Job Creation

This is a very good piece by John Tamny who writes for Real Clear Markets (a good site that links dozens of market related articles each day). He goes through the simple, yet largely ignored , process of how jobs are created. Despite all the rhetoric, government doesn't create jobs. Government doesn't create wealth, it consumes wealth. John has a keen mind and describes why America will likely continue to be a place of innovation, job creation and wealth building.

Financial Folly

Another good , cogent article on global debt and individual investors by Jason Zweig. 2 or 3 very useful tidbits including the study saying debt levels like ours here in the U.S. erode economic growth by 1% per year (not surprising). Later in the article a quote about these "processes not being linear" is oh so true. Finally, the last sentence where Zweig advises investors to "wring your hands while sitting on them". Agreed.

The Elephant in the Room

A spot on piece in NYT today on the latest from Fannie and Freddie. A very ugly picture indeed. I guess the ability of the politicians to keep this under the radar is owed, in part, to the inability of most Americans to understand what these entities purport to do. I am sure there will be more to come. Stay tuned.

Crisis,Anxiety & Error

A destructive mixture of all the above in Thursday's sharp U.S. stock market pullback. a cogent article in IBD today providing some perspective. While some of the issues yesterday might have indeed been trading errors or even a computer virus , little doubt that the underlying concerns centered on the worldwide debt bombs beginning to explode in Greece(and other European countries).

The S&P 500 is still up about 78% in the past 14 months- one of the best periods in history so some level of pullback is probably good and healthy. Remember our saying around here "markets go up and down, not up and up."

Fannie and Freddie...

A very good easy to read article in WSJ today on just how deep the Fannie and Freddie mess is and the unintended consequences. A real eye opener is how this huge government involvement has not helped us much in terms of home ownership . No one seems willing to address this huge hole in the federal budget (since it is not in the official budget).

Conflict of Interest Revisted

Saw a good article in The New Yorker on how poorly many of the large banks/brokers have performed for their "clients" , yet investors still do business with them. This is one of the real mysteries of life and lends credence to the idea that we don't learn much from history . I guess marketing trumps all else . If this were not so these firms would have been out of business long ago.

Housing risks revisited

We have mentioned several times previously of the (still) somewhat below the radar problems with FHA, Fannie Mae and Freedie Mac- collectively representing government involvement in the residential mortgage market. New home sales and foreclosures have risen in the past few months. The general narrative proffered in the media is that the formerly risky lending by these lenders has all but ceased. NOT!! In 2006 the percentage of loans with low income to payment ratios and weak credit equalled 17% of the total. Today, these type risky loans account for 23% of the total! The upshot is no lessons have been learned and in many if not most areas housing may still have a ways to go before reaching bottom.