Economy and Bond Market Highlights

Sunday, February 28th, 2010

The Economy and Bond Market

Consumer confidence took a dive this month, highlighting the fragile nature of the economic recovery. Most of the economic news out this week from consumer confidence, to housing and concerns regarding European stability had a negative bias to it.

Strengths

• Fed Chairman Bernanke reiterated his view that record low interest rates would be maintained for some time while the economy recovers from the recession.
• Fourth-quarter GDP, fueled by business spending, was revised higher to 5.9 percent from 5.7 percent.
• The Congressional Budget Office (CBO) estimated the emergency fiscal stimulus created more than 2 million jobs and boosted the economy more than many had expected.

Weaknesses

• New home sales hit a new record low, falling to just 309,000 annualized units.
• Existing home sales were also weak, falling 7.2 percent in January.
• Weekly initial jobless claims rose to 496,000 and hit the highest level in three months. This is a sign the economic recovery remains uneven.

Opportunities

• If financial markets are a good mechanism for discounting the future, the future appears relatively robust. The markets have been able to shake off bad news relatively easily this week, probably a good sign for the economic recovery.

Threats

• If one of the eurozone countries were to seriously threaten default, the whole eurozone system comes into question and threatens global financial stability.

Tags: Bad News, Bond Market, Bonds, Congressional Budget Office, Consumer Confidence, Economic News, Economic Recovery, European Stability, Eurozone Countries, Existing Home Sales, Fed Chairman Bernanke, Financial Markets, Fiscal Stimulus, Fourth Quarter, Fragile Nature, Global Financial Stability, Initial Jobless Claims, Low Interest Rates, Negative Bias, Quarter Gdp, Recession
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David Darst - Robert Kessler - Interview Transcript (Feb. 19)

Sunday, February 28th, 2010

Connie Mack recently interviewed David Darst, chief investment strategist for Morgan Stanley Smith Barney, and Robert Kessler, head of Kessler Investment Advisors, which runs portfolios for institutional investors and governments around the world. This is a MUST view/read interview. The complete transcript follows.

CM: David Darst is known as a master of the art of asset allocation. He is the chief investment strategist for Morgan Stanley Smith Barney. David is also a teacher and prolific author, and his latest book is The Little Book that Saves Your Assets . And it’s great to have you both here. Thanks so much for joining us on WealthTrack.
Robert Kessler, U.S. Treasuries, you make your living in investing and managing portfolios of U.S. Treasuries, and as long as I’ve known you, they have been denigrated by most of the competition except in this most recent period when everyone rushed to Treasuries, but now the naysayers are back again. So why are they wrong again about Treasuries?

ROBERT KESSLER: It’s not a question of being wrong or right. A Treasury is really a benchmark to almost every other asset class. So as a benchmark, you can’t be wrong or right about a benchmark. It’s just simply matter of spread between what other asset classes are selling at. So in the Treasury market, we’re lucky enough to be able to have a choice of overnight Treasuries, which is cash, or longer-term Treasuries. And longer term Treasuries are really based on whether you believe inflation is going to be an issue or whether disinflation will be an issue.
So right now we’re in what we call a credit crisis. We’re in a credit recession. And during credit periods of time, you don’t want to own risk assets, and if you don’t want to own risk assets, you want to go to something that has very little risk, which is a Treasury. Now the question becomes: do you own Treasuries as bills overnight or do you really believe that rates are going to come down because there’s very little inflation in the world? So since we believe rates will come down because there is very little inflation, then Treasuries become very attractive.

CONSUELO MACK: All right. So let me stop you there and we’re going to follow up on that in a couple of minutes. David Darst, as a global strategist first and as an asset allocator second, how do you view this?

DAVID DARST: It’s a great point because really, inflation is a monetary phenomenon. We have a big war going on between this monetary phenomenon called inflation potential down the road.

CONSUELO MACK: Right.

DAVID DARST: And deflation is a credit phenomenon. And right now credit is contracting. The latest month figure for December showed it contracted, consumer credit, Consuelo, by $2.5 billion. That’s 11 months in a row the government has been keeping these numbers since 1943. It’s never contracted for 11 months in a row. So right now we have this epic, titanic struggle between the deflation phenomenon, credit contracting and the inflation phenomenon, which is the government attempting to pump up the money supply, add liquidity to the system, which people, makes them worry about inflation down the road. So we feel that maybe Treasury bonds, Treasury securities, you can have them in the portfolio right now, you need to have a little offense as well as a little defense. Treasury securities are a defensive investment in our opinion. Last two years ago they were up 20%. They were up 20% in 2008 when the stock market went down 37%. Last year, ten-year Treasuries lost 9.9% on a total return basis.
I’m very receptive. For a person basically to say stay away from Treasuries means they think interest rates are going to rise. That means the consumer is going to come back. That means that credit is going to stop contracting and we’re going to worry about inflation. But over the next 12 months, I’m not so sure those things are going to be an issue, Consuelo.

CONSUELO MACK: So short term at any rate, next 12 months, Treasuries are probably a good place to be defensive.

DAVID DARST: I think you can have some in the portfolio. We are underweight. We are underweight. Normal is 16%. We’re 7%. That’s our largest single underweight. We are very underweight because we’re worried about the health of sovereign credit finance about the condition of the U.S., the U.K., the European community and so forth, the condition of these finances. So much money has been issued.

CONSUELO MACK: Okay. How do you answer that argument because, in fact, as you know, that most people who are looking at U.S. Treasuries are saying, we’ve got a record deficit; we have to finance that record deficit. If we are basically having to sell a lot of Treasury bonds, that is going to mean that the value of the dollar of our securities is going to go down. And then, in fact, that means that it’s going to be inflationary for the U.S. So how do you respond to that argument? Why aren’t you worried about the size of the deficit and what we have to finance being inflationary?

ROBERT KESSLER: Let me answer two questions. The first question is this concept of the deficit. There is this constant talk of deficits lead to inflation. We don’t really have any indication that that’s true. In the Depression in the United States, we had huge deficits, of course, and we had no inflation. We had deflation. Japan has gone through 20 years now of deficits that are far, far higher than ours, and they have deflation. So we don’t know anything about the inflation side of it. What’s really important is that if people can’t raise prices and there’s an awful lot of excess capacity in the world and wages are going down and unemployment keeps staying kind of sticky at these very, very high levels, it’s very difficult to have inflation.
And so there is no inflation. That’s not our issue. The real issue is– television was interesting today because not only are we dealing with Greece, Greece is very interesting because we’re bailing out Greece and bailing out perhaps Portugal next, but we’re probably going to bail out New Jersey after that. Because New Jersey just announced today that they’re running into a huge deficit, too.

CONSUELO MACK: As are a lot of states.

ROBERT KESSLER: As are a lot of states. So we have states having problems, lowering wages, firing people; very, very difficult to raise prices and consequently, very difficult to have inflation.

CONSUELO MACK: All right. So you think we’re deflationary. You think the credit contraction you think which is extraordinary is actually, we’re in the beginning stages of it. You’re not thinking a year down the road, you’re thinking for inflation, you’re thinking, what three, four, five…

ROBERT KESSLER: It sounds like I’m being very pessimistic.

CONSUELO MACK: You’re a bond person.

ROBERT KESSLER: No, no but I don’t want to be pessimistic. We just got back from the Middle East. I have to tell you, not only is everything for rent in the Middle East, not only are buildings completely unoccupied, but banks, since we deal with banks, banks right now are doing one trade. They’re doing what we call a carry trade, meaning they’re buying their sovereign debt, either U.S. sovereign debt or their sovereign debt short term and they’re carrying it at very low cost.

CONSUELO MACK: Because they can borrow it at very low cost.

ROBERT KESSLER: Because they can borrow at very low cost, as is JP Morgan in the United States and as is Morgan Stanley and everyone else. So the fact of the matter is when people say we’re in a bear market in Treasuries, it’s ridiculous. Last year, even though David is correct, the ten-year Treasury was down 9%. The fact of the matter is we made more money last year in two-year Treasuries than any year I can think of because everyone was carrying a two-year Treasury at zero and getting a point. Now, in bank talk…

CONSUELO MACK: So they were borrowing at lower than 2% and then they were buying the two years… So they made?

ROBERT KESSLER: They do it at a very high leverage level because they don’t need to do very much with a capital question. So the fact of the matter is you have this bull market going on and yet everyone is saying, anything but Treasuries. Tell that to JP Morgan.

CONSUELO MACK: Right. So David, not to completely focus on Treasuries, but as far as asset allocation, you said that your biggest underweight is U.S. Treasuries right now.

DAVID DARST: It’s sovereign credit, Consuelo.

CONSUELO MACK: Across the board.

DAVID DARST: It would include U.K., it would include Canada, it would include Europe.

CONSUELO MACK: And the reason for that is what?

DAVID DARST: Well, the sovereign… we believe there’s so much issuance of sovereign debt; we do believe that the balance sheet of the Fed has ballooned from $900 billion to $2.2 trillion. We do see the deficits as being quite large on out into the future. And we do believe that these trillion dollar and trillion and a half dollar deficits are going to have to be bought and to entice people, which will cause higher interest rates. So that’s why Morgan Stanley’s economists have a big out-of-consensus call, which Robert is very familiar with. And by the way, the word Robert means bright fame. His name means bright fame. Now Robert is familiar with this- Morgan Stanley is expecting 5.5%. And every conversation I get into, I have to argue we think that inflation fears will be higher towards the end of 2011. We see all this slack. But there’s concern. Supply, which you mentioned, that is the excess issuance by the Treasury, and also the Fed, and I know there’s a lot of disagreement over this, we expect them to begin their exit strategy later this year, second half of this year.

CONSUELO MACK: And exit strategy could mean raising the federal funds rate?

DAVID DARST: Higher short-term interest rates, and that means we think higher long-term interest rates. We take a little bit of respectful issue with Robert Kessler’s brilliance over here. But we believe the essence of our underweight versus sovereign debt is because of enormous supply and people’s concern. Inflation is the biggest… The biggest inflations of all times have all come from fighting deflation. In the 1946 to 1949 period in Germany, in communist China, in the 1920s and 1923 period of Weimar Germany, the biggest inflations have all come from fighting deflation.

CONSUELO MACK: So what’s interesting is the common ground is here. Right now we are fighting deflation, which is actually positive at least for the next 12 months, possibly for…

DAVID DARST: Steroids, financial steroids. Mark McGuire has admitted to it and the Fed is taking financial steroids.

ROBERT KESSLER: Let me be a little contrary for a second.

CONSUELO MACK: For a second?

ROBERT KESSLER: All right, for 30 seconds. The fact of the matter is we talk about this exit strategy all the time about the Fed. I’m into the entrance strategy. I am trying to figure out how we’re going to help out 8.5 million people who don’t have jobs. It’s probably closer to 17 million because that’s really a more correct figure.

CONSUELO MACK: The ones who have been discouraged and not looking for jobs anymore.

ROBERT KESSLER: Why we’re talking about exit strategies is very, very disconcerting to me.

CONSUELO MACK: Because the Fed is actually. Bernanke is talking about it, right.

ROBERT KESSLER: What we’re talking about again is Wall Street and the banking industry. When you get to, excuse me, the middle of the United States, at least where I live.

DAVID DARST: Right, you live in Denver.

ROBERT KESSLER: In Denver. People don’t have a clue to what JP Morgan is doing or Morgan Stanley is doing. What they’re looking for is their job, and when someone says, excuse me, I think it will be a good idea to raise interest rates, they can’t even borrow money; not only can’t they borrow money, no one will lend them any money. So they’re really…

CONSUELO MACK: Like the credit contraction you were talking about.

ROBERT KESSLER: So the issue is why are we talking about exiting the strategy?

DAVID DARST: The reason we’re talking about exit strategy is psychological. It’s the use of Shakespearean language and words to try to divert people from worrying about the debasement of the currency, internally and externally. And that’s why he’s saying it. And I agree with you. I don’t see rates jacking way up very quickly. This is going to be gradual, but we went from $900 billion Fed balance sheet to $2.2 trillion. And it is very, very important.
Sarkozy, during the last four weeks– opening speech at the World Economic Forum said that in 2011 France is going to be head of the G7 and the G20 and he says his number-one agenda item is to create a new world monetary system, a new system without the United States dollar as the primary reserve currency. The reason they talk about exit strategy, Robert, is to keep people from going to this new currency.

CONSUELO MACK: So how concerned are you about the fact that the dollar could be replaced as the reserve currency?

ROBERT KESSLER: First of all, for a second I’m going to represent Main Street as opposed to Wall Street, and Main Street doesn’t have a clue to what we’re talking about.

CONSUELO MACK: Right.

ROBERT KESSLER: Believe me. This all gets very, very complicated to talk about.

CONSUELO MACK: And our viewers are investors.

ROBERT KESSLER: They’re investors, so my answer to all of this is the United States will continue to be the reserve currency. There’s nothing wrong with the dollar. Everyone will put money into the dollar, as we’re doing today. Today is a very, very good example. We had a 30-year auction today. What was exciting about it, even though it didn’t go over very big as an auction, didn’t go well, but what was exciting about it is 23% of the auction was bought by Americans. What we call direct investors.

CONSUELO MACK: We’ve seen a trend here where the direct investors, Americans are buying more and more of their Treasury securities.

ROBERT KESSLER: And so when you look at the American dollar, as you can look at the Japanese yen- the reason the yen has stayed strong for so long is because the Japanese support their own country.

DAVID DARST: Internal savings, financing.

ROBERT KESSLER: And in the United States, we are beginning to do the same thing. And so even though we have a deficit, if we’re willing to pay for it, then frankly there’s nothing so terrible about the deficit.

DAVID DARST: Your legion of viewers in the aggregate have 25% stocks, 25% their home and 7% bonds. That’s why, as you’ve pointed out on the show, Consuelo, over the nine months from March through December, they, we all put $315 billion net into bond funds and ETFs, $35 billion into non-U.S. stocks and minus $24 billion into U.S. stocks. So there has been this trend. 1982, the average baby boomer, the median age was 25 years old. Today it’s the reverse of the digits- 52 years old. People have been killed by the dot com meltdown, the housing price meltdown and the financial stock meltdown and that want to set aside some money. So your point is an excellent point, Robert. They want to put this money and maybe some of the buyers will be U.S. households.

ROBERT KESSLER: Let me add one more statistic.

CONSUELO MACK: Very quickly because we have to get to the One Investment.

ROBERT KESSLER: The statistic being, that if Americans begin to invest in Treasuries the way they have in the past, then there would be no deficit. There would be simply no deficit.

DAVID DARST: We’re sitting on $8 trillion of cash right now. And they need only $1.5 trillion, but we need higher rates, Robert, to entice us to take it out of the cookie jar and the mattress and put it in Treasuries.

CONSUELO MACK: So one quick question for you, David Darst, and this is put your asset allocation hat on again. What are you overweighting, in a minute or less?

DAVID DARST: We’re overweighting corporate credit to summarize quickly. That would be high yield bonds, and high grade bonds.

CONSUELO MACK: Because of the yield.

DAVID DARST: The yield is more attractive. We are overweight in real estate investment trust, which have a nice yield to them.

CONSUELO MACK: Right.

DAVID DARST: We’re overweight in emerging market stocks and Canadian stocks, Australian stocks, and in small cap stocks. They have basically taken a little gas in the first part of this year. We think that’s a pause, a healthy, needed correction that we will believe as the economies grow around the world- we just jacked up our China forecast to above 10% for this year- and we think probably world growth will surprise to the up side. Maybe that’s why yields will surprise to the up side, too. Interest rates.

CONSUELO MACK: Very interesting. And so let’s go to the One Investment for our investor viewers out there, and Robert Kessler, guess what you’re recommending.

ROBERT KESSLER: A quick comment.

CONSUELO MACK: Yes.

ROBERT KESSLER: A quick comment. I am so weary of people who wear white suits and recommend emerging markets. Now, David’s not.

DAVID DARST: White suits?

ROBERT KESSLER: White suits.

DAVID DARST: Tom Wolf.

ROBERT KESSLER: Right.

CONSUELO MACK: I don’t understand that.

ROBERT KESSLER: Consequently, what I’m saying is I think you want to be in everything that is risk-averse. And therefore I would suggest that a Treasury, whether it’s overnight money or it’s ten or a 30-year Treasury, I think the ten year will probably outperform everything this year, and that’s a way-out kind of a call, but I do think that rates are going to substantially come down, and they do usually the second or third year after a recession, and since we’re only a year into this, we have a long ways to go, and I think you’ll see the ten-year Treasury probably back at 2% range or lower. And that’s a big move.

CONSUELO MACK: Wow. And David Darst, you’re thinking defensive action, too.

DAVID DARST: I am, Consuelo. Procter & Gamble (PG), which I’ve recommended on the show before- they have 23 products with over $1 billion in annual sales, and they have 20 products in addition with over $500 million in annual sales. They just changed leaders. Robert McDonald takes over from A.G. Lafley. McDonald has been with them for 29 years. He sold Folgers Coffee. He’s selling off the pharma area to focus on personal care, on household products and human well-being, okay. We see three billion people every day out of six billion in the world that are touched by a Procter & Gamble product.

CONSUELO MACK: Wow.

DAVID DARST: He wants it to go up to four billion. Only 30% of their revenues are outside the U.S. and Europe. Stock sales are 14 times last year’s earnings. It yields 2.9%. They’ve not been buying stocks in a year and a half. They’ve just begun to buy stocks, and the last thing is it was only up 1% last year with its lag to market. It went down less than the market. It went down 14 in ‘08 when it went 37 down, up 1% last year. We think this is a company that’s been a defensive stock about to go on the offense.

CONSUELO MACK: So we have a diversified portfolio right here between the two of you. Robert Kessler from Kessler Investment Advisors, thank you so much for coming in from Denver and from New York, it’s great to have you regardless, David Darst from Morgan Stanley Smith Barney, thanks so much for joining us.
At the conclusion of every WealthTrack, we tried to leave you with one action to take to build and protect your wealth over the long-term, as well. This week we’re revisiting a retirement income theme that we and many of our guests have emphasized over the years. This week’s Action Point is: lock in some retirement income for life.
How do you do that? The Obama administration recently came out in support of annuities as a tool to deliver a form of “guaranteed lifetime income.” Specifically, President Obama has called for a change in federal rules to allow adding annuities to 401(k) retirement plans.
Until that becomes a reality, one way to assure a stable flow of income that you can count on for life is to buy the simplest, plain vanilla version, an immediate fixed annuity, also known as a single premium immediate annuity. You turn over a one-time payment to an insurance company, and it in turn will provide you with a predictable and guaranteed monthly income as long as you live. To make sure it’s there, that it is as long as you live, only work with life insurance companies that have the highest credit ratings, and don’t put all your eggs in one basket.
The financial advisors we have talked to recommend investing only a portion, no more than one-third of your retirement assets, in annuity products, and also recommend consider staggering the amount you put in over a number of years, so you can adjust your income stream as you need it. To get an idea of what kind of monthly income a given amount will return, go to immediateannuities.com for a quote.
Now what troubles many people about these immediate fixed annuities is that you might die before you have recovered your investment, your heirs don’t get any benefit, and inflation can eat away at the value of the income stream. So the insurance industry, in its infinite wisdom, has responded with variations on immediate annuities that address these concerns. The tradeoff is the adjustments reduce the monthly income. Annuities are not right for everyone, but as a vehicle to create your own guaranteed pension plan for life, an immediate fixed annuity is definitely worth considering.
That concludes this edition of WealthTrack. Join us for one of our Great Investors series next week. I’ll sit down with Steven Romick, portfolio manager of the FPA Crescent Fund, a finalist for Morningstar’s Domestic Equity Fund Manager of the Decade award. In the meantime, to watch this program again, please go to our website, wealthtrack.com. Starting Monday, you can see it as streaming video or a podcast. Thank you for visiting with us. And make the week ahead a profitable and a productive one.

Source: Consuelo Mack, WealthTrack, February 19, 2010
http://www.wealthtrack.com/transcript_02-19-2010.php

Tags: Asset Allocation, asset class, Asset Classes, Bonds, Chief Investment Strategist, Connie Mack, Credit Crisis, David Darst, Disinflation, Institutional Investors, Interview Transcript, Kessler Investment Advisors, Morgan Stanley, Naysayers, Prolific Author, Recession, Robert Kessler, Smith Barney, Stanley Smith, Treasuries, Treasury Market
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Canada Moral Hazard Corporation?

Monday, February 15th, 2010

As the world’s spotlight turns to the Vancouver Olympics, all eyes will be on Canada. Our nation suffered comparatively less than other G7 economies during the last recession, and our banking system has received praises for being good and boring (read the Sceptical Market Observer’s comment on this).

To be sure, our economy is adding jobs, our stock market has rallied sharply, our currency is close to reaching parity with the USD, commodity exports are up, everything looks great. A buddy of mine even told me that our currency is being bought by central banks around the world. Canada seems to be on a tear.

But things are far from perfect. For one, there is a housing bubble in the making that could last a lot longer than people think. Stephen Jarislowsky, one of Canada’s best known investors, says he believes government measures aimed at juicing the housing market has put the sector in a bubble:

“I am convinced there is a housing bubble in Canada,” Mr. Jarislowsky told Bloomberg News. “… I conclude that the prices of housing today in the U.S. are cheaper than they should be, and that the prices in Canada are far more expensive than they should be.”

Mr. Jarislowsky is not alone. Other economists have also fretted about a bubble given the stunning rebound in real estate after the slump, and projections for record sales and prices this year. Ottawa is now considering tightening some rules. Said Mr. Jarislowsky: “They have basically encouraged people to buy houses based on cheap mortgages. That has created the opposite effect of what was desirable.”

Then, there is what Peter Foster of the National Post calls the Canada Moral Hazard Corporation:

There has been much official chest swelling over Canada’s relatively strong performance during the financial crisis, but perhaps Canadians shouldn’t — if you’ll excuse the mixing of metaphors — be counting their chickens until they are sure that there are no black swans present. And in fact there does seem to be one dark, plump, bird looming around the back of economic barnyard: the Canada Mortgage and Housing Corporation. Or is that a turkey that should be renamed the Canada Moral Hazard Corporation?

The CMHC was never given a cutesy acronym like its U.S. equivalents, Fannie Mae and Freddie Mac. But why not “Morrie Haz,” acknowledging that it has always been an instrument of moral hazard, the situation where insurance makes the insured-against event more likely?

As we know, Fannie and Freddie — which were privately-owned but “government-sponsored,” which meant they inevitably got bailed out — were front and centre in the U.S. housing market meltdown, which in turn precipitated the global financial crisis.

There are increasing concerns that the Canadian housing market is headed the same way as that of the U.S., stoked by the same factors: artificially low central bank interest rates, and the government insurance/promotion of risky mortgages.

This policy double whammy explains the growing calls for somebody — banks? CMHC? Carney? Flaherty? Anybody else? — to tighten mortgage regulations. These requests appear puzzling until we realize the role of the CMHC in encouraging perverse behaviour.

In a free market, if banks felt a housing bubble building, they would simply tighten standards themselves, either by demanding higher credit qualifications, hoisting rates, or shortening amortization periods. Hoisting rates is out of the question, since rock bottom mortgage rates are now considered by the Bank of Canada to be essential to national economic recovery and protection of our export industries. That leaves Morrie Haz waiting there to insure mortgages, and gives the banks every incentive to hand out any loan that can get insurance. However, they obviously grasp that such cosmic policy fecklessness will ultimately come back to haunt them.

A couple of weeks ago, Peter Routledge of credit analyst Moody’s pointed out that the overheating of the housing market was goosing an unsustainable increase in household borrowing more generally. “As witnessed in the United States,” he wrote, “this movie does not end well.” Specifically, once the punchbowl of low interest rates disappears, households find themselves in trouble, and so do their bankers.

Mr. Routledge noted that Canadian banks likely wouldn’t wind up in the same depths as their U.S. counterparts, but that is only because their riskiest mortgages are backstopped by CMHC. But this makes the systemic threat to the Canadian economy greater.

The U.S. crisis was massive but did not fall entirely on Fannie and Freddie. It was shared with other financial institutions. Nevertheless Fannie and Freddie both failed and had to be taken into government “conservatorship.” Mr. Routledge suggests that the situation is more “secure” in Canada, but as a recent report from the Fraser Institute points out, what this really means that the Canadian system features “massive taxpayer exposure.”

Mr. Routledge suggested that CMHC should tighten its insurance criteria, and this week he was seconded by former Governor of the Bank of Canada David Dodge.

The Fraser study, by Neil Mohindra, confirms that the taxpayer risk from a housing collapse is greater in Canada than elsewhere. He notes that a stunning 90% of all insured residential mortgages in Canada are covered by the CMHC. This amounts to an estimated $480-billion for which Canadian taxpayers would be on the hook if the housing market tanked (although any loss would obviously only be a fraction of this amount).

The study suggests that the CMHC’s activities should be privatized, but that possibility appears a long way down the road, both for practical and political reasons. The biggest problem is that nobody is going to want to privatize a property which harbours a potential time bomb.

The whole thrust of CMHC insurance is to encourage banks to make riskier loans. Normal insurance provisions are based on actuarial principles. CMHC insurance is based — like the activities of Fannie and Freddie — on promoting home ownership. Mixing social and economic objectives usually ends in taxpayer tears.

There is no indication that the Canadian mortgage market has been subject to the lunacies of the U.S., where — for a while — anybody with a pulse could get a home loan. Still, high ratio mortgages — that is, ones with down payments as low as 5% — inevitably carry a hefty risk of default when a bubble bursts. That default then becomes the CMHC’s problem.

As such, notes Mr. Mohindra, Canada is not a model for anybody. Morrie Haz has always been an accident waiting to happen.

According to Moody’s Mr. Routledge, “If policymakers deploy the appropriate tools early rather than late in this period of household credit expansion, perhaps the Canadian movie will end differently.”

But Finance Minister Jim Flaherty knows that ending the party is not going to be popular, which is where inevitable political self-interest compounds those practical problems. Meanwhile CMHC isn’t just a provider of potentially reckless insurance and the depository of last resort for mortgage assets the banks don’t want. Yesterday a representative of Diane Finley, Minister of Human Resources and Skills Development, who is also responsible for CMHC (go figure), was in Montreal handing out stimulus slush under Canada’s Economic Action Plan.

Mr. Flaherty doesn’t want to see a bubble, much less a bomb. But when it comes to which movie we’re coming to the end of, maybe he should check out The Hurt Locker. Just in case.

Of course, lenders like ING, oppose any clampdown to rein in mortgage borrowing. Sound familiar? I agree with Stephen Jarislowsky and I also fear that this movie isn’t going to end well. Enjoy the Vancouver games, because I feel a post-Olympics winter chill headed our way.

Tags: Banking System, Black Swans, Canada, Central Banks, Cheap Mortgages, Chickens, Commodity Exports, Financial Crisis, Government Measures, Housing Bubble, Housing Market, Jarislowsky, Metaphors, Moral Hazard, Parity, Praises, Recession, Record Sales, Slump, Swans, World Canada
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Whither Deflation?

Thursday, February 4th, 2010

This article a guest contribution by Leo Kolivakis, of Pension Pulse.

Last week, I warned my readers to get ready for more upward growth revisions. I believe that US growth in Q1 2010 will surprise even the most optimistic forecasters.

Why am I so confident? After all, my last call before the December employment report was way off. The bond market didn’t go ‘boo’ back then and more jobs were lost. Today, Bloomberg published a sobering article stating that 824,000 jobs will disappear on February 5th.

No doubt, when all is said and done, and the government bean counters finish tallying up the wreckage, job losses from this recession will be far worse than what was initially thought. And this recession hasn’t been gender neutral. By far, men have suffered a lot more than women as cyclical industries got hit harder.

But all that is about to start changing in Q1 2010. Consider the following very carefully:

• The Conference Board Leading Economic Index™ (LEI) for the U.S. increased 1.1 percent in December, following a 1.0 percent gain in November, and a 0.3 percent rise in October.
• The January 2010 ISM Manufacturing report showed widespread growth. Importantly, the manufacturing sector grew for a sixth straight month, and both the New Orders and Production Indexes are above 60 percent, indicating strong current and future performance for manufacturing.
• US real GDP surged 5.7% in the fourth quarter 2009, confirming that the recession is over and the recovery is gaining traction. While the acceleration in real GDP growth in the fourth quarter primarily reflected an acceleration in private inventory investment, there was a pick-up in non-residential investment, exports and investment in equipment & software, a harbinger of future job growth.

In the near term, it is highly likely that US growth will continue to surprise to the upside. Interestingly, Tom Braithwaite of the FT reports that US deflation no longer seen as a risk:

The US has escaped the danger of a Japanese-style deflationary trap, according to James Bullard, a voting member of the Federal Reserve’s key policy-setting committee.

Mr Bullard, president of the Federal Reserve Bank of St Louis, told the Financial Times in an interview that his preoccupation throughout 2009 had been deflation, but the risk had “passed”.

Last week’s Fed meeting produced a dissenting vote for the first time in a year when Thomas Hoenig, president of the Kansas City Fed and a rate hawk, argued that financial conditions no longer warranted a policy of holding rates at “exceptionally low levels . . . for an extended period”.

Other members of the Federal Open Markets Committee voted to preserve the “extended period” phrase, generally taken to mean near-zero interest rates will continue for at least six months. But they are also working on an exit strategy from the exceptionally loose policy used to fight the financial crisis.

Mr Bullard, who is considered a centrist member of the FOMC, said he was happy to continue with the current guidance, but he did have some sympathy for Mr Hoenig’s argument that “if you come off zero and you move up a little bit, it’s still a very easy policy. You’ve still got a very large balance sheet and you’re still at very low interest rates.”

He added that, although it was not time to tighten policy, members of the committee would weigh in their decisions factors other than inflation and unemployment. Factors to consider would include asset bubbles.

“I think they’re gaining weight with many people because of the bad experience we had in the aftermath of the last recession, the housing bubble and how that really has blown up and caused so many problems,” he said.

When the Fed does come to raise rates it may have to switch from its traditional benchmark of targeting the federal funds rate to targeting a repurchase rate because of the upheaval in the two markets over the last two years.

“I think what the operating regime will really look like going forward is an open question and one that the committee is working on,” said Mr Bullard, who said the Fed could consider using interest it paid on reserves as the main rate but that it might prefer a market measure such as the repo rate.

The broader post-crisis economy was “on track” with its recovery, he said. “It’s not a real strong recovery but that’s what we had predicted anyway. But it will be above-average growth for the first half of 2010 and we’ll probably see some positive jobs growth in the first part of 2010 here.”

He “hoped” that improvement in the labour market would come in the first quarter.

Following harsh criticism of Ben Bernanke in the Senate ahead of his reconfirmation as Fed chairman last week, Mr Bullard warned that political interference with the Fed would be dangerous and he strongly opposed plans to strip banking supervision from the central bank’s roster of duties.

“I think it’s dangerous for America and dangerous for a global economy to try to divorce this central bank from true understanding of financial markets, and I think that that’s the direction we’ll be going in if we separated out the central bank from regulation,” he said.

“What this crisis has shown is that our understanding of financial mediation and how it can impact on macro economy was not good enough. So what you want is to force the central bank to get better understanding and more information about financial markets as they’re making monetary policy decisions.”

Not good enough? I’d say the Fed’s understanding of how financial mediation impacts the macro economy was downright pathetic pre-crisis and has only marginally improved post-crisis. Who is tracking flows into hedge funds, commodity funds, private equity funds, and flows coming from sovereign wealth and global pension funds?

More importantly, who is tracking leverage being built into the bond market? There too, pension funds are playing an increasingly important role as they leverage up their fixed income holdings to deliver on their required actuarial rates of return.

I urge you to carefully read Niel Jensen’s February 2010 letter from Absolute Return Partners, aptly titled If PIIGS Could Fly. Mr. Jensen’s conclusion is a stark reminder of the challenges that lie ahead:

As far as the bond market is concerned, as often pointed out by Martin Barnes at BCA Research, if you want to know where the next crisis will be, then look at where the leverage is being created today. And nowhere is there more leverage being created at the moment than on sovereign balance sheets. What is happening is an experiment never undertaken before. As John Mauldin puts it, we are operating on the patient without anaesthesia.

The big challenge will be to get the timing right. These situations can run for longer than most people imagine. Japan’s crisis has been widely predicted for almost a decade now, and the ship appears to be as steady as ever. As I suggested earlier, the key to predicting the timing of Japan’s demise – because there will be one – may very well be embedded in the savings rate, which could quite possibly turn negative in the next few years.

The Dubai crisis taught us that markets are in a forgiving mode at the moment and, before long, Greece could very well find some respite from its current problems. But then again, ultimately, governments will find – just like millions of households have found over the years – that you cannot spend more then you earn in perpetuity. The enormous debt levels being created at the moment will haunt us for many years to come and we may have to wait a long time to see PIIGS fly again.

While I agree with many of the arguments Mr. Jensen puts forward, I am not convinced that the bond market will be the next crisis. You will likely see the short end of the curve getting hit hard in Q1 2010 as the market adjusts its expectations on the Fed’s next move, but not a full-fledged crisis in bonds.

Neither am I convinced that deflation is dead. The risks of deflation have subsided but the bigger test will come in the following few years, especially if stimulus programs do not translate into a sustained improvement in US and global labor markets. And that still remains the overarching concern of policymakers across the planet. If they fail to achieve this, a nasty deflationary spiral will ensue, in which case high quality government bonds will look very attractive, even at historic low yields.

Tags: Bean Counters, Bond Market, Commodities, Cyclical Industries, Economic Index, Employment Report, Fourth Quarter, GDP Growth, Harbinger, Inventory Investment, Ism Manufacturing, Manufacturing Sector, No Doubt, Optimistic Forecasters, Private Inventory, Q1, Real Gdp, Recession, Residential Investment, Upward Growth, Wreckage
Posted in Bonds, Markets | No Comments »

GDP - What it Really Looks Like

Wednesday, February 3rd, 2010

By now we all know that a swing in inventories flattered the growth in U.S. Q4 GDP. The chart below, courtesy of Goldman’s chief US economist Jan Hatzius (via Clusterstock - Chart of the Day), shows the “real” story. It illustrates that the growth in real final demand - basically GDP excluding inventory restocking - is flat and doesn’t live up to past recoveries at all.

“There will be lingering headwinds to growth from the financial meltdown, such as ongoing credit restraint and an upward drift in the personal savings rate. The U.S. economic recovery should be sustained, but it will fall far short of what would normally occur in the wake of a very deep recession,” said BCA Research.

Without stronger demand growth, a V-shaped recovery is not on the cards and the unemployment rate will not start heading south.

Tags: Cards, Drift, Economic Recovery, Economist, Financial Meltdown, GDP, Gold, Goldman, Heading South, Inventories, Personal Savings Rate, Q4 Gdp, Recession, Swing, Unemployment Rate
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Give Bernanke A Break

Sunday, January 24th, 2010

As populist politicians, long on hypocritical outrage and short on fiscal rectitude, begin the witch hunt for the parties to blame for the Great Recession, fingers are being pointed at Federal Reserve Chairman Ben Bernanke. Their criticism is that Bernanke and the Fed contributed to the housing bubble by keeping short-term interest rates too low for too long early in the decade and then not increasing them quickly enough to snuff out escalating house prices.

In a recent speech, Bernanke pointed out that it was low real long-term rates (i.e. nominal rates less inflation) determined in the bond market that were a major contributor to the housing bubble, not the short-term interest rates engineered by the Fed.

The facts support Bernanke. As depicted in the following graph, real long-term rates trended downwards for much of this decade, hitting bottom just before Lehman’s failure in September 2008. Even the Fed tightening in 2004 and 2005 failed to push real rates up to the levels of the 1990’s. Long-term real rates were just too low and consumers got the message – instead of saving, they spent.

As depicted in the following graph, this view is also supported by the failure of long-term mortgage rates (in red) to respond to the increase in the fed funds rate (in green) in 2005-2006 as they had in previous tightening cycles.

In 1994-95 and 1999-2000, long-term mortgage rates were 2.0% or so higher than the fed funds rate as they peaked, while in 2006 the spread was in the 1.0% range. Monetary policy was less effective at driving up mortgage rates than previous cycles.

The real culprit in keeping long-term real interest rates low was the global savings glut that was in large part created by the recycling of U.S. dollars by China and other Asian countries. The chronically undervalued currencies of those countries have created a permanent trade imbalance and yawning current account deficit in the United States. In fact, Bernanke himself coined the phrase “global savings glut” in a speech that he made in March 2005. At that point, he warned that low real interest rates seemed to reflect an imbalance between global savings and investment – too much money chasing too few investments around the world.

Viewed from this vantage point, the seeds of the recent crisis were sown when China was allowed to join the World Trade Organization in 2001 in the absence of adequate safeguards to curb its policy of promoting exports through currency manipulation. The Great Recession is an unwelcome consequence of the structural faults that were allowed to develop in the world economic system.

Although China and other Asian exporters play leading roles, asset bubbles typically manifest themselves through the disparate actions of a cast of characters so there are many players to point fingers at. Blame the U.S. home buyer for thinking house prices always grow to the sky. Blame the bankers who sold collateralized mortgage securities to every Tom, Dick and Harry and, worse yet, kept some of this dreadful paper on their own books creating systemic risk for the entire financial system. An especially large share of the blame must go to the credit rating agencies who gave their AAA blessing to so much of this flawed paper. Blame also the mortgage brokers who turned “liars’ loans” into the raw material of defective investments as well as the financial engineers who mispriced the risk in a host of derivatives simply because they had never read a history book on the Great Depression. And finally politicians should look in the mirror – they consistently supported housing policies and programs that made housing accessible to buyers who couldn’t afford a down-payment let alone a house.

Instead of pointing fingers at Bernanke, his critics should lead a round of applause for his leadership of the Fed in initiating the dramatic increase in monetary expansion in March 2009 that was clearly the catalyst for the recovery in the stock market and the turn-around of the U.S. economy, however tenuous and fragile it may be. In addition, given the immense challenge faced by the Fed in unwinding its massive monetary stimuli, Bernanke’s second term should be confirmed by the Senate and he and his colleagues should be allowed to concentrate on steering the economy to terra firma.

This is vital. The recession and stock market collapse of 1937-38 that occurred after the initial recovery from the Great Depression was in part triggered by the Federal Reserve’s increase in bank reserve requirements. We cannot afford Bernanke and the Fed to get it wrong this time around.

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Tags: Asian Countries, Bond Market, China, Culprit, Current Account Deficit, Emerging Markets, Fed Funds Rate, Federal Reserve, Federal Reserve Chairman, Global Savings Glut, Hitting Bottom, House Prices, Housing Bubble, Lehman, Monetary Policy, Mortgage Rates, Recession, Rectitude, Term Interest, Term Mortgage, Trade Imbalance, Witch Hunt
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Rosenberg: US Bear, Canada Bull - Setting the Record Straight

Friday, December 11th, 2009

In today’s Breakfast with Dave, David Rosenberg (Rosie), Chief Economist, Gluskin Sheff, sets the record straight about being his being bearish the US and bullish Canada.

SETTING THE RECORD STRAIGHT

I get this all the time; how can you be bearish on the U.S. economy and the stock market and also be calling for an elongated period of credit contraction and still be bullish on Canada and commodities?

Well, here goes:

The U.S. credit crunch began in July 2007 (it took the stock market three months to figure it out). The Fed cut the discount rate in August 2007 so it began to be very nervous. And the GDP recession began in December 2007.

When did the Canadian stock market peak? How about June 18, 2008, at 15,073, which is almost a year after the U.S. credit crunch began and six months after the onset of the U.S. recession. At the peak in the Canadian stock market, the S&P 500 had already sagged by almost 15% from its prior highs. The two markets did not hit their peaks at the same time, believe it or not.

And when did the Canadian dollar peak? How about May 21, 2008. Again, 10 months after the credit crunch began. Go figure.

Oil peaked at $145/bbl in July 2008, which is nearly a year after the beginning of the credit collapse and seven months after the U.S. recession began. The CRB also peaked in July - from the time the U.S. recession began to the peak seven months later, commodity prices were up 15%. I would therefore have to assume that there is a very loose connection between the U.S. economy and the performance of resource prices.

In fact, the U.S. was more than a half-year into an economic downturn and a full year into a credit collapse, and copper was still north of $4 a pound; wheat over $10 a bushel; and soybeans above $15 a bushel. At the time these commodities were hitting their highs, not only were U.S. Baa credit spreads in excess of 300bps (from 160bps at the height of the credit bubble) and S&P financials were down more than 40%! Again, go figure.

The reality is that during the first nine months of the U.S. recession, China’s GDP (its imperfections notwithstanding) was still expanding at an average annual rate of 8.9%; India by 6.7%; Brazil by 6.7% too; Russia by 4%; the Philippines by 3.7%; Korea and Thailand by around 2.5%. So the rest of the world did not exactly go to sleep just because the U.S. economy became comatose for a period of nine months. But when Lehman collapsed and global trade finance vanished and it became impossible to secure export credits, well then, it was vertical down everywhere.

So at least we know that it will take to pull the rug from underneath the commodity sector, the Canadian stock market and the Loonie - not just a U.S. recession; and not just a contraction in credit; but a major financial event that infects the entire world economy and trade flows. We certainly are not bullish on the outlook, but nor are we calling for a resumption of the awful destabilizing conditions that prevailed a year ago.

Meanwhile, despite the fact that the U.S. consumer cannot seem to revive without ongoing government life support; despite the fact that 130 U.S. banks have failed so far this year; despite the fact that consumers have had to liquidate their debt for each of the past nine months; despite the fact that 1 in 7 Americans with a mortgage are either in arrears or in the foreclosure process; and despite the fact that the U.S. has shed four million jobs through the first 10 months, commodity prices are up more than 30%, the Canadian stock market is up 27%, and the Canadian dollar is up 14%. Go figure.

Tags: 10 Months, Bbl, Bear Canada, Bushel, Canada, Canadian Dollar, Canadian Stock Market, Chief Economist, China, Commodities, Commodity Prices, Contraction, Crb, Credit Bubble, Credit Crunch, David Rosenberg, Economic Downturn, Emerging Markets, Half Year, India, Loose Connection, Market Peak, oil, Recession, Resource Prices, Rosie, Seven Months, Soybeans
Posted in Emerging Markets, India, Markets | No Comments »

No respite from recession for small businesses

Friday, December 11th, 2009

Despite the marked improvement in a number of credit spreads - including the TED spread, LIBOR-OIS spread, mortgage spreads, high-yield spreads and credit derivative indices - the credit situation for small businesses remains tight. The graph below shows the percentage indicating it was harder to obtain credit, as reported in the National Federation of Independent Business Optimism Survey, remains at crisis-type levels.

Source: Gluskin, Sheff & Associates - Breakfast with Dave, December 9, 2009.

The dilemma of small businesses is also illustrated by data from DiscoverCard Small Business Watch, showing the proportion of small businesses that have experienced cash-flow problems over the past 90 days.

Source: Chart of the Day, Clusterstock - The Business Insider, December 10, 2009.

Without a turnaround in the above, small businesses will not create jobs. And this is key to the overall economic recovery as small businesses are responsible for more than 60% of employment.

Tags: Amp, Business Insider, Business Optimism, Cash Flow Problems, Credit Situation, Dilemma, Economic Recovery, Federation Of Independent Business, Graph, Libor, National Federation Of Independent Business, Ois, Proportion, Recession, Respite From, Small Business, Small Businesses, Source Chart, Ted, Turnaround
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While pundits play “gotcha”, the unemployment situation improves

Friday, November 27th, 2009

This post is a guest contribution by Paul Kasriel* of The Northern Trust Company.

The best measure of the current condition of the labor market is the state unemployment insurance data. These data are not samples or surveys with guesstimates of how many new jobs were created by new businesses, but the head count of actual people standing in actual unemployment insurance lines. Too be sure, because a government entity is doing the counting, the first count is not always the most accurate count. But after four weeks of counting and recounting, the number that emerges is the one that remains for all times. The monthly labor reports from the Establishment and Household surveys get revised over and over, literally, for years.

Weekly data, which the state unemployment insurance data are, are inherently “noisy.” So, in order to more accurately measure the signal rather than the noise, it is prudent to average the state unemployment insurance data over rolling four-week periods. So, what are the state unemployment data signaling? They are indicating that the rate of firing has slowed significantly and that hiring could commence soon, if it already has not. As Chart 1 shows, the number of first-time claimants for state unemployment insurance on a four-week moving average basis has come down from a cycle peak of 659,000 in the four weeks ended April 4 to 497,000 in the four weeks ended November 21. Now, 497,000 new firings per week is nothing to brag about, but we can be thankful that it is coming down after the worst recession in the post-war era, a recession that started well before the stimulus program was instituted.

Although fewer people are now being fired, are any of those that have previously been fired being re-employed? Probably not yet, according to the continuing unemployment claims data, but the outlook for re-employment is improving. Because the past recession, which commenced in January 2008, well before the current stimulus program was initiated, was the longest recession in the post-war era, many of the people who have lost their jobs have been out of work so long that their regular unemployment insurance benefits expired. The current Congress and administration have implemented programs to extend unemployment insurance benefits to those who have exhausted their regular benefits. If we add these extended benefit claimants, which are not seasonally adjusted and need not be because there is unlikely to be any regular seasonal pattern to them, to seasonally-adjusted benefit claimants under the regular program, we see in Chart 1 that the four-week average of combined continuing unemployment claims appears to have peaked at about 9.9 million people and in the four weeks ended November 7 had moved ever so slightly lower to 9.8 million. Again, nothing to brag about but something to be thankful for. The combination of a decline in the number of firings per week and a slight drop in the total number of unemployment insurance beneficiaries suggests either that hiring has commenced in a small way or that it is about to.

How much of the improving labor market conditions can be directly attributed to the current stimulus program is impossible to say. For the current administration to make any claims along these lines opens it up to legitimate criticism. But what is possible to say is that about three months after the stimulus program was initiated, the overall economy began to emerge from the deepest and longest recession in the post-war era and now, about nine months after the initiation of the stimulus program, the labor market is showing incontrovertible signs of improving. Two of the biggest critics of the stimulus program with regard to job creation are two former chairs of the president’s Council of Economic Advisers (CEA), Michael Boskin from the Bush Sr. administration and Eddie Lazear from the Bush Jr. administration. Both of these presidential advisers appear to have gained policy wisdom after leaving their presidential advisory posts. For you see, during both Bush presidential terms, Senior and Junior, and under the tutelage of Messrs. Boskin and Lazear, the U.S. experienced the slowest job growth in the post-war era. If these guys are so smart with regard to job creation, why was job creation so weak when they were advising presidents?

*Paul Kasriel is Senior Vice President and Director of Economic Research at The Northern Trust Company. The accuracy of the Economic Research Department’s forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005. The accuracy of Paul’s 2008 economic forecast was ranked in the top five of The Wall Street Journal survey panel of economists. In January 2009, The Wall Street Journal and Forbes cited Paul as one of the few who identified early on the formation of the housing bubble and foresaw the economic and financial market havoc that would ensue after the bubble inevitably burst.

Source: Northern Trust - Daily Global Commentary, November 25, 2009.

Tags: Accurate Count, April 4, Claimants, Current Condition, Cycle Peak, Government Entity, Household Surveys, Insurance Data, Insurance Lines, New Businesses, New Jobs, Northern Trust Company, Paul Kasriel, Post War, Pundits, Recession, State Unemployment Insurance, Stimulus, Unemployment Claims, Unemployment Data
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Recession is Over - But has the Recovery Begun?

Friday, November 27th, 2009

On the topic of the magnitude of the economic recovery, David Rosenberg, Chief Economist and Strategist of Gluskin Sheff & Associates, provided the following interesting snippet:

“The recession in the US may be over, but what sort of recovery lies ahead remains in question. All we can say is that when looking at what is normal in the context of a post-recession rebound during the post-WWII era, the first quarter of growth is closer to 7.3% at an annual rate, not 2.8% as we just saw in the latest real GDP estimate - the median was 6.3%. To think that with the massive amount of stimulus - without it, growth would have flirted with 0% - this first quarter of positive growth was basically one-third of what is typical really says something.”

Food for thought indeed.

Source: David Rosenberg, Gluskin, Sheff & Associates - Breakfast with Dave, November 26, 2009.

Tags: Advertisement, Ahead, Amp, Chief Economist, David Rosenberg, Economic Recovery, Era, First Quarter, Food For Thought, GDP, Gluskin Sheff, Magnitude, Median, Real Gdp, Rebound, Recession, Snippet, Stimulus, Strategist, Wwii
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The Secret To Happiness According To Kids | Seven Ways to Create More Time In Your Day | Secrets to Long Life | How to Get Rid of Cold Sores

Friday, November 20th, 2009

For this weekend here are four articles you might find interesting. Enjoy and Have a Great Weekend!

Melina Bellows: The Secret To Happiness According To Kids
November-19-09, 11:29 AM

As the New York Times recently pointed out, many parents have found themselves out of work and at home–and it ain’t good. “For many families across the country, the greatest damage inflicted by this recession has not necessarily been financial, but emotional and psychological,” reports Michael Luo. “Children, especially, have become hidden casualties, often absorbing more than their parents are fully aware of.”

Seven Ways to Create More Time In Your Day
November-19-09, 11:41 AM

Do you ever feel like you have way too much time on your hands, and far too little work and life to fit into it? Unless you’re a teen on summer break, I reckon it’s unlikely! Most of us would love to have an extra couple of hours in each day. With two more hours, we could find time to exercise, to read some of the books that are gathering dust on our shelves, to spend time with the kids…

Don’t Overeat - Secrets to Long Life
November-20-099:36 AM

Ask Walter Breuning his secret for living as long as he has, and he’ll reply modestly, “There is no secret about it.” Breuning, who became the world’s oldest living man on his 113th birthday September 21, adds that kindness and common sense have played a crucial part to his longevity. Learn the six things that have allowed him to lead a long and happy life.

How to Get Rid of Cold Sores - Nutrition
November-20-0910:13 AM

Q: Are there any foods I can eat-or avoid-to help prevent cold sores?

Tags: Bellows, Common Sense, Gathering Dust, Happiness, Hidden Casualties, How To Get Rid Of Cold Sores, Kindness, Long And Happy Life, Longevity, Michael Luo, New York Times, Nutrition, Oldest Living Man, Parents, Psychological Reports, Read Books, Recession, Seven Ways, Shelves, Summer Break
Posted in DXD, Emerging Markets, Markets | No Comments »

Richard Koo: Lessons Learned from Japan’s Lost Decade

Monday, November 9th, 2009

Richard Koo, the world-renowned chief economist of Nomura Research Institute, discussed the lessons learned from Japan’s “lost decade” during a presentation at Center for Strategic and International Studies (CSIS). During his discussion, Koo suggested that government stimulus can play a key role in alleviating the problems of a balance sheet recession. Koo’s recent book, “The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession”, discusses these issues in greater detail.

Source: CSIS, October 29, 2009.

Tags: Advertisement, Balance Sheet, Center For Strategic And International Studies, Chief Economist, Decade, Holy Grail, Japan, Key Role, Lost World, Nomura Research Institute, Presentation, Recession, Richard Koo, Stimulus
Posted in Markets | No Comments »