Brian Beaulieu's blog

Why Systemic Financial Risk Might Become Riskier

Nothing is certain but death and taxes…. and financial crises.  Unfortunately the cyclical ebbs and flows of the marketplace are an inevitable feature of the modern economy.  The mere presence of business cycles indicates that the American economy is prone to financial instability, recessions, and bubbles.

Banks that took TARP money reduced lending more significantly, and gave their employees bigger raises, than did banks that did not take TARP money.  This is according to a study generated by the American University Investigative Reporting Project and USA Today based on federal bank data.

 The numbers for the 12 months ending September 30, 2009 are:

 With TARP money

 Loans outstanding to businesses and individuals fell 9.1%

 Average employee pay up 9.4%

A sign of the economic times….

 Spirit Airlines announced that they would charge their passengers as much as $45 a bag for carry-on luggage; you know, the stuff that folks jam into the overhead bin.  Paying a charge for carry-on bags would be outrageous to many folks.  They would let their displeasure be known by not flying Spirit Airlines.  That’s the marketplace at work.  If the practice spreads to more airlines, than folks will vote their displeasure at these other airlines by avoiding them also.  That is unless you like fewer bags being brought on b

Thinking of recovery and perhaps where to invest some money in capital equipment, a very interesting divergence has recently developed between the Natural Gas Futures Prices trend (down 24.6% to $3.87 MMBtu over the last two months) and Oil Futures Prices (up 14.9% to $83.76 per barrel over the same two months).  There still seems to be a longer-term cyclical identity between the two fossil fuels even though oil is global and natural gas is local.  Stark divergences like we have seen over the last two months have a way of dissipating, but the recent numbers brought to mind a poten

Stimulation through taxation?

 Most people probably haven’t read the HIRE Act (Hiring Incentives to Restore Employment Act) that is intended to provide incentives for businesses to increase hiring.  Most Congressmen probably didn’t read it either.  We didn’t either (there are limits to how bored even we are willing to sink to) but the folks at KPMG did and what they came across isn’t so much surprising as it is worrisome.

 On the one hand we have the government encouraging hiring ostensibly to stimulate the economy, but buried in the legislation is some f

It has been an interesting two to four weeks watching the drama over Greece et. al.

Real World Confirmation                  

NARA is the National Aircraft Resale Association.  I had the pleasure of speaking at their Spring 2010 meeting in Puerto Vallarta.  Great group of folks and something wonderful is happening in their industry numbers.  Recovery.  The level of customer interest and the number of transactions are both in strong cyclical recovery trends.

Why mention this?  Because sometimes it is easy to see the rise going on in leading ind

Fictitious Deficit Reduction  

While watching the health care legislation drama on Sunday night, I was struck by the repeated comments that this amazing social spending package (that folks kept equating in terms of historical significance to Social Security and Medicare/Medicaid) would actually reduce the deficit going forward according to the Congressional Budget Office. 

It seems the oft-cited deficit reduction claim is the result of the fact that the “budget office is required to take written legislation at

Ameritina

A colleague sent an interesting video to us this morning called “Argentina and the tale of financial ruin…Are we far behind?”  It depicts the historical events in Argentina involving their tremendous run up in national debt, inflation, increasing government control of the economy, etc., and how it ultimately ended in the country going from a global powerhouse to a shadow of its former self after the economy suffered a devastating depression. 

This colleague wanted to know if this is something like how we see the scenario playing out in terms of our 2030-

Recovery is at hand as evidenced by the rising trend in US GDP and the 12MMA data trend ascent that began in January 2010.  New Orders are in a recovery trend and people are spending money.  The recovery is sustainable through at least 2010 and we think well beyond this year.

You may have heard this prognostication from us at any number of presentations.  So why repeat it now?  Because it is important to keep that construct in mind as we go through the next two quarters and are talking about some weakness in the leading indicators.  From the S&P 500 Inde