After the tech bubble burst in 2000, the proverbial house cleaning of the speculative mess mercilessly swept aside the weak players, of which there were many. But as Nietzsche said, whatever doesn’t kill you makes you stronger. True for one’s soul, true for companies. Indeed, the tech survivors are a stronger, and in many cases smarter lot. Business plans are something more than the back-of-the-envelope variety that was infamous in the late-1990s in the dot-com boom. Meanwhile, the large, established tech firms in many instances have learned how to play the game with a nimbler hand.
Monthly Archives: September 2005
WAITING FOR THE REBALANCING
Everyone’s talking about it, but will anything come of it? And if so, when?
The Wall Street Journal today weighs in again on the subject of a global economic rebalancing, a topic’s that’s no stranger to these digital pages or any self-respecting economic pessimist. For those who are new to this corner of the dismal science, the basic outline runs thus: the United States spends too much, saves too little, while the rest of the world saves a lot (arguably too much) and spends too little, at least from America’s consumer centric perspective.
RESEARCH ROOM UPDATE
After adjusting for taxes, municipal bond yields should be comparable to Treasuries for similar maturities. Ok, so why aren’t they? Taxes are commonly thought to be part of the answer, and for good reason. Munis are free of federal taxes and sometimes state and local taxes as well. Treasuries, on the other hand, are taxable on the federal level and exempt from state taxes. Calculating what the yields should be by factoring out taxes should leave similar yields after making the proper adjustments. But Mr. Market has often seen fit to ignore this academic rule of thumb. Why? In particular, why are tax-adjusted muni-bond yields higher than expected relative to U.S. Treasury Bonds? Good question, and a new research paper recently listed on the Federal Reserve’s web site (and added to our Research Room today) claims to have some fresh insight on the muni yield conundrum, and by extension, what it means for investors.
BOTH SIDES NOW
The post-hurricane economic data is starting to roll in, and the conclusion is…less than conclusive. Or, perhaps we should say that one can find whatever one wants to find.
MR. MARKET’S AGENDA
Hurricanes, volatile energy markets, and god knows what else haunt the stock market these days. But equities are holding up surprisingly well, considering that everything but the kitchen sink has been thrown at Mr. Market. The S&P 500, for instance, is now about 2.5% below its post-2000 peak set back in early August.
WILL SHE, OR WON’T SHE?
Investors will have the weekend to ponder if Hurricane Rita will deliver the knock-out blow to the economy that Katrina threatened but never delivered. But some have already decided that the twin storms together won’t be enough to derail U.S. GDP from its momentum. One research paper published this week even suggested that hurricanes actually boost economic growth.
FORECASTING FOR A RAINY DAY
The International Monetary Fund has published another global economic outlook, and the conclusion is nearly as optimistic as the previous forecast published earlier in the year. The IMF, in sum, says the expansion of world gross domestic product remains “on track.”
WHAT’S UP WITH REITS?
In the coal mine, the demise of the canary sends an early warning sign that’s something amiss in the atmosphere down under. Might REITs be the proverbial canary in the financial market warning that the investment air isn’t quite fit to breath at current valuations?
POST-KATRINA DREAMING
So much for taking a hurricane break. The Federal Reserve today raised interest rates for the eleventh consecutive time, hiking Fed funds by 25 basis points to 3.75%.
STRATEGIC THINKING
A new age of higher energy prices may very well be dawning, but the United States isn’t going to rush into the new world order without a fight. Although the options available to the world’s last superpower are dwindling when it comes to keeping energy costs low, whatever does remain of America’s choices won’t soon be surrendered.