With the debt deal concluded, you might have expected global markets to have rallied. There is a growing consensus among the investing class that a double-dip recession is imminent and that, as a result, stocks are in for tough times — and may even be poised for a crash.
The markets have been sinking steadily, fed on a diet of weak economic data — GDP growth in the second quarter came in at an anemic 1.3%. Yet, in the past week, company after company has announced stellar earnings — none more stellar than Starbucks, Amazon and Expedia.
Wednesday’s plunge in the markets signaled that the impasse over the debt ceiling ,if it continues, will eventually trigger a substantial market sell-off. That belief itself should have been a warning sign; when investors dismiss what is known as “tail risk,” only trouble ensues.
s the tortuous debt ceiling debate continues, with plot twists that even the most diehard political junkies are having a hard time keeping straight, one aspect continues to bedevil the process: the staunch refusal of both President Obama and Senate Majority Leader Harry Reid to accept a short-term deal.
In the nearly 15 years that I’ve been writing about markets and managing money, there’s been a dramatic shift that has gotten only marginal notice. We’ve gone from having an optimism surplus to an optimism deficit. That may be a greater problem than the budget surplus becoming a deficit.
As Washington continues to skate perilously close to the economic abyss, 3,000 miles away in Cupertino, California, this week Apple released its results for the second quarter. To no one’s surprise but to almost universal amazement, Apple managed to sell more iPads (9.3 million) and iPhones (20.3 million) than ever before. Quarterly revenues of $28 billion were up more than 80% from last year, and profits were up 125%.
On Friday, I posted a piece on the U.S. debt and how we are creating a false crisis given current interest rates and our ability to manage that. Judging from the responses, you would have thought I was penning a piece in defense of eugenics. OK, the online world is not known for its sobriety, but the heated reaction to my post is typical of the current debate about debt.
In case you haven’t noticed, Washington is currently consumed in an acrimonious debate over whether to raise the debt ceiling. There is no agreement about whether to do so or how, but both parties appear to accept the logic that the United States is suffering from an unacceptably high level of government debt and that further debt will doom the U.S. to generations of decline. Judging by polling data, large swaths of the country agree. Nonetheless, that consensus is wrong.
Over the past year, story after story has touted the rebirth of the U.S. auto industry. Ford Motors, which unlike General Motors and Chrysler survived the 2008-2009 crisis without taking bailout money from the federal government, has enjoyed a string of positive reviews, and its earnings and revenue are higher than at any point since the 1990s.
Listening to an interview with an Iranian-American journalist about being detained in jails in Damascus and Tehran, I was struck by the contrast between the extremis of those experiences and the daily drumbeat of high emotions about money.
The jobs report was bad enough. But it’s hardly the only indication of continuing trouble for the U.S. economy. Released at the end of June, U.S. Bancorp’s annual survey of nearly 3,000 small businesses confirmed what many people already know: the recession that began in 2008 never ended for vast swaths of the U.S.
One of America’s favorite pastimes is to play the “what would the Founding Fathers say” game. Just pick an issue du jour, and ask the question. Given that today’s world (Google, Twitter, television) is probably way beyond even the imagination of the 18th-century designers of the Constitution, the game usually says more about today’s partisan fights than about the Founders.
This week, I’ve been treated to a visceral experience of the upside of a downside. Driving with my family through the Tetons and Yellowstone National Park, I have sat behind endless lines of RVs and assorted SUVs depositing masses of people who are swarming the parks, descending on Old Faithful concession stands, and snapping endless digital photos to be sent over Androids, iPhones and even Blackberries.
Cars 2 opened to lukewarm reviews and a smash box office, taking in $66 million domestically and another $42 million internationally during its opening weekend. The film’s ability to transcend unusually tepid reviews is clearly a testament to the power of the Pixar brand (another gift of Steve Jobs), which has generated a remarkable series of animated hits stemming from the Toy Story franchise that began in 1995 and continuing through gems like Wall-E and The Incredibles, as well as the first Cars. But this film also carries a loud and unmistakable message about alternative energy, automobiles and their shared future.
Today we were treated to the second installment of the Federal Reserve’s new policy of openness with Chairman Ben Bernanke’s press conference. That followed on the heels of the statement by the Fed Open Market Committee about interest rates and the economy.
The latest out of Wall Street-land is a warning by analysts at Citibank that profits at Goldman Sachs and Morgan Stanley (and to a lesser degree at other banks as well) will show a sharp contraction for the second quarter of 2011. Leaving aside the inside baseball nature of one Wall Street firm issuing a negative report on other firms, the decline in profitability stands in contrast to the widespread perception that banks and investment houses are booming while the rest of the economy is suffering. Or does it?
The past few weeks in financial-land have been dominated by two combustible fears: 1.) that this time Greece really will default on its debts and plunge the Eurozone into chaos; and 2.) that this time China really will hit the brakes and bring much of global economic activity down with it. One of these fears alone would be enough to roil markets. Together they have been a potent and toxic mix.
On Thursday, the maker of the once-ubiquitous Blackberry devices, Research in Motion, reported its quarterly results. They were not pretty.
Today, IBM officially marks its 100th anniversary. But the company today bears remarkably little resemblance either to the sleepy Computer Tabulating Recording Corporation that was formed on June 16, 1911, or to the more iconic International Business Machines (renamed to one-up then rival National Cash Register in the 1920s) that was one of the dominant companies during the brief but spectacular American century.
At the start of the week, Jeff Immelt, the CEO of GE and the head of President Obama’s task force on job creation, released an interim report on plans to boost employment in the U.S. The reactions have been relatively predictable. Immelt himself has come in for criticism — fair or not — as a corporate titan who has overseen job creation abroad and job destruction at home, and there has been no shortage of voices pointing to GE’s global profits that have not been subject to American taxation.
There was something dramatic and striking about the Dallas Mavericks’ victory over the Miami Heat in the NBA Finals on Sunday. No, it wasn’t the caliber of play – which was high – nor the sight of the vaunted Miami “Dream Team” falling just short of their pre-ordained championship season. Rather, it was the stark contrast of the multimillionaire players of a multi-billion dollar league arousing not the animosity but the passion of millions of fans who are almost certainly not faring as well.
Headlines were replete this week with talk of an imminent slowdown of the global economy. Combined with the pallid recovery of the United States and continued waves of debt crises in Europe, a lull in activity from Brazil to India to China would be trouble indeed.
As global markets go through another week of selling and anxiousness, a new record was set yesterday: the Chinese yuan – that much maligned, politically charged national currency – hit a record high against the U.S. dollar.
It now appears that Greece will once again be bailed out of its financial morass. A year ago at this time, the world was roiled by the prospect of Greece defaulting on its considerable debts, and only the reluctant decision of the leading members of the European Union – Germany most prominently among them – led to more than $100 billion in loans extended to the Greek government.
If the economic news wasn’t bad enough after the release of yet another anemic jobs report, the highly influential global ratings agency Moody’s just announced that it was contemplating a downgrade of the U.S.’s credit rating.
Another day, another market plunge. Yesterday was notably sharp, with all major indices declining more than 2% and getting worse as the day wore on. The story du jour – and it is an axiom of market declines that there must be a story that goes with it – was that the sell-off was triggered be a toxic combination of weak U.S. economic data, more concerns about Greece and whether it would default on its debts and bring down the Eurozone
More than two years after the near-meltdown of the global financial system, “the economy” remains the story of our day.Yes, with the United States involved in wars in Afghanistan and Libya, and continued enmeshment in Iraq, traditional foreign affairs matter greatly. And yes, with the presidential elections season starting its slow-burn, politics have a central seat at the tabl
The just-released monthly inflation report showed that prices for most goods eased a bit. The exception of course is oil, and even though oil prices globally have declined in recent weeks, most Americans are paying ever more for gasoline even as inflation overall remains statistically tame.
Yesterday, Ben Bernanke departed from the silent, opaque tradition of the Federal Reserve and held a press conference. The event attracted considerable attention, for its novelty as much as for its substance. But those hoping that Bernanke would do his best imitation of Willy Wonka and reveal hidden facets of humor, complexity and charisma were, to say the least, disappointed.
Tweets from @ZacharyKarabell
Refusing to attend a vote and fleeing the state because you are in the minority and will lose is a cowardly and ant… https://t.co/ERcpjBW3LV
Better to do it themselves: https://t.co/EzKjfcdoJV
You often need to work w people who revile you and who you don’t like. Nixon and a very hostile congress passed muc… https://t.co/TsvrMOYBnA
It was a. Very. Serious. Photo https://t.co/edT9d1k82r