I recently sat down with Wallace Forbes to discuss investing in China and other emerging markets—the interview is now up on Forbes.com. The text of the article follows below: Using ETFs To Play China Wallace Forbes 03.01.10, 5:00 PM ET John Rutledge, founder and chairman of Rutledge Capital, discusses with Wallace Forbes investments in China and other emerging markets. Rutledge: Needless to say, this is a tricky time for people trying to forecast the economy since there are so many policy changes in the wind. I think what we’ve got to realize is that last year, 2009, was really dominated by an undervalued or broken market that came back to life. In March 2009 we had the opportunity to buy a dollar of equities for 50 cents,... [Read more]
The Reid Bill ($15B) is better than either the December House bill ($154B) or the Baucus/Grassley Senate Finance bill ($85B) simply because it has a smaller price tag. But, like the other bills, it will have very little impact on jobs. The central piece of the bill is the temporary payroll tax cut (employer portion 6.2% of the 12.4% payroll tax) for the rest of 2010 if a company hires a person who signs a statement they have been unemployed for at least 60 days, with a $1000 bonus if the worker is still hired at end of one year. The 60 day unemployed requirement is both troubling and counterproductive. It creates tremendous incentives for fraud and abuse. It will force the government to create an enforcement mechanism, potentially going after... [Read more]
Fed discount rate yesterday not a big policy event and good to do. It is part of their sweeping up exercise, trying to encourage banks to repay some of the $1 trillion (1100%) increase in bank reserves they added to banking system during crisis a year ago. You can read the Fed’s press release here. Worth noting–the quarter point increase, times today’s reserve base, will reduce bank earnings by about $3 billion over 12 months. It is imperative that the Fed extracts those additional l reserves this year before they show up as inflation down the road. Left as is, the reserve increase is more than enough to than double the US price level. What they are trying to do is a little like putting a genie back in a bottle. I don’t... [Read more]
You have to see this. My friend Mark Swenson, Arizona Deputy Treasurer, has shown me their new website. Arizona State Treasurer, Dean Martin, has put Arizona’s financial system online for all to see. Dean’s purpose was to provide Arizona taxpayers with a searchable, user-friendly website that discloses all revenues and expenditures for Arizona State government. The site has daily cash balances the the entire state government (the figure above is from today’s front page) plus detailed information on all outlays and revenue sources as you can see below. It is the most transparent government site of any kind I have ever seen. Now all we need is to get Washington to do the same. And Mr. Geithner, if you are going to say we can’t... [Read more]
Whether China will continue to own/buy our bonds or not is a story that shows up in the media every few months. It makes good copy but most of the people who write about it have little direct knowledge of the situation. Bottom line: China is not going to stop buying U.S. securities but they have become our biggest creditor–too big to ignore what they are thinking. I have spoken with the Chinese leaders personally about this issue in recent months. They are concerned that the U.S. government is spending too much money, that our budget deficits are too big, that our debt is growing too fast, and especially that the Fed has printed so much money in the last year we will have significant inflation in the future. A Chinese Vice Premier, asked... [Read more]
New reports from S&P and Moody’s indicate housing crisis has 3 more years to run, that Obama’s HAMP loan modification program has been a flop and will drive down home prices by 8% this year, and that 70% of the modified loans will re-default. This is one more reason why we need pro-growth policies–not phony stimulus spending plans–now. The “shadow inventory” of bank-repossessed properties, as well as distressed mortgages facing foreclosure, will take nearly three years to clear at the current sales rate, according to a report from the credit rating agency Standard & Poor’s (S&P). The “shadow inventory” of homes includes all delinquent loans and real-estate owned (REO) property that has not reached... [Read more]
No, the U.S. should not bail out Greece or the other PIGS that are being punished by the bond market. It doesn’t pass the grown man test. After two years of picking taxpayers’ pockets to solve one crisis after another, we have to draw the line somewhere–lets get started now. Greece’s financial crisis is a self-inflicted wound. Their government simply spent them into the poorhouse while Greek voters cheered them on. They need to learn from their mistakes so they don’t keep spending in the future. And the banks and other investors who loaned them money knew they were taking a risk. No Way should the U.S. taxpayers pay the price. If Greece defaults on its debt the world will not end; adult investors will just lose... [Read more]
I hope you read Mary O’Grady’s great piece in today’s Wall Street Journal Argentina Seizes the Central Bank. When you read it, think of the parallels with recent events in the U.S. I bet you feel a chill up your spine just like I did. Argentina’s nut-job President, Cristina Kirchner (wife of former president Nestor Kirchner) decided she didn’t want to use the tax money in the treasury to pay foreign debts but would simply seize the reserves of the banking system for the purpose. Martin Redrado, President of the central bank, refused to hand over the keys so she fired him last week. In his place, she appointed Mercedes Marco, a young Yale-trained economist, who thinks the idea that central banks should be independent... [Read more]
I just got a mass email from the Teamsters union urging everybody to vote for the jobs bill that will be voted on this week. That’s sufficient reason to vote against it. I have seen the legislation these guys have supported before (Obamacare, where they got a special exemption from having their insurance plan taxed like the rest of us.) We don’t need to pour any more money down the political rathole they call “stimulus.” Congress already has $1 trillion per year deficits over the next decade. We need to get spending back under control before the U.S. gets a banana republic credit rating. JR Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages. Read More →
I don’t often write about government policies that I like. It’s not that I’m crabby; it’s because they are so scarce. But today I will make an exception. Today, the Fed and the Treasury, along with several other financial regulators, correctly identified the cause of the small business lending problem–themselves–and took steps to fix it. It’s about time. Today the financial regulators passed the grown man test by “manning up” to what we have known all along; banks have been effectively redlining loans to small businesses due to fears of regulatory reprisal. You can read the statement by clicking here. They have made a start at addressing the problem by instructing banks to look at the health... [Read more]
This week is jobs week. Not Steve Jobs–last week was his, with blowout Apple earnings and the announcement of the slick new iPad. Real jobs–remember those? Where people actually get to go to work and earn a paycheck. This week’s data include the ADP report, today’s initial unemployment claims number and Friday’s payroll employment report along with several other reports (ISM manufacturing, ISM non-manufacturing, and factory orders) that give further color on the subject. Add them all together and what do you get? Blah! Positive but crappy growth–not enough to meaningfully increase employment. That will still have to wait for the banks to start lending to small businesses. And no, they haven’t started... [Read more]
