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Margin Shrinkage – It Can Happen to You

Profit margins are a tick away from all-time highs and are creating the impression of cheap equity valuations.   But that impression is a mirage, because today’s generous margins are destined to shrink. I first wrote about this in January 2008, and here is an update to that article.  All I had to do was to […]

Set the Bar High

The Ups and Downs of Flying I am a very nervous flyer.  Whenever there is a little bit of turbulence, I look out the window, see shaking wings, and start to wonder whether they’ll keep holding the plane up.  Then my rational self kicks in, and I tell myself that statistically it is safer flying […]

U.S. Must “Man Up and Take the Pain” or We’ll Become Japan

After it’s property bubble burst, Japan embarked on a stimulus program Katsenelson describes simply as: “Lower taxes and borrow money to finance it,” which pretty much sounds like U.S. fiscal policy during the Bush years. Japan’s central bank has also employed quantitative easing repeatedly since the early 2000s; if their experience is any indication, Ben […]

QE2: Beware the Perils of its Success

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.  … the bad economist pursues a small present good that will be followed […]

Shadow over Asia

The summer is over in Denver.  Of course, in Denver the summer was officially over Labor Day weekend, when the outdoor swimming pools were drained and locked for the winter.  For most people summer ended a few weeks later, when the leaves turned bright yellow.  But not me, I wanted to hang on to this […]

Don’t call me Dr. Doom, call me Mr. Realist

 I had an interesting conversation last week with a potential investor.  I described my thoughts on the US economy, explaining that in our (my firm’s) view the current strength of the US economy is significantly boosted by steroids graciously provided by the US government in the form of stimulus.  (I’ve written about it in this […]

Chinese Quest for Shortcut to Greatness

The Chinese economy must be getting out of control, because the Chinese government is doing the unthinkable: It is desperately trying to put the brakes on the economy. When you pump a stimulus package that represents 14% of GDP through a fire hose into an economy, which was already on shaky bubble foundation, in a […]

Welcome to Another Lost Decade

The stock market’s performance over the next decade will be very similar to the one since 2000: the WSJ appropriately named it “the lost decade.”  Stocks will go up and down (setting all-time highs and multiyear lows), stagnate, and trade in a tight range.  At the end of this wild ride, when the excitement subsides […]

Barron’s: Economic Steroids Are Toxic, Too

AS THE NEW YEAR OPENS, THE stock market is behaving as if the past 20 years were about to repeat themselves: Another recession will turn into a robust expansion. Stock prices already are discounting an earnings recovery to something only slightly below the level before the financial crisis. Risk-taking is in vogue again. The global […]

Q&A with FT:Investing in Range-Bound Markets

In the bull market that preceded the collapse of Lehman Brothers and the ensuing financial crisis, equity valuations reached some very frothy levels. The correction that followed only lasted until March, since when, the S&P 500 index has risen more than 60 per cent, while the FTSE Eurofirst 300 has gained a similar amount. Vitaliy […]