Saturday, March 24, 2012

Points of Public Interest

Ugly day in DC after a beautiful week, but more good NCAA basketball on TV. Good luck to those whose brackets still have a chance of winning!

  1. “The Current Models Have Nothing to Say”
Should we be surprised? Policy makers continue to employ models of an economy with no financial system.
  1. Economics without a blind-spot on debt
The aggregate level of debt, especially private, matters in
forecasting economic growth.
  1. Consumer Credit Growing at Highest Rate in Past Decade: Unhealthy and Unsustainable?
Stopping addictive habits is not easy, but extending those actions will only make the eventual adjustment more difficult and painful.
  1. The Japan debt disaster and China’s (non)rebalancing
Chinese consumers continue to increase savings in lieu of domestic consumption. Japan is attempting to rebuild its trade surplus, but which countries will allow their surplus to decline or deficit to increase? Global (and domestic) imbalances not addressed remain significant risks to the global economic outlook.
  1. A step in the right direction
Scientific exploration incorporating complex systems and networks continues to move our understanding of reality forward.
  1. It's not structural unemployment, it's the corporate saving glut
Businesses save instead of investing in labor when consumer demand is weak. Until policy focuses on improving the consumer balance sheet (e.g. debt write-downs), unemployment will remain high.
  1. Wrong vs Early – Contrarians Bet on Natural Gas
The best investors are often early and patient.
  1. The Real Problem with Microfoundations
Microeconomics is not especially sound in predicting all outcomes
  1. Principal writedowns of the day, mortgage edition
Positive for households but will Bank of America (and others) really accept the associated losses?
  1. Why Using P/E Ratios Can Be Misleading
In early 2009, at the market bottom, the P/E jumped to over 100 as profits plummeted. Using E/P corrects for this issue and shows the market is slightly overvalued currently.

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