Wednesday, January 29, 2014

We seem to be missing the larger picture somewhere in the middle of the debate about income inequality and minimum wage. Chief Executive Officers,  whose pay has traditionally been measured by the truckload, have forgotten who their clients are. Henry Ford knew. Henry was in favor of higher wages for his workers and a shorter work week - both of which would be considered heresy by today's standards. Why, because Henry was selling cars and he wanted his workers to not only be able to buy his product but have the time to use it thereby increasing the demand. Is this rocket science? No. Why is this too complicated a concept for Walmart or McDonalds? For the record I am not in favor of a government mandated minimum wage however; I think paying the workers the absolute lowest possible amount is short sighted and bad business in the long run.

One of the lingering hangovers from the financial meltdown is the litigation concerning interest rate swaps. Wall Street sold these complicated instruments to everybody they could find and the havoc these swaps have caused is enormous. The story of this is still under the radar but countless school districts, colleges, towns, states etc. have experienced real monetary pain because of this product. What the banks did borders on the criminal. Somebody once said that if a banker ever comes to you to sell you a product it is time to lock up your wallet and hide the livestock. Good advice. Take it.

Friday, January 3, 2014

Things I expect for 2014:

Interest rates will rise slightly under their own power, the Fed will continue to reduce QE monthly bond purchases but there is enough liquidity in the world to absorb the extra supply.

The economy will slow down in certain sectors like housing in response to higher rates. I expect the housing sector to cool off a little as people adjust to higher mortgage rates, this should be a pause nothing more.

The dollar should strengthen and the US economy will see a slight erosion of the competitive edge it has enjoyed due to the weak currency. This will be most notable in areas like New York City which benefit from tourism.

Stock market should continue to march but not at an annual 30% clip like last year.

It might be too much to wish for, but it seems like some of the mean spirited, nasty, partisan gridlock in Washington might be easing. Fingers crossed.