Blog
Too much to ask.
October 17, 2011 20:17:25 | 0 comments

Just when some thought we were out of the woods, Angela Merkel and the Empire Manufacturing index reminded us that that it is not the case. In the last two weeks the stock market had its best run in a while: in the beginning of the month the headlines were stating that the indexes (Dow and S&P) were at the edge of the bear market, being, at that point, 20% off the April high. Two weeks later the indexes had erased the losses and in one week the Dow Jones raised 12%. What led to that rally? Nothing, really, except hopes for the best: hopes that the fact that the French and German Governments agreed to plan to have a plan would lead to a resolution of the European woes, hopes that the earning season would bring good news, hopes that the worst had passed. Today those hopes were dashed: Merkel asked the market to “temper” the expectations and the Empire manufacturing came at -8.48% while the market was expecting -4.0%. Industrial Production came in line with expectations at 0.2%, which is very low.  A week ago the Senate repealed Obama’s jobs bill, but it looks like nobody really ...

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Too big to stop!
October 13, 2011 20:33:17 | 2 comments

The Occupy Wall Street movement has become too big to ignore. Although it started on September 17th, it took a while for the media to even mention the events. While it is true that there is no clear proposal and no specific demands – or perhaps inconsistent ones – they are angry at the right people. We have heard that income inequality has grown in the United States and that the rich are not suffering that which the rest of the nation is being forced to endure. New York is the financial center of the United States and home of the Wall Street executives. New York is also the most unequal city in the United States, precisely because it is home of the financial market.  To know more about this issue, read: http://www.orionmagazine.org/index.php/articles/article/6470. To summarize some of the information in the article, in New York, the top 1% households have an average income of 3.7 million dollars and take 44% of the total income of New York. That one percent represents 3,000 families or 90,000 people. ...

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Good news!
September 29, 2011 13:20:33 | 1 comments

Good news are indicating for a good day for the markets: the German parliament approved the increase on the EFSF—the Eurozone’s (EZ's) financial rescue fund to 440 billion  of euros and the economic data for the American economy were better: jobless claims fell from 428.000 to 391.000 and the GDP from April to June grew 1.3%  better than the previous estimate of 1.0%. As the market goes up or down according to the news, today should be a good day. However I want to share the video below with you: http://www.huffingtonpost.com/2011/09/26/trader-to-bbc-goldman-sachs-goldman-sachs-rules-the-world_n_981658.html  

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Minister of Finance of 2011
September 27, 2011 14:41:00 | 1 comments

Yesterday I attended a luncheon at the Harvard Club in New York in honor of Deputy Prime Minister and Treasurer Wayne Swan. He just recently received the prestigious title of Minister of Finance of the year 2011 awarded by Euromoney. His presentation was very interesting. He showed that, contrary to what one could think, the performance of the Australian economy doesn’t come from luck, or merely from the fact that it has all the natural resources that China needs to its investments. It is the result of sound economic policies implemented by a government that although doesn’t have majority in the Congress ,is competent enough to have its proposals approved. It is also the result of economic reforms implemented in the last 20 to 30 years. Since the Minister had just come from Washington...

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Obama resurrected!
September 20, 2011 08:52:09 | 1 comments

Those who saw President Obama speech on the Rose Garden yesterday presenting his plan to cut the deficit saw a very different president, one that resembles the Obama that was elected in 2008 and was MIA. He was feisty and ready to pick a fight with the republicans. He clearly drew a line and said he was going to veto any proposal that cut Medicare without asking the wealthiest Americans to pay their share. He criticized the opponents and established the difference between him and the republicans. For those like me that have lost hope on Obama, it was a wonderful surprise. Republicans reacted as expected saying that what Obama was doing was class warfare. I didn’t think that in the 21st century someone would still use this term.It remains to be seemed if the resurrection had come in time to save Obama’s chances to be reelected. For the economy, unfortunately, there will be no practical result, as his plan for creating jobs will probably not be approved. for more: Read More »

Contagion
September 13, 2011 14:06:14 | 2 comments

No, this is not a post about the recent released movie, contagion. Unfortunately, as expected, the prospects for the Obama’s bill are not good. Yesterday, the details of the plan were released and as he showed how he intend to pay for it - cutting loopholes in the tax code, ending tax breaks for oil companies and investment fund managers- the republicans expressed their discontent. It is interesting to observe how the republicans think and act: when George W. Bush started two wars without proper funding- resulting on the deficits we see today- they didn’t oppose, they were accomplice of the “ great fiscal irresponsibility “ in the US so far. When Obama, conscientiously, shows where the funding is, they bark. They oppose for many reasons: there are some that believe that the money investment fund managers don’t pay in tax is good for the economy and increase employment. It is naïve as the only thing that really increases is their bank account. However, I think the majority just want Obama’s to fail. We will have to see how this will play in the next election, if Obama can win blami...

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Obama e Bernanke
September 09, 2011 12:46:39 | 4 comments

The market didn’t react well to Bernanke’s speech and the disappointment was expressed in the stock market, with stocks closing lower. I don’t see it that way: he said he thinks the legislators are playing and will continue to play an important role in determining the direction of the economy. I think he also wanted to wait to see what Obama was going to propose and how the Congress will react. If the right decisions are not made and the economy still stalls, the FED has tools and is willing to use them. That posture, although doesn’t affect the economy imediately, is very important. Obama was bolder than I expected and offered a package of more than 400 billion. If approved there will be positive consequences both on GDP and unemployment in 2012. The problem is that we don’t know if they will be approved and until then, I am not changing my 50%-50 % chance of a recession.  

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Recession or sub-par growth?
September 08, 2011 15:34:44 | 3 comments

The Roubini team now thinks there is a 60% chance of a recession in the developed economies, notably Europe and the US. It is worthy to remember that they forecasted the 2008 crisis and economic troubles in Europe earlier than the majority of the analysts. They believe that there is a 40% chance that growth remains subpar but economic policy could avoid a recession. On the other hand, if there is a delay in economic policy actions we could face a recession sooner than later. Although emerging markets continue to grow, they will also be affected. That in fact was the reasoning supporting the decision of the Brazilian central bank to reduce interest rates in the last meeting. In other words, it all depends on the actions the politicians will take, a point that we have insisted since our first newsletter.  

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Anticipation...
September 07, 2011 18:33:40 | 0 comments

is the best part of the party.....That applies to the upcoming speech of President Obama tomorrow. Reports indicate that he will announce 300 billion in infrastructure spending, tax cuts on payroll and other measures aiming to improve the economy. The stock market raised in anticipation of the news. I think this will be like the hurricane Irene, a nonevent. I don’t believe Obama will have the guts to be bold and even if he does, I don’t believe any measure will be approved by the Congress. The events of this week, starting with several speeches from  democrats and republicans  on Labor Day, plus the republican debate tonight, plus the presidential  speech tomorrow, indicates the beginning of the 2012 campaign. Unfortunately politicians are not interested in the improvement of the economy. That is why I think it will be a nonevent. I hope I am wrong!

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Hurricane Irene
August 28, 2011 17:24:58 | 1 comments

The arrival of Hurricane Irene in New York was a nonevent. For almost a week there was nothing else in the TV except for news about the impending storm. Maybe because the response to the blizzard in December was so criticized, Bloomberg took extra precautions and really prepared for the worst: 350,000 people evacuated their homes, Broadway shows were cancelled and so the public transportation. I looked through my window during the night on Saturday and Sunday morning but the only thing I saw was rain. In short, it was a nonevent. Tomorrow is supposed to be a sunny day and as I write, the sun is trying to come out. In the past week economic news were left behind: the gains on stock market or even Bernanke speech didn’t receive too much attention. It should have: Bernanke basically said that he is not going to do anything now because he doesn’t think it is necessary so he didn’t announce a QE3. He also, talked a lot more about fiscal policy than monetary policy. The new estimate from the Commerce Department showed a second quarter GDP growth of only 1.0%, down from its previous estimate of...

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