(19 Dec) Thought we'd look at a few topics since the markets aren't doing much - nor likely will until, say, I don't know, say late January???
ZIRP
No, that's not the appropriate response to 'Zup, (i.e., "what's up?") It is, in the wonderful world of governmental acronyms, the short-hand for what the Fed did this week - the Zero Interest Rate Policy. This covers the Fed's moves in keeping the funds rate in a range between 0 and 0.25 percent. It is the code for the way the Fed is hoping to help manage our way out of this convoluted credit confusion that's keeping all the money on the sidelines.
GM
Well, the Prez did a handoff today to the crowd coming to town in January. By propping up the two weakest - GM and Chrysler - and, of course, their union, with some money and vaguely worded payback requirements, he postponed anyone having to look at the real issues until Q1 of 09, at least. I'm sure the bombast about to be forthcoming from the unions about the "need" to maintain their status quo, will be nothing less than variations on an ongoing song about how the country needs this 19th century technology in order to survive as a nation - or some such drivel.
Flawed and diseased systems can only be fixed or saved by major re-structuring. That's something that the car makers and their union are unwilling to face. I'm sure they'll do their best to aim the blame toward anywhere but themselves for the mess they're in.
In the meantime, anyone who is currently a stockholder in GM or Chrysler - and, to a lesser extent - Ford, is now just a lottery ticket holder. The odds that however many shares they own will still have any value at some point next year, gets more and more remote daily.
Dumb money and (the usually) smart money
Studies have shown - one of the great phrases of all time - that the first 30 minutes (I'd go so far as to say the first 60 minutes myself) of trading activity in the markets tend to be simply reactions to the news du jour, whether that be good or bad. This is an almost totally emotional response as what the pros call the "dumb money" jumps in, based solely on their initial reactions and not considering it more completely.
Additional studies show that trading activity in the last hour-ish is believed to be the counter to that early blast. It's thought to be more rational and based on the "smart money" reactions to future expectations. During this last hour, the more experienced traders will decide if they want to be long (own) a position. Having said that, traders tend to play it close to the vest on Fridays and before long holidays. They don't like the extra time exposure with no way to react to events. Interestingly, since the market bottom of October 10th, if you were to just focus on the activity in the last hour of trading, Fridays included, you would see something I believe to be quite positive.
Despite the lows made by the various indexes during November, the folks who trade in the last hour have been across the board buyers. Matter of fact, if you were to segment out that hour by itself, the markets would have had a much bigger gain than what the results of the day long trading has provided us.
I am convinced that these traders are giving us a window to the not altogether distant future. You can see yourself that the markets have not really been dropping very much in response to what the MSM criers have been trying to convince us is just more terrible news. Most of the drops have been following previous day gains in a process that used to be called profit-taking... (Still is, actually - it's just not mentioned when the news readers want to focus on bad stuff.) If the news were perceived by market pros to be as terrible as the telling, I can assure you we'd be somewhere close to a 500 Dow Jones by now.
Have a great weekend. We've got a couple feet of snow and more coming where I am, so I'll be busy...
Please come back for more antidotes to the conventional wisdom next week.
Friday, December 19, 2008
Wednesday, December 17, 2008
The Fed has gone as low as they can go - now what?
(17 Dec) The realization that the Federal Reserve simply did what it has been saying it would do for some time moved the stock and bond markets broadly higher on Tuesday. This is not new news, by any means.
Mr. Paulson, Mr. Bernancke and the crew on the Federal Open Market Committee are all bound and determined to "employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability." They added that, "weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time." In American, that means that the funds rate - that which the Federal Reserve loans money to banks - will probably be between zero and 0.25% for a while. So, we're kind of like Japan in that regard, though our economy and population is much different.
The Fed also announced that it will be adding to the program it already announced where it will be buying $100 billion of Fannie and Freddie agency debt and $500 billion of their mortgage-backed securities. So, there's plenty of money all around and the Feds are going to keep the presses running until there's some pretty strong evidence that the economy is growing.
What's it mean to me?
It's great news for banks - one reason their stocks shot up on Tuesday and helped the rest of the market too. How come? Well, here's how your friendly banker makes out on this.
They can "pay" their depositors a whole 25 or 50 basis points - there are 100 basis points in one per cent - while earning a very nice chunk on the difference (spread) between what they are paying and what they're lending at. Seen any 1/4% to 1/2% rate loans lately. No. That spread, essentially, flies right down to the bottom line.
So, the Fed is walking a tightrope here. On one hand, they're moving to restore confidence and get the economy going. That's understood and a good idea - I believe. The challenge is the long-term effect. Once the economy shows those recovery signs, they are going to have to move quickly to ensure that we don't get whipsawed by the effects of rapidly rising inflation. Interest rates then will have to be raised to put on the brakes - but not too hard. It will take a deft touch, to be sure.
What does this mean for housing?
In a report released on Tuesday - prior to the Fed announcement - we learned that housing starts are down 47% compared to a year ago and down over 72% from the peak in January, 2006. Lot more than the stock markets, even.
This is what the bottom looks like, when overtly bad news becomes maybe even good news. Consider this.
Housing starts are now at the lowest level in, at least, 50 years. Home builders have been working to clear out all excess inventory. Despite the reported drop in starts, home completions actually rose in November and have been staying in pretty much the same area for the past few months. The ratio of completions-to-starts is now the second highest on record as builders are have their crews work on finishing homes they already had underway.
Home builders may even continue to reduce starts for a while yet. The truth is that there isn't that much room left for major declines. Where can they decline from? In 2005, single-family housing starts peaked at a 1.75 million annual rate. Now, single-family starts are running at a 441,000 annual rate with only about 280,000 being built for sale . This isn't nearly enough to meet the demand for new homes, which continues to run at around 400,000 a year. So, it would seem that inventories will continue to fall - and increasingly more rapidly.
Mortgage rates have come down a lot and, with this Fed move, will probably continue to move lower. Even our friendly bankers will have to drop their mortgage rates as most 30 year fixed loans are priced in comparison with the 10 year US Treasury note. That note Tuesday closed at 2.27%. Says to me that the pent-up demand that's out there - whether for new or existing homes - is going to respond even more rapidly. Low rates and low prices are a pretty powerful combination to help get buyers out on the prowl again.
Summary
Some of my favorite readers of the tea leaves and such suggest that we'll see good improvement next year in the overall real estate markets and on the building side later in the year and into 2010.
As for the stock markets, be prepared for more backing and filling. One day does not a trend make. More to the point, there are a lot of folks who really want this negativity to continue - because they said it would or should - and will do their best to jawbone it down again.
Nonetheless, the values in tremendously well-run, profitable companies - like those in most segments of the real estate market - are right there, plain as day. And with interest rates where they are now, good quality taxable and tax-free bonds are almost a license to be like the Fed and just print your own supply of money.
Christmas may not just be coming - it's looking more and more like it's already here!
Mr. Paulson, Mr. Bernancke and the crew on the Federal Open Market Committee are all bound and determined to "employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability." They added that, "weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time." In American, that means that the funds rate - that which the Federal Reserve loans money to banks - will probably be between zero and 0.25% for a while. So, we're kind of like Japan in that regard, though our economy and population is much different.
The Fed also announced that it will be adding to the program it already announced where it will be buying $100 billion of Fannie and Freddie agency debt and $500 billion of their mortgage-backed securities. So, there's plenty of money all around and the Feds are going to keep the presses running until there's some pretty strong evidence that the economy is growing.
What's it mean to me?
It's great news for banks - one reason their stocks shot up on Tuesday and helped the rest of the market too. How come? Well, here's how your friendly banker makes out on this.
They can "pay" their depositors a whole 25 or 50 basis points - there are 100 basis points in one per cent - while earning a very nice chunk on the difference (spread) between what they are paying and what they're lending at. Seen any 1/4% to 1/2% rate loans lately. No. That spread, essentially, flies right down to the bottom line.
So, the Fed is walking a tightrope here. On one hand, they're moving to restore confidence and get the economy going. That's understood and a good idea - I believe. The challenge is the long-term effect. Once the economy shows those recovery signs, they are going to have to move quickly to ensure that we don't get whipsawed by the effects of rapidly rising inflation. Interest rates then will have to be raised to put on the brakes - but not too hard. It will take a deft touch, to be sure.
What does this mean for housing?
In a report released on Tuesday - prior to the Fed announcement - we learned that housing starts are down 47% compared to a year ago and down over 72% from the peak in January, 2006. Lot more than the stock markets, even.
This is what the bottom looks like, when overtly bad news becomes maybe even good news. Consider this.
Housing starts are now at the lowest level in, at least, 50 years. Home builders have been working to clear out all excess inventory. Despite the reported drop in starts, home completions actually rose in November and have been staying in pretty much the same area for the past few months. The ratio of completions-to-starts is now the second highest on record as builders are have their crews work on finishing homes they already had underway.
Home builders may even continue to reduce starts for a while yet. The truth is that there isn't that much room left for major declines. Where can they decline from? In 2005, single-family housing starts peaked at a 1.75 million annual rate. Now, single-family starts are running at a 441,000 annual rate with only about 280,000 being built for sale . This isn't nearly enough to meet the demand for new homes, which continues to run at around 400,000 a year. So, it would seem that inventories will continue to fall - and increasingly more rapidly.
Mortgage rates have come down a lot and, with this Fed move, will probably continue to move lower. Even our friendly bankers will have to drop their mortgage rates as most 30 year fixed loans are priced in comparison with the 10 year US Treasury note. That note Tuesday closed at 2.27%. Says to me that the pent-up demand that's out there - whether for new or existing homes - is going to respond even more rapidly. Low rates and low prices are a pretty powerful combination to help get buyers out on the prowl again.
Summary
Some of my favorite readers of the tea leaves and such suggest that we'll see good improvement next year in the overall real estate markets and on the building side later in the year and into 2010.
As for the stock markets, be prepared for more backing and filling. One day does not a trend make. More to the point, there are a lot of folks who really want this negativity to continue - because they said it would or should - and will do their best to jawbone it down again.
Nonetheless, the values in tremendously well-run, profitable companies - like those in most segments of the real estate market - are right there, plain as day. And with interest rates where they are now, good quality taxable and tax-free bonds are almost a license to be like the Fed and just print your own supply of money.
Christmas may not just be coming - it's looking more and more like it's already here!
Tuesday, December 16, 2008
What's driving the talk of production cuts by OPEC
(16 Dec) It's been over 30 years since what the 13 member OPEC crowd said had any real impact in global economics. One of the main reasons is that their individual members are notorious for their "enlightened self-interests" and, as a result, for saying one thing and then doing something else - especially when it comes to talking about how much each member is going to produce.
So, when their current figure head - sorry - Secretary-General announced on Monday (at the fourth OPEC meeting in as many months) that "OPEC should make a 'sizable' cut in oil production at this week’s meeting because there are excess global stockpiles," one needs to consider what brought them to this...other than that mere $100 per barrel drop in price since July, of course.
Oil meeting announcements
As the individual oil ministers arrived in Algeria for the meeting, there were comments like, "the fundamentals say a cut should be made” and " stocks (oil supplies on hand) are very high, we have about 100 million barrels of oversupply in the market, we have to take them out.” According to the gentleman from Kuwait, "global stockpile levels are at 57 days of forward cover, higher than their five-year average."
The OPEC president - not sure how he relates to the Secretary-General - said, "all the group’s members support an output cut at the meeting." On top of that, he opined that "he’s confident Russia, the biggest non-OPEC producer, will act to support the effort to revive prices." So, why all this locking of arms and unilateral raising of voices?
Current oil situation
The price for the nearest delivery month on the NY Mercantile Exchange closed Monday at $44.51 a barrel. As noted by the OPECers, oil is, in fact, backing up in the system. Given the ripple effect of a global slowdown, it's possible - possible - that oil could drop back down below $30 for a bit. It will go somewhat lower near-term if no prodo cuts are made - that's pretty certain.
So far, there have been no OPEC cutbacks of any significance to reflect the big drop in demand. That's why we're getting the back-up in supplies. An energy economist named Philip Verleger suggested that OPEC would have to "execute an astounding 7.7 million barrels per day" just to restore the supply-demand balance today. Global demand continues to drop by over 5 million barrels a day.
Non-OPEC countries are producing almost 50 million barrels of oil. OPEC currently produces roughly 31 million. Mr. Verleger says OPEC oil production "needs to drop by almost 25%, to somewhere under 24 million barrels a day."
I don't think so. Here's why.
A rock and a hard place for the producers
Oil demand will fall this year for the first time since 1983 as the global recession cuts fuel consumption, according to the International Energy Agency.
This has put the OPECers and Russia in a major economic Catch-22. In order to raise the price per barrel - assuming demand doesn't drop more - these cats have to cut back production, as Mr. Verleger says. So, assuming they did so, they then just sit back and wait for the excess supply to be used up and watch the prices slowly tick back up. Fat chance.
It's tough running a totalitarian state - they have current expenses, you see. They all need to continue to fund the strong man who's running the store, together with his various programs and local bailouts/payoffs/whatever. So, they still need to pump all they can today in order to keep their semblance of an economy running or...the natives might get restless. Hard to maintain power with no lights or food.
Imagine the "interesting" political dilemmas in Venezuela, Iran, Saudi and, yes, Russia, if cash flows continue to drop as they have been. How does a guy in their situation manage to maintain the status quo and increase cash flow when all you have is one thing to sell. On top of that, people all around the globe are looking for, and actively working on, ways to cut back on your product anyway. Our new president has a cake walk compared to those characters.
I don't know what a dilemma actually looks like but I do know that all of these guys are sitting on the horns of one - right now.
The real OPEC challenge
Under the heading of it's all perceptual, the OPEC Secretary-General stated that, "oil at $75 a barrel is 'satisfying' to producers and consumers." He added that, "prices below $70 may cut investment in production, risking a renewed supply crisis" and that "the scope of production cuts will decide how long it takes to remove surplus inventories from the market."
I don't know about you, but $75 buck oil doesn't make me satisfied. Where do you suppose he got that number?
My close, personal friends at Deutsche Bank may be able to provide some insight. They have done some studies about what price a barrel of oil needs to be in order for "certain countries" to be able to balance their budgets. You may find this quite instructive...
Below are the prices per barrel needed for those countries. Inflation has a whole new meaning, it would seem. Also, with the exception of that goofy guy in South America, I think you can see exactly who might find that $75 number to be so "satisfying." At today's prices, only one is in good shape.
Country 2000 2008 2009
Algeria 22 31 35
Iran 18 55 58
Kuwait 11 42 51
Nigeria 32 68 71
Russia ? ? 70
Saudi Arabia 23 55 62
UAE 5 42 51
Venezuela 34 94 97
No wonder these guys don't like capitalism...they just can't get the markets to do their bidding...
So, when their current figure head - sorry - Secretary-General announced on Monday (at the fourth OPEC meeting in as many months) that "OPEC should make a 'sizable' cut in oil production at this week’s meeting because there are excess global stockpiles," one needs to consider what brought them to this...other than that mere $100 per barrel drop in price since July, of course.
Oil meeting announcements
As the individual oil ministers arrived in Algeria for the meeting, there were comments like, "the fundamentals say a cut should be made” and " stocks (oil supplies on hand) are very high, we have about 100 million barrels of oversupply in the market, we have to take them out.” According to the gentleman from Kuwait, "global stockpile levels are at 57 days of forward cover, higher than their five-year average."
The OPEC president - not sure how he relates to the Secretary-General - said, "all the group’s members support an output cut at the meeting." On top of that, he opined that "he’s confident Russia, the biggest non-OPEC producer, will act to support the effort to revive prices." So, why all this locking of arms and unilateral raising of voices?
Current oil situation
The price for the nearest delivery month on the NY Mercantile Exchange closed Monday at $44.51 a barrel. As noted by the OPECers, oil is, in fact, backing up in the system. Given the ripple effect of a global slowdown, it's possible - possible - that oil could drop back down below $30 for a bit. It will go somewhat lower near-term if no prodo cuts are made - that's pretty certain.
So far, there have been no OPEC cutbacks of any significance to reflect the big drop in demand. That's why we're getting the back-up in supplies. An energy economist named Philip Verleger suggested that OPEC would have to "execute an astounding 7.7 million barrels per day" just to restore the supply-demand balance today. Global demand continues to drop by over 5 million barrels a day.
Non-OPEC countries are producing almost 50 million barrels of oil. OPEC currently produces roughly 31 million. Mr. Verleger says OPEC oil production "needs to drop by almost 25%, to somewhere under 24 million barrels a day."
I don't think so. Here's why.
A rock and a hard place for the producers
Oil demand will fall this year for the first time since 1983 as the global recession cuts fuel consumption, according to the International Energy Agency.
This has put the OPECers and Russia in a major economic Catch-22. In order to raise the price per barrel - assuming demand doesn't drop more - these cats have to cut back production, as Mr. Verleger says. So, assuming they did so, they then just sit back and wait for the excess supply to be used up and watch the prices slowly tick back up. Fat chance.
It's tough running a totalitarian state - they have current expenses, you see. They all need to continue to fund the strong man who's running the store, together with his various programs and local bailouts/payoffs/whatever. So, they still need to pump all they can today in order to keep their semblance of an economy running or...the natives might get restless. Hard to maintain power with no lights or food.
Imagine the "interesting" political dilemmas in Venezuela, Iran, Saudi and, yes, Russia, if cash flows continue to drop as they have been. How does a guy in their situation manage to maintain the status quo and increase cash flow when all you have is one thing to sell. On top of that, people all around the globe are looking for, and actively working on, ways to cut back on your product anyway. Our new president has a cake walk compared to those characters.
I don't know what a dilemma actually looks like but I do know that all of these guys are sitting on the horns of one - right now.
The real OPEC challenge
Under the heading of it's all perceptual, the OPEC Secretary-General stated that, "oil at $75 a barrel is 'satisfying' to producers and consumers." He added that, "prices below $70 may cut investment in production, risking a renewed supply crisis" and that "the scope of production cuts will decide how long it takes to remove surplus inventories from the market."
I don't know about you, but $75 buck oil doesn't make me satisfied. Where do you suppose he got that number?
My close, personal friends at Deutsche Bank may be able to provide some insight. They have done some studies about what price a barrel of oil needs to be in order for "certain countries" to be able to balance their budgets. You may find this quite instructive...
Below are the prices per barrel needed for those countries. Inflation has a whole new meaning, it would seem. Also, with the exception of that goofy guy in South America, I think you can see exactly who might find that $75 number to be so "satisfying." At today's prices, only one is in good shape.
Country 2000 2008 2009
Algeria 22 31 35
Iran 18 55 58
Kuwait 11 42 51
Nigeria 32 68 71
Russia ? ? 70
Saudi Arabia 23 55 62
UAE 5 42 51
Venezuela 34 94 97
No wonder these guys don't like capitalism...they just can't get the markets to do their bidding...
Monday, December 15, 2008
Potpourri
(15 Dec) A few bits and pieces for today's post. With so many topics to chose from, it's hard to just pick one...
Just what is an American car?
Based on all the caterwauling out of the UAW, the car makers and all their collective enablers this past week, you'd think we were chastising Mom and apple pie and all that and that the entire fabric of our society and economy is dependent upon those cats. Maybe 50 years ago, but today? Not so much.
"How you define an American car is one of the great conundrums of this world," said Dutch Mandel, the editor and associate publisher of AutoWeek. Seems to me that Dutch ought to know what he's talking about, so let's consider some facts he brought out.
In no particular order, they are: "fewer than half of the parts on some Big Three vehicles are made in the US. Looking at a Ford Fusion? It's assembled in Mexico. The Chrysler 300C is assembled in Canada, but its transmission is from Indiana; the brand's V-8 engine is made in Mexico." (I guess that makes them North American cars, technically.)
Here's a particularly good one; "the engines in the Chevrolet Equinox sport utility vehicle are from China." Tough to call that one an "American car."
The counter to all that is, according to Toyota, 80% of all the parts in their Camry, Sienna and Tundra models are made here in the US. Further, 56% of all the cars Toyota makes are sold in the US. Given its parts composition and the fact that the Camry is the best selling car in the US, maybe it too should be an "American" car.
My point is that this underscores the truth that we are in a global economy. People buy products of all types based on quality and value. Always have - always will. The point of origin really should be moot. Politics is what usually gets in the way of efficient markets - not just in this country...
Anyone bought an American TV lately? Guess when that industry faded away about 40 years ago, their unions just didn't have a big enough soap box to sing the blues from...
It's all about the velocity
This has nothing to do with fast cars - wherever they're made. In this instance, I'm referring to the velocity of money.
This is the rate at which money changes hands. The process by which an economy uses the same dollars multiple times to create economic benefit. Velocity is important for measuring the rate at which money in circulation is used for purchasing goods and services. This helps investors gauge how well the economy is doing. Higher velocity equal a generally strong economy and vice versa.
Let's say you go out and have dinner at a restaurant. The waiter then takes the money that you give him as a tip and uses it to pay for his dry cleaning. The dry cleaner then takes that money and pays to have his car washed. This process continues until the bill is eventually taken out of circulation. In many cases, bills are not removed from circulation until many decades of service. So, by the time this occurs, a single bill shall have created many times its actual face value in total purchases.
Now, what if you decide to go out less frequently. Odds are the waiter will reduce his trips to the cleaners. The cleaner probably won't then keep his car looking so good and so on.
This is how we got to where we are now. Not from going out for dinner less often but from delaying or eliminating purchases of many sizes. There is lots/tons/oodles of money in money markets, CDs, Treasuries and, yes, even the mattress. The Fed is in the process of pouring in even more with various programs, so the supply of money is definitely not an issue. The slowing of the velocity in which its turned over (spent) - something in control of individuals - has done much to prolong our current economic situation. Until people get over this fog of fear about whatever, we're going to just drift along.
The good news is that holiday sales have, so far, indicated that the velocity is showing signs of improvement as we are ahead of last year's spending pace. Now, if people can begin to look forward more than being influenced by the old news of events already having occurred, we will be in fine shape.
Remember what the Romans said. "Tu ne cede malis sed contra audentior ito" - Yield not to misfortunes, but advance all the more boldly against them.
Please return regularly to this blog for more antidotes for conventional "wisdom"...
Just what is an American car?
Based on all the caterwauling out of the UAW, the car makers and all their collective enablers this past week, you'd think we were chastising Mom and apple pie and all that and that the entire fabric of our society and economy is dependent upon those cats. Maybe 50 years ago, but today? Not so much.
"How you define an American car is one of the great conundrums of this world," said Dutch Mandel, the editor and associate publisher of AutoWeek. Seems to me that Dutch ought to know what he's talking about, so let's consider some facts he brought out.
In no particular order, they are: "fewer than half of the parts on some Big Three vehicles are made in the US. Looking at a Ford Fusion? It's assembled in Mexico. The Chrysler 300C is assembled in Canada, but its transmission is from Indiana; the brand's V-8 engine is made in Mexico." (I guess that makes them North American cars, technically.)
Here's a particularly good one; "the engines in the Chevrolet Equinox sport utility vehicle are from China." Tough to call that one an "American car."
The counter to all that is, according to Toyota, 80% of all the parts in their Camry, Sienna and Tundra models are made here in the US. Further, 56% of all the cars Toyota makes are sold in the US. Given its parts composition and the fact that the Camry is the best selling car in the US, maybe it too should be an "American" car.
My point is that this underscores the truth that we are in a global economy. People buy products of all types based on quality and value. Always have - always will. The point of origin really should be moot. Politics is what usually gets in the way of efficient markets - not just in this country...
Anyone bought an American TV lately? Guess when that industry faded away about 40 years ago, their unions just didn't have a big enough soap box to sing the blues from...
It's all about the velocity
This has nothing to do with fast cars - wherever they're made. In this instance, I'm referring to the velocity of money.
This is the rate at which money changes hands. The process by which an economy uses the same dollars multiple times to create economic benefit. Velocity is important for measuring the rate at which money in circulation is used for purchasing goods and services. This helps investors gauge how well the economy is doing. Higher velocity equal a generally strong economy and vice versa.
Let's say you go out and have dinner at a restaurant. The waiter then takes the money that you give him as a tip and uses it to pay for his dry cleaning. The dry cleaner then takes that money and pays to have his car washed. This process continues until the bill is eventually taken out of circulation. In many cases, bills are not removed from circulation until many decades of service. So, by the time this occurs, a single bill shall have created many times its actual face value in total purchases.
Now, what if you decide to go out less frequently. Odds are the waiter will reduce his trips to the cleaners. The cleaner probably won't then keep his car looking so good and so on.
This is how we got to where we are now. Not from going out for dinner less often but from delaying or eliminating purchases of many sizes. There is lots/tons/oodles of money in money markets, CDs, Treasuries and, yes, even the mattress. The Fed is in the process of pouring in even more with various programs, so the supply of money is definitely not an issue. The slowing of the velocity in which its turned over (spent) - something in control of individuals - has done much to prolong our current economic situation. Until people get over this fog of fear about whatever, we're going to just drift along.
The good news is that holiday sales have, so far, indicated that the velocity is showing signs of improvement as we are ahead of last year's spending pace. Now, if people can begin to look forward more than being influenced by the old news of events already having occurred, we will be in fine shape.
Remember what the Romans said. "Tu ne cede malis sed contra audentior ito" - Yield not to misfortunes, but advance all the more boldly against them.
Please return regularly to this blog for more antidotes for conventional "wisdom"...
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