackerjackfinance.com/2012/03/welcome-to-the-world-north-korea-%e2%80%93-investment-opportunities-will-eventually-sprou/?utm_source=rss&utm_medium=rss&utm_campaign=welcome-to-the-world-north-korea-%25e2%2580%2593-investment-opportunities-will-eventually-sprou http://crackerjackfinance.com/2012/03/welcome-to-the-world-north-korea-%e2%80%93-investment-opportunities-will-eventually-sprou/#comments Tue, 13 Mar 2012 04:59:14 +0000 crackerjack http://crackerjackfinance.com/?p=2183 North Korea has been isolated since the disintegration of the Soviet Union in 1991. Significant amounts of communist aid ceased, and the fall of communism across Eastern Europe ultimately had a profound impact on the Democratic People’s Republic of Korea for the next two decades. North Korea was figuratively and literally off the grid as the country experienced severe shortages of electricity, energy, and food for many years. Society was more advanced around the time of Mao Zedong’s death in 1976 compared to today and the economy was much more productive. North Korea has been one of the few industrialized civilizations to experience famine during peacetime over the past 50 years. The state controlled media ranks second to last in terms of the World Press Freedom Index (if you’re curious, like I was, on the lowest rank on the planet – answer: Eritrea). With internet and cell phone access limited to the government elite, there are 25 million people in North Korea who have not been exposed to the rest of the world. Actions taken by North Korea over the past two-months could begin to change this. With North Korea back in the news, for the first optimistic reasons in [...]]]> http://crackerjackfinance.com/2012/03/welcome-to-the-world-north-korea-%e2%80%93-investment-opportunities-will-eventually-sprou/feed/ 0 http://crackerjackfinance.com/2012/03/first-the-japanese-yen-and-then-gold-%e2%80%93-there-is-no-safe-haven-currency-panacea/?utm_source=rss&utm_medium=rss&utm_campaign=first-the-japanese-yen-and-then-gold-%25e2%2580%2593-there-is-no-safe-haven-currency-panacea http://crackerjackfinance.com/2012/03/first-the-japanese-yen-and-then-gold-%e2%80%93-there-is-no-safe-haven-currency-panacea/#comments Thu, 01 Mar 2012 05:02:33 +0000 crackerjack http://crackerjackfinance.com/?p=2174 Beware of the one-way, one-speed runaway train! Usually in the normal chain of events the train stops, lets the passengers off, turns around, and starts going the other way. In a rare circumstance, all hell breaks loose and the train can’t be turned around and runs off the track and over the cliff. In the investment world it is rare to find this type of “accelerating in your favor (or against you)” investment theme. Two recent moves highlight how the risks can be largest in the most comfortable havens. In less than a month, the seemingly invincible Yen has sold off from 76 to 81 (the USD dollar now buys 5 more) which is a 6.6% move, and a very large one-month move for the currency market. Not to be outdone, the commodity which has been described as an alternative currency, gold, swiftly sold off today not on an actual action or event but on the lack of one. Gold fell about $100 (over 5.5%) in a number of hours. The Yen selloff was telegraphed. After all, the Bank of Japan expanded the Japanese version of QE just two weeks ago. The BoJ left rates unchanged but unexpectedly expanded the [...]]]> http://crackerjackfinance.com/2012/03/first-the-japanese-yen-and-then-gold-%e2%80%93-there-is-no-safe-haven-currency-panacea/feed/ 1 http://crackerjackfinance.com/2012/02/the-economic-process-of-deleveraging-part-two-%e2%80%93-why-the-us-is-well-positioned/?utm_source=rss&utm_medium=rss&utm_campaign=the-economic-process-of-deleveraging-part-two-%25e2%2580%2593-why-the-us-is-well-positioned http://crackerjackfinance.com/2012/02/the-economic-process-of-deleveraging-part-two-%e2%80%93-why-the-us-is-well-positioned/#comments Wed, 22 Feb 2012 05:12:57 +0000 crackerjack http://crackerjackfinance.com/?p=2160 The differences between the US situation post-financial crisis and Japan in 1990 are stark. The previous post outlined how extreme things got in Japan and how ahead of itself the Japanese stock market, real estate market and economy got. While Japan was exposed to “extreme extremes” the US economy experienced imbalances that could be worked off much more quickly. Real Estate Excess Has Been Wrung Out Over 5-years The US experienced multiple years’ worth of double digit real estate gains. The gains were spectacular and fueled by credit standards which continued to loosen until the point where the housing market evolved into the concept of “renting with the option to own”. When mortgage financing was willing to underwrite this type of one-way asymmetric risk the party was bound to end soon. A great quote from George Soros on Chuck Prince was: “he said that we have to dance until the music stops, but actually the music had stopped already when he said that.” The original comment was uttered back in July 2007. There are credible arguments made that the housing bubble in the US could have been partially avoided or lessened due to better monetary policy oversight and tighter regulation [...]]]> http://crackerjackfinance.com/2012/02/the-economic-process-of-deleveraging-part-two-%e2%80%93-why-the-us-is-well-positioned/feed/ 0 http://crackerjackfinance.com/2012/02/the-economic-process-of-deleveraging-part-one-what-happened-in-japan/?utm_source=rss&utm_medium=rss&utm_campaign=the-economic-process-of-deleveraging-part-one-what-happened-in-japan http://crackerjackfinance.com/2012/02/the-economic-process-of-deleveraging-part-one-what-happened-in-japan/#comments Thu, 09 Feb 2012 06:03:09 +0000 crackerjack http://crackerjackfinance.com/?p=2153 The process of deleveraging has been in place since the onset of global recession and financial crisis in 2008. Many investors and economists have highlighted how long the process can take once it gets going. It’s striking how the theme of deleveraging, broadly speaking, is universally assumed to play out over a very long time. Japan is the oft cited example of how a deleveraging processes can take 20 years or more! It is all very alarming given that the western world’s recent crisis is only 2-3 years in. At risk of sounding Pollyannaish, there are dramatic differences between the economic situation in Japan in the late 1980’s and the US in 2008. For a number of reasons, I believe that a decade-long deleveraging process in the United States is quite unlikely to happen. Heading into 2012, the US has experienced a 4-year deleveraging process already and is likely to be closer to the end than the beginning. The Bubble in the Nikkei was spectacular and surreal In 1982 the index level of Japan’s Nikkei 225 bottomed at 6,849. The index peaked at year-end 1989 at 38,916. The stock market in Japan rallied almost 6x during a 7-year span. New [...]]]> http://crackerjackfinance.com/2012/02/the-economic-process-of-deleveraging-part-one-what-happened-in-japan/feed/ 1