Monday, July 19, 2010

Thoughts

It looks like the banks are picking up a bid.

I'm hearing that Paulson made another big purchase.

Speaking of financials, high above the Alps, the Gnome is saying Paulson has purchased another 100 million shares of C today.

Today's action is a reminder how fragile the financial system remains in Europe.

The markets are weak now on a report that Hypo Real Estate Holdings failed to pass the EU bank stress test. While this is a "no $*!% " conclusion and was widely anticipated, it is a reminder how fragile the financial system remains in Europe.

The Baltic Dry Index is starting to rally.

There was little in the way of added value extracted from Roubini's presentation at the Jewish Center of the Hamptons.

But I now think that he is more well-intentioned and perhaps even more studious than I previously thought. He is an engaging speaker; Yesterday afternoon, Nouriel Roubini was the speaker at the Summer Institute lecture series at the Jewish Center of the Hamptons.

In the interests of full disclosure, I have been critical (perhaps, at times, too critical) about:

1. the way in which the media have embraced Nouriel;

2. in Nouriel's apparent inflexibility and dogma; and

3. in his inaccurate stock market forecasts.

Nouriel gave his standard talk: The U.S. is entering either a "U" (at best) or a "W" (at worst), while over there, he estimates 0% growth in the eurozone over the next 12 months.

Reduced fiscal and monetary stimuli, the cessation of temporary benefits (inventory build, Cash for Clunkers, homebuyer's tax credit, etc.) and diminished confidence (consumer and corporate) spell subpar growth (1.5% estimated second-half domestic growth). Deflationary pressures remain the mainstay in the aftermath of the last economic and credit cycle and in the face of tax policy (higher January 2011) and the obliteration of the shadow-banking system and securitization markets.

In the U.S., Nouriel says we are kicking the can down the road and that we face a fiscal train wreck with no visible exit strategy in sight.

The one part of his talk that stood out to me was in the section of his speech in which he talked about some possible solutions to our fiscal imbalances. Specifically, he feels that we, as a nation, have been overly preoccupied with housing-central policy. He argued that housing provides little in the way of sustained productivity and growth and that many of the benefits of home ownership (such as the mortgage-interest deduction) should be reassessed.