Uffdah. Pretty choppy month or so on the financial markets. I talk a little bit about debt, the dollar, oil and cars, and the future. No conclusions — just great opportunity for my unborn grandchildren to giggle over the irony of it all.
Uffdah. Pretty choppy month or so on the financial markets. I talk a little bit about debt, the dollar, oil and cars, and the future. No conclusions — just great opportunity for my unborn grandchildren to giggle over the irony of it all.
Hi Mike,
Wonderful to hear your voice and reflections. Funny, too, hearing your salutation to your unborn grandchildren as I have begun thinking in terms of the next generation arriving perhaps before another decade has passed.
Regarding the economic market volatility that you’ve observed, I recently rejoined JP Morgan (in San Antonio TX of all places) and have gained a new set of tools through which to filter my capital market views. You are right that volatility has picked up recently, but might feel reassured to know that 2003-2006 was a period of highly unusual low volatility. Also, it might reassure somewhat that the market top that we saw in mid July corresponding with the same high multiples reached in 2006 relative to Dow Jones Industrial price-to-earnings, price-to-book, and dividend yield…simply meaning that long-term bond rates bottomed in 2005 after declining for more than twenty years, and that stock market valuations which are linked to bond yields are pretty much capped on the multiple side, and therefore dependent for the immediate future on corporate earnings growth. Of course, relative to the next two years, we are facing a slowdown in corporate earnings growth (maybe without a recession) and, I think, longer term higher bond yields. Why the higher bond yields? Partly just because we are at the tail end of an extended economic expansion and capacity utilization levels are high (so, labor costs are rising, as are hotel rooms in New Deli and New York). Emerging markets are driving global economic expansion and their expansion is inflationary; even more so, the US can only maintain full employment (and political stability) if we continue to steadily devalue the US dollar, and hence import inflation. I’ll send you the official JP Morgan summary, if you are a glutton for such. But wanted to send this short piece to sort of say there continues to be largely order in the economic markets, but with some end of cycle gear changing. Again, good to hear your voice and your words.
All the best, John