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Markets Volatile, Economy Fine

September 10, 2015

As you woke up this morning, US stock market futures were down again. They say it’s because the Chinese stock market fell, and in spite of this every summary of Fed intentions that we read suggests a rate hike this year (possibly in September) is still very much on the table.

If we were the Fed, we would ignore China, too. Investors are allowing China to rent way more space in their brains than it deserves. In fact, some are allowing it to build an entire apartment building up there.

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This Correction is Technical, Not Fundamental

September 10, 2015

Well…what’s up? The Chicago Cubbies, that’s what. They’ve won 19 out of their last 23 games and have the fourth best record in Major League Baseball. Maybe hell really is about to freeze over. Cub’s fans have been waiting for a very long time.

The only people more giddy with anticipation are the stock market pundits looking for The Big Short – II. It’s an eagerly anticipated sequel of the Panic of 2008. The S&P 500 is tumbling again today, more than 10% below the peak in May.

The Pouting Pundits of Pessimism have been waiting for a long time for this. They haven’t waited as patiently as Cubs fans, but they’ve waited. In the past six and one-half years, every time the market has gone down sharply for a day or two, or a piece of economic data turned negative, the decibels have risen. Technical moves in stocks, or seasonal patterns in data, are turned into a fundamental reason to run for the hills with weapons and gold.

Continue Reading This Correction is Technical, Not Fundamental

2015: More Investment and Profits, Higher Rates, Dollar and Stocks

January 15, 2015

Contrary to popular opinion, business investment is a key factor behind the current recovery. Productive investments have boosted profits to record highs and, in turn, those profits have driven stock prices to record highs. They should continue to do so.  Analysts have missed this surge in investment and profits for three reasons. First, many look at “nominal investment” – before adjustment for inflation. Second, spending on “structures” has been very weak. And, third, many analysts confuse real GDP growth with the health of corporate America.  It is true that real GDP (inflation-adjusted gross domestic product) has increased at an annual rate of just 2.3% since bottoming in Q2-2009. It is also true that nominal investment is lower today, at 12.8% of GDP, than it was in 2008 when it was 13.5% of GDP.  But, tablets and phones that cost a few hundred dollars today have capabilities that cost millions just 20 years ago. Shale oil drillers are successful on most of the wells they drill versus much lower percentages of success in the days of wildcatters. 3-D printing reduces prices, while increasing flexibility in production. Low cost apps, websites, and the cloud undermine the need for brick and mortar investment.

Continue Reading 2015: More Investment and Profits, Higher Rates, Dollar and Stocks

A View of Health Care from Around the World

August 13, 2014

The United States health-care system has been impacted by the Affordable Care Act (ACA). But how does delivery of health care in the United States compare to that of other nations? And where does the United States rank with respect to the cost of health care per capita and as a percentage of gross domestic product?

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