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Posts Tagged ‘Bloomberg’

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Bloomberg has had an interesting progression over the past 6 months on how Milton Friedman’s legacy is slowly diminishing – then again, who’s isn’t?

Here’s the first article, which quarrels with the principles of laissez-faire government, which were made possible through Friedman’s free market ideology – the belief that unadulterated by government policies, markets will determine the perfect prices and interest rates, based on supply and demand.

The article also goes as far as assigning Friedman some blame for the decay of our financial system:

In 1972, Friedman helped persuade U.S. Treasury Secretary George Shultz, former dean of Chicago’s business school, to approve the first financial futures contracts in foreign currencies.

Such derivatives grew more complex after Chicago economists created the mathematical formulas to price them, helping spawn a $683 trillion market that’s proved to be a root of today’s financial system breakdown.

The follow up article – written yesterday – makes some bolder conclusions:

After a three-decade run, the free-market philosophies of Friedman that shaped U.S. policy are being eclipsed by the pro- government ideas of Tobin, the late Yale economist and Nobel laureate who brought John Maynard Keynes into the modern era.

I generally like Bloomberg’s exclusives, since they’re always thought provoking. In this instance, I also agree with them; however I don’t necessarily believe that Wall Street has given up/will ever give up on Friedman Economics – it worked too well for them for 30 years.

I’m also not seeing this idea catch on anywhere else in the media, nor have I seen anyone blame Friedman the way Bloomberg does (most people are still focused on Alan Greenspan and Fannie Mae/Freddie Mac, neglecting the fact that “deregulation” is almost synonymous with the name “Milton Friedman”).

It would be naive to think we’ll have a paradigm shift back towards the ideals of Keynes/Galbraith (as these articles seem to suggest), since we haven’t yet identified the architect of the problem on a broad enough level – although I think Friedman is a good place to focus a lot of our criticism.

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“They must not fail,” McCain said during a campaign stop in Belleville, Michigan, today. Fannie Mae and Freddie Mac “are vital to Americans’ ability to own their own homes,”

– Bloomberg

Thanks John, for that very thought provoking bit of information…I guess the fact that you’ve acknowledged the financial crisis is a quantum leap from your continual gibberish about the war though. God knows you’ll need Mitt Romney as your vice president if that’s the most you can say about America’s current economic condition, especially if Barack Obama elects New York Mayor Bloomberg as his running mate. (That may be wishful thinking on my part, but I don’t know of another potential candidate who is more qualified in making decisions regarding our economy).

The markets, in addition to the current craziness, should get even more interesting once the election season comes around. While I think the financial issues will temper by November, the most obvious vulnerability lies within the national defense sector (Lockheed-Martin, L-3 Communications) because should Obama emerge as the favorite, he would end the war in Iraq (or so he says).

I will delve further into these issues in a later post, I’m getting a little busy.

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This is some market, but as Warren Buffet says, “when everyone gets scared, I get greedy.”

That is not to say that this downturn is over, but something tells me we will have a relief rally next week. Just a hunch, but it will be the end of a REALLY bad month (down 8.5%), it’s a short trading week before America’s holiday celebrating our independence, a light earnings week, and the market has responded to every bottom of this year with a rally.

That said, Bloomberg pointed out an interesting statistic today:

The Chicago Board Options Exchange Volatility Index, or VIX, rose 13 percent to 23.93 yesterday, leaving it 26 percent below the 2008 high. The Dow is poised for the worst June since the Great Depression after record oil prices and credit-market writedowns sent the average to its biggest drop in three weeks.

The VIX is a gage for the market’s volatility, and we have not had that much of it relative to prior short-term bottoms. I am not enough of a statistician to interpret what that means for today’s market but Cramer came out with a surprisingly good insight:

The negativity coming into today’s session is as thick as I can recall nearing most short-term bottoms. The issue is there is not enough fearout there. Despite the consensus, which obviously creates a need for lower prices before it is worth buying, there isn’t a big spike in the VIX, there isn’t a gap down, or a crescendo of selling. There isn’t even any volume. So while the bearishness is real thick, the selling isn’t. (Bloomberghad an excellent piece on this yesterday, noting how much lower the VIX was than at other bottoms.)

There sure is a lot of gloom and doom out there.

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