Los Angeles Times (September 12)
In the U.S. a fiscal cliff is approaching when tax cuts expire on January 1, government spending is scheduled for automatic reduction and limits on government borrowing will be reached. “The message from the analysts at Moody’s and S&P is that lawmakers can’t keep putting off the day of reckoning. Moody’s set a reasonable condition for avoiding a downgrade: adopting policies that stabilize, then reduce the debt as a percentage of the U.S. economy over the next several years.”
Barron’s (June 11)
“The second half of the year promises to be an adventure.” The 10 financial wizards of Barron’s Roundtable “expect the Federal Reserve to launch a third round of quantitative easing, or Treasury-bond purchases, in an effort to juice the economy and rouse the somnolent job market. But they don’t expect that to do the trick.” Moreover, they harbor concerns over the world financial system, given the massive debt held by industrialized nations. To weather the storm, “the consensus among our experts is to stick with companies that have good businesses, savvy managers, healthy balance sheets, and low valuations. Preferably, they also pay dividends and buy back shares.”
Bloomberg (June 8)
“The Fed ought to get off the fence…. Bernanke and his colleagues should decide on a new program of monetary easing…. We think the case is stacked pretty strongly in favor of more quantitative easing— the Fed’s unorthodox (and controversial) method for driving long-term interest rates lower by buying government debt.”
Tags: Bernanke, Debt, Fed, Interest rates, Quantitative easing, U.S.
Economist (May 26)
“Despite a recent slowdown, the world’s second-biggest economy is more resilient than its critics think.” China is not dependent on foreign borrowing, enjoys a high saving rate (51% of GDP), has highly liquid banks, and very low central government debt (25% of GDP). “China plainly has enough fiscal space to recapitalise any bank threatened with insolvency. That space also gives the government room to stimulate growth again, should exports to Europe fall off a cliff.”
Wall Street Journal (April 8)
As a group, S&P companies have gained efficiency while rebounding to pre-recession levels. “S&P 500 companies have become more efficient—and more productive. In 2007, the companies generated an average of $378,000 in revenue for every employee on their payrolls. Last year, that figure rose to $420,000.” These same companies have also increased capital expenditures, reduced debt and increased cash on hand.
As a group, S&P companies have gained efficiency while rebounding to pre-recession levels. “S&P 500 companies have become more efficient—and more productive. In 2007, the companies generated an average of $378,000 in revenue for every employee on their payrolls. Last year, that figure rose to $420,000.” These same companies have also increased capital expenditures, reduced debt and increased cash on hand.
Tags: CAPEX, Cash, Debt, Efficiency, Productivity, Recession, S&P
Financial Times (February 23, 2012)Financial Times (February 23, 2012)
“Japan has somehow managed to creep by with its problems untouched.” Will Japan’s “happy depression” end as the Greek crisis settles down? Jim O’Neil of Goldman Sachs believes there’s reason to worry. “Japan’s outstanding debt to gross domestic product stands at a whopping 230 per cent and makes Greece’s latest 120 per cent by 2020 target seem like a picnic by comparison.”“Japan has somehow managed to creep by with its problems untouched.” Will Japan’s “happy depression” end as the Greek crisis settles down? Jim O’Neil of Goldman Sachs believes there’s reason to worry. “Japan’s outstanding debt to gross domestic product stands at a whopping 230 per cent and makes Greece’s latest 120 per cent by 2020 target seem like a picnic by comparison.”
Wall Street Journal (February 14, 2012)
“Athens has agreed to carve €3.3 billion out of this year’s budget (including €300 million out of pensions), slash the minimum wage by 22%, and eliminate 150,000 government jobs by 2015.” This will not put out the fires and rioting. The Greek crisis will continue. “The larger question is whether the rest of Europe and America will learn from Greece’s chaos before they experience the same fate.”
Washington Post (January 31, 2012)
The Post urges Congress to deal with the mounting long-term debt problem without jeopardizing the economy. “The smart path would deal with the debt in a way that is gradual, balanced between spending cuts and revenue increases and intelligently targeted rather than the current law’s bludgeon.” Trying to reduce the debt too quickly would be “dumb” and cause the economy to crash. Simply ignoring the debt problem, however, would be “dangerous.”
Wall Street Journal (November 30)
Germany is unfairly getting blamed for the Eurozone crisis. “The reality is that the Germans—along with the Dutch and the Finns—are the rare Europeans who understand that saving the euro requires more than a blank check. It requires a new political commitment to better economic policy…. Money alone won’t solve Europe’s more fundamental debt and growth problem.”
Germany is unfairly getting blamed for the Eurozone crisis. “The reality is that the Germans—along with the Dutch and the Finns—are the rare Europeans who understand that saving the euro requires more than a blank check. It requires a new political commitment to better economic policy…. Money alone won’t solve Europe’s more fundamental debt and growth problem.”
Investment Week (November 10)
Famed investor Jim Rogers predicts the next crisis will be worse than that of 2008. “In 2002 it was bad, in 2008 it was worse and 2012 or 2013 is going to be worse still—be careful.” He points his finger at non-sustainable debt levels which have left countries with few options for increasing economic stimulus. “The world has been spending staggering amounts of money it does not have for a few decades now, and it is all coming home to roost.”
