Germany Making Greece an Example to Euro Zone Nations

Oct 4, 2011, 2:19 pm EST

So far, 2011 has unfolded like a crash course in ancient history. First, the Mubarak Dynasty in Egypt fell, then the civilization of Greece collapsed. Now, the Huns from Germany threaten the Roman Empire.

Most analysts already have priced a collapse of Greek sovereign debt into the price of the euro and European stocks. But Greece is a relatively small economy. Italy is a different story. European banks are loaded with Italian debt, so European stock markets will remain very sensitive to the fate of Italy.

The good news is that, last week, German Chancellor Angela Merkel’s ruling coalition overwhelmingly voted in favor of a bill to boost the European Financial Stability Facility, effectively forestalling the sovereign debt crisis for now. At home, German aid to Greece is not politically popular, but the whole idea behind the creation of the euro in the 1990s came from Germany, which placed severe budget constraints on member nations. That means Germany will continue to help those countries that pledge austerity and discipline. Read 

Financial Professionals Around the World Give Obama a Big Thumbs-Down

Oct 3, 2011, 2:18 pm EST

It’s no secret that Americans have grown increasingly disgruntled with President Barack Obama. Less than half of the country (42.8%) approves of his job as president and 45.3% of Americans view him unfavorably. These numbers reflect random samples of ordinary Americans. As the Bloomberg Global Poll makes clear, financial professionals worldwide have perhaps an even more negative assessment of Obama. A majority (57%) of Bloomberg’s customers that were surveyed have an unfavorable view of the president; an even larger majority (74%) of these folks are pessimistic about Obama’s policies as they relate to the investment climate of the United States.

In an effort to right his reputation and jump-start the economy, Obama has been on a tear around the country trying to drum up popular support for his jobs bill, the American Jobs Act. The proposed legislation offers, among many things, tax cuts for both workers and employers, federal dollars for school modernization and a National Infrastructure Bank. Obama has said he would pay for these programs by increasing taxes on households making more than $250,000 and promoting the “Buffett Rule,” which would increase taxes on people who earn more than $1 million per year. Note: Don’t confuse these people with the mega- or ultra-rich, as Warren Buffett himself clarified.

It stands to reason that Bloomberg’s savvy insiders would be generally unsupportive of the president’s policy proposals to create jobs and generate revenue to trim our massive deficit, given the 74% who are pessimistic about his policies. But no, in fact, most of the respondents favored the idea of a millionaires tax and believed infrastructure spending would significantly reduce the unemployment rate in the U.S. Read 

Federal Spending Cuts Set to Hit a Down Economy

Sep 29, 2011, 12:38 pm EST

President Barack Obama and House Speaker John Boehner seemed to be on the verge of a fiscal compromise at several points this summer. Obama signaled he might be willing to accept more cuts, and Boehner signaled “revenues” might be negotiable (although he later denied such an unorthodox position).

As of last week, Obama said unequivocally (no more Mr. Nice Guy) that he wouldn’t sign any legislation that didn’t raise taxes on the wealthiest Americans. Boehner, of course, has clearly instructed the Republicans on the “super committee” to ignore such crazy talk and work only on cutting spending.

Truthfully, we can’t know whether or not the super committee will add revenues to the legislation or call Obama’s bluff and pass a simple spending bill. But, thanks to the bizarre debt-ceiling compromise this summer, we are sure to have at least $1.2 trillion in spending cuts either way. Read 

Uncle Sam Has a Grudge Against These Industries

Sep 28, 2011, 9:47 am EST

On Friday, Sept. 23, executives from bankrupt solar firm Solyndra pleaded the Fifth in front of a Congressional oversight committee. The committee sought to probe how the company squandered a $535 million loan guarantee from the Department of Energy right before imploding. The episode has been one big embarrassment for President Barack Obama, as last year he touted Solyndra as a perfect example of a clean energy firm capable of creating high-tech, high-paying “green jobs.”

The Solyndra incident is a perfect example of government support for a company and/or industry gone wrong. It also clearly shows the damage that can be levied on taxpayers when the government tries to pick winners and fails. But perhaps more pernicious than the consequences of government support for a loser is when the government seemingly carries out a crusade against specific sectors of the economy, and even against specific companies.

Reviled and vilified industries such as big oil, tobacco and even restaurants all have come under scrutiny by the government in recent months, despite the fact that they sell legal products that consumers demand. Read 

The Score on Europe, Debt and the U.S.

Sep 27, 2011, 1:39 pm EST

Being an investor used to be so easy. Don’t you pine for the days of studying P&L statements, creating valuation spreadsheets, assessing management and determining the likelihood of success of a cool gadget or product or marketing scheme?

Now everything has gone “macro,” with the success of virtually every sector tied to your ability to forecast political events — not economic or financial events.

Since modeling politicians is a lot harder than modeling financials, this might be one of the toughest environments ever seen. My biggest complaint is that Europe seems unwilling to act with the sense of urgency that befits the current situation, with Greek debts due and potential knock-on contagion effects very real, no matter what the optimists tell you on television. Read 

Why Herman Cain Will Struggle to Win the Black Vote

Sep 27, 2011, 11:16 am EST

Richard Young engages in a thought experiment about Herman Cain winning the Republican primary (still a long shot) and going on to challenge President Barack Obama in the 2012 general election. He concludes that Cain can safely split the black vote with Obama. Two African-Americans running against each other for the American presidency would be unprecedented and probably make traditional political analyses moot. However, let us note the following impediments to Cain’s victory among blacks in the 2012 election:

1. Blacks vote overwhelmingly Democratic and have for decades. It’s a big leap to assume that you will see about half of them switch party affiliation.

Read 

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