Search Results
Results 201–250
of 265 found.
Double-Dip Fears
by Milton Ezrati of Lord Abbett,
A robust recovery was never in the cards?as Lord Abbett has continually pointed out?even during the consensus? optimism earlier this year. But a second recessionary dip is highly unlikely. Instead, the American economy should carry on with middling growth of 2.5?3% in real terms, propelled by exports, moderate consumer spending growth, and continued, cautious advances in corporate spending, while sideways moment in housing and absolute declines in state and local government spending hold the pace back from what it might otherwise achieve.
Oil Prices?Fundamentally Unhinged
by Milton Ezrati of Lord Abbett,
Oil prices spiked up more than 40% between September 2010 and early May, before suddenly giving back half the gain within the space of a week. Analysts naturally sought to explain the wild price swings with supply and demand. But, as is so often the case with commodities the fundamentals mean less than speculative money flows. These explain both the run up and the retreat and why prices moved so far so fast. Speculative motivations, more than the fundamentals, will set future price movements, though the fundamentals, when they influence, should keep the direction pointing down more than up.
Dancing on the Debt Ceiling
by Milton Ezrati of Lord Abbett,
The government seems set to hit the dreaded debt ceiling in stages instead of all at once. The first touch came on May 16. But because the Treasury can redeploy funds, it can delay any practical constraints from the limit until early August. While Washington and the media show considerable anxiety, investors seem to expect that the event will have no practical effect in the end. Of greater significance to investors are the policy positions that swirl around to debt ceiling debate, especially since by August, Washington will need to argue both the ceiling and the 2012 budget at the same time.
Housing Fears Still Lurk in the Shadow
by Milton Ezrati of Lord Abbett,
Housing remains a focus of uncertainty and anxiety. Its collapse largely created the 2008 financial crisis and recession. Housing concerns formed the basis of last year?s ?double-dip? recession scare. Many fear that further problems in the area could thwart the present economic recovery. Of particular concern now is the still large overhang of vacant, unsold properties and the even larger overhang of properties on which lenders have delayed foreclosure, the so-called ?shadow inventory.? The inventory situation will hold back real estate prices and building activity for a long time to come.
One Small Step for Bernanke
by Milton Ezrati of Lord Abbett,
Fed has indicated its intention to let QE2 end as scheduled in June. This decision would mark the first designated step in the cautious program for policy change that Bernanke had previously outlined. If the Fed sticks with this plan it will take until early 2012 before policy makers will begin to increase market interest rates. Even at that last step, policy would remain easy as the Fed makes its gradual moves. The only difference is that the easing will gradually become less extreme. It will likely take until late 2012 or 2013 before American monetary policy even approaches restraint.
The Fiscal Debate Continues
by Milton Ezrati of Lord Abbett,
The fiscal debate has dramatically changed character and emphasis in just the past few months. Whereas last January President Obama only hinted at tax reform and spending cuts, they now have taken over the fiscal agenda. True, Republicans and the president remain far apart, and Washington is nowhere near a grand compromise, but it now looks as though the parties could agree on some bits and pieces, significant enough for markets to begin, but only just begin, to gain some confidence in progress on the deficit issue. The fiscal goal posts have moved.
Inflation Threat?
by Milton Ezrati of Lord Abbett,
Any serious discussion of inflation today must separate short- from longer-term prospects. For the short run, the risks of a generalized inflation remain small, recent increases in commodity prices notwithstanding. For the longer run, the risks rise. Perhaps recent commodity price hikes anticipate this longer-term potential, though there are other explanations. But whatever the specifics, the fundamental risks lie almost entirely with policy in Washington, that is, how the Fed treats the excess liquidity in markets today and how the federal government deals with its huge budget deficits.
Inflation: Some Important Technical Perspectives
by Milton Ezrati of Lord Abbett,
Concern about inflation these days seems to travel along two separate avenues. On the more technical side are the worries over recent food and fuel price spikes and the objections to Washington?s practice of excluding such price moves from its analyses and policy decisions. The second, very different concern takes a much longer-term view and worries that federal budget deficits and the liquidity poured on markets during the past two years or so by the Federal Reserve will cause considerable inflationary pressure in 2012 and beyond.
Republicans Draw Budget Battle Lines
by Milton Ezrati of Lord Abbett,
Now that the debate on the 2011 budget has largely run its course without the much-feared government shutdown, the more serious and substantive debate on the 2012 budget has begun. Though less suspenseful than the issues of 2011, the 2012 budget debate will determine basic fiscal directions in the United States for years to come. The Republicans recently offered their counter to the budget that the president unveiled some weeks ago. Having already examined the White House proposals, this third in Lord Abbett?s occasional series on fiscal issues takes up the Republican plans.
Now Hiring
by Milton Ezrati of Lord Abbett,
The jobs market has begun to improve. True, the pace is much too gradual for many, but still there can be no mistake that business has at last started rehiring. Not only have payrolls increased but also other indicators foretell further fulltime hiring. What is more, the unfolding jobs recovery, despite people?s understandable impatience, seems pretty much on track with past cycles. Prospects for any continued improvement, then, should give Washington cover to cease its largely singular focus on jobs and deal with longer-term issues. Recent signs are fairly consistently positive.
Does Tax Reform Stand a Chance?
by Milton Ezrati of Lord Abbett,
The budget debate goes on, scrapping over the still-unfinished 2011 budget and, more importantly, positioning for the more fundamental issues of the 2012 budget. President Obama has already issued his budget for 2012 and the years beyond. These are exciting times for Washington?s policy wonks. For investors, these matters are important, if sometimes mind-numbing. Related to these larger deficit issues, but also separate from them, are the newly raised questions of corporate tax reform. These will form the subject of this second in Lord Abbett?s occasional series on fiscal matters.
The Consumer's Slow Climb
by Milton Ezrati of Lord Abbett,
American households have used the economic recovery to improve their finances. However, They have a long way to go before their balance sheets resemble financial health. Though just about every relevant financial ratio has improved, household finances remain far from the comparatively sound state that prevailed in the mid-1990s. And since households remain sensitive to their situation, they should continue to hold back on spending and save at higher rates going forward. If spending rises, as expected, more or less in tandem with income, the consumer will offer the economy a slow growth engine
Housing - Still Troubled
by Milton Ezrati of Lord Abbett,
As lenders, managing their foreclosure opportunities, gradually feed the ?shadow inventory? of homes onto the market, the flow of properties will no doubt keep a lid on real estate pricing and on construction activity for some time to come, particularly in the most hard-hit regions of the country. Still, if circumstances keep housing from offering the economy a growth engine for a long time to come or the source of wealth creation in the household sector, the economy and financial markets will nonetheless welcome the change from the sharp declines and volatility of past years.
The President?s Contribution to the Budget-Deficit Debate
by Milton Ezrati of Lord Abbett,
This piece takes up President Obama?s 2012 budget. This budget does project shrinking deficits, but offers little in the way of policy that might achieve the more fundamental goal of fiscal prudence. It includes revenue enhancers, the expiration of the Bush tax rates, now scheduled for 2012. It also looks for substantial additional revenues from corporate taxes. It proposes spending cuts in civilian discretionary programs and in defense. Apart from these, the administration forecasts deficit improvement on the basis of economic growth that, would raise revenues faster than spending.
Special Update?A Word on Japan
by Milton Ezrati of Lord Abbett,
No one pretends to know what the immediate future holds, not even Japan?s nuclear engineers. Fear that has caused a general sell-off in markets. The huge uncertainty has raised risk premiums and sent investors for a time in the direction of safe havens, such as government bonds though Europe's particular problems compound the uncertainty about European sovereigns in this regard. The weight of uncertainty has fallen hardest on stocks connected to the nuclear industry. There is a need for investors to look beyond the immediate emergency to at least seven basic points:
Riots, Oils, and Economics
by Milton Ezrati of Lord Abbett,
The turmoil in the Middle East goes on, and, though oil has continued to flow uninterrupted, understandable uncertainties have bid up crude and gasoline prices anyway. A barrel of crude now costs considerably more than straightforward supply/demand fundamentals would imply. And as long as the uncertainty persists, prices will almost certainly stay high. Despite this, three aspects of the situation seem more definite. First, fuel cost pressures may slow, but they are unlikely to stop the American and global economic recovery.
Economic Insights: Misplaced Muni Fears
by Milton Ezrati of Lord Abbett,
Though each scare story on municipal bonds has a kernel of truth in it, the trend of late has become hyperbolic, sparked to no small degree by an exciting, popular, but evidently poorly researched television news show. To be sure, state and local finances are a mess. It will take decades of remedial effort to bring them anywhere near what people might characterize as sound. But especially since pricing now seems to anticipate calamity, the prospects for these securities hang less on good than on improving finances, and on that score, the outlook is favorable.
Winding Down Fannie and Freddie?
by Milton Ezrati of Lord Abbett,
The U.S. Treasury has released the most remarkable proposals on the future of Fannie Mae and Freddie Mac. After actively supporting these government-sponsored enterprises, the administration has effectively recommended that they cease to exist. More than that, the proposals would reduce long-standing government support for broad-based home ownership and look to alter financial arrangements to offer greater support to the rental market. In just these outlines, it is clear that the current administration would reverse Washington?s long-standing approach to the housing market and home ownership.
The Capitalization Conundrum
by Milton Ezrati of Lord Abbett,
Within equity portfolios, there certainly is good reason to lean toward larger capitalization issues. Standard cyclical timing would point toward larger capitalization issues anyway, and small capitalization stocks, having led in the rally by a wide margin so far, now carry less favorable valuations than they once did. What is more, when retail investors at last return to the equity market, they will likely favor larger, better-known names. Still, in taking advantage of these circumstances, it would be a mistake to abandon small cap issues altogether.
What Will Propel Equities Further?
by Milton Ezrati of Lord Abbett,
The positive outlook for equities draws on many sources, but basically rests on two pillars: 1) continued economic growth that will sustain an earnings expansion and 2) still-favorable valuations prevail, despite the great rally since March 2009. Neither point, of course, is beyond complaint. Nothing in any investment outlook is absolutely secure. Now, as ever, prospects are overshadowed by a cloud of risks. But the likelihoods still favor the earnings growth and a favorable response from equity markets.
Why Credit-Sensitive Bonds Still Make Sense
by Milton Ezrati of Lord Abbett,
Clearly if Europe?s sovereign debt problems careen out of control, a global flight to quality would likely reoccur, bringing U.S. Treasury and agency yields back down. But if as expected the European Union (EU) manages the situation, then the recent unwinding of the former flight to quality should continue, rendering Treasuries and agencies problematic investments at best, and leaving the only fixed-income opportunities in credit-sensitive investments.
The Investment Outlook: An Overview
by Milton Ezrati of Lord Abbett,
This is the first of a four-article series on the macro considerations behind Lord Abbett?s fixed-income and equity outlooks. This first installment offers an overview. The three pieces that follow will, in turn, take up the reasons behind 1) the general preference for credit-sensitive fixed-income issues; 2) the positive overall stance on equities; and 3) the call for a thorough capitalization mix within equities.
Monetary Stimulus is Gaining Traction
by Milton Ezrati of Lord Abbett,
The Federal Reserve?s recent recommitment to a second round of quantitative easing (aka QE2) has come at a time when past efforts at monetary stimulus seem at last to have gained traction. Accelerations in various measures of money supply suggest that the economy is finally drawing on the copious amounts of liquidity the Fed previously injected into it even before the most recent round of quantitative easing.
Is Chinese Real Estate the Next Great Fall?
by Milton Ezrati of Lord Abbett,
There is little question China is suffering a real estate bubble. Property prices have risen rapidly, encouraging more speculation in development, which in turn has propelled prices up farther. The boom has already brought land prices to 60% above their pre-2008 peaks. Prices have so far outstripped the population?s ability to buy. The price of a home is 10 times the median household income. In Beijing, housing prices on average are 22 times the average annual income of city residents. In contrast, in the US, home prices at the peak of its bubble stood at 6.4 times median household income.
Capital Spending Shifts Course
by Milton Ezrati of Lord Abbett,
Capital spending seems set to broaden this year. Business so far in this recovery has aimed its spending only at improving efficiency (not expanding capacity) and finding ways to substitute technology and software for workers. Though not unusual in the early stages of cyclical recoveries, the intensity of the focus during the past year has been remarkable. Now, however, some of the cause of the extreme emphasis on labor-saving equipment has begun to shift, at least at the margin, leaving reason to look in 2011 for a broader, if more moderate, growth in capital spending.
Economic Outlook 2011?Inching Our Way Toward Recovery
by Milton Ezrati of Lord Abbett,
For all the complexities and undeniable risks, the outlook is reasonably upbeat. Continued, if slow, economic growth will raise earnings and, in time, gradually will begin to improve the labor market. Inflation, though a longer-term risk, will remain well contained in the coming year. Questions about monetary and fiscal policy will continue to hang over the economy and the markets, but circumstances nonetheless seem set to generate further advances. If, at the end of the year, few would declare themselves as rich and secure as they once felt, they still will have experienced improvement.
Treasury Moves?Four Reasons Why
by Milton Ezrati of Lord Abbett,
Treasury bonds recently have made an impressive and, to some, frightening move?a sudden reversal of the long flight to quality that previously had so bid up Treasury prices and reduced the yields to ridiculous lows. Many explain this sudden reversal in terms of Washington?s recent decision to extend the Bush-era tax cuts for another two years. Certainly, there is reason to make such a link, but there is more going on than just this compromise, enough to keep the trend in place for some time to come. Here are four references on what lies behind this reversal.
The European Union?Will It Hold Together?
by Milton Ezrati of Lord Abbett,
With an Irish rescue seemingly in place, Europe must now look to Portugal, Spain, and Belgium. The continent?s sovereign debt crisis threatens the euro?and the EU itself. We can make some tentative conclusions: 1) Europe?s existing rescue resources are more than ample for Greece, Ireland, and Portugal. 2) The great danger lies with Spain, less because of government profligacy and more because of the potential fallout from that country?s collapsed real estate bubble. 3) The EU has shown determination to deal with the problem and protect the euro and the union.
Economic Insights: Consumers Save Themselves
by Milton Ezrati of Lord Abbett,
Like the Southern belle of romance, American households have begun to revive from their former swoon. Reestablished
savings flows have, during the past year or so, begun to pay down the debt-overhang built up in previous years. Households still have a long way to go before they can return their finances to the sound state they enjoyed in, say, the mid-1990s, but matters have improved enough to support a modest expansion in spending and enough to support a continued, if slow, overall economic recovery.
Trade Wars
by Milton Ezrati of Lord Abbett,
Trade tensions seem to intensify daily, especially between the United States and China. Congress not too long ago upped the ante, labeling China a "currency manipulator." both the United States and China could get around immediate passions and politicking and find a basis for accommodation in their common, longer-term goals. In this regard, it is at least modestly encouraging that the International Monetary Fund (IMF) has become involved in the China?U.S. currency dispute.
Valuation Opportunity
by Milton Ezrati of Lord Abbett,
Because the fears forged during the 2008?09 crisis still linger, investors continue to avoid equities. For a while, extreme caution drove almost all new flows of funds into cash and U.S. Treasury bonds. As these flows drove down Treasury and agency yields, investors sought returns in more credit-sensitive bonds, but still, they largely avoided equities. The pattern has by now distorted valuations enough to present a special opportunity in stocks, even after their impressive rise from spring 2009.
Economic Insights: Five Reasons to Give Thanks
by Milton Ezrati of Lord Abbett,
Custom at this time of the year asks people to look back for reasons to give thanks. Though for investors the political-economic turmoil and risk of the times seem at first blush to yield little along such lines, a dispassionate reprise of the last year does, in fact, offer more material for thanks. To be sure, economic and financial matters are far from perfect or even second best. But still, they have improved during the last 12 months, in some instances, dramatically. Here are five reasons for thanks.
Export Engines
by Milton Ezrati of Lord Abbett,
President Obama has singled out exports as a preferred driver of the U.S. economy. He plans to double their size over the next five years. Since the president, apart from announcing this goal, has offered hardly any substantive policy for export promotion, the goal resembles a wish as much as anything else. Nonetheless, it is plausible. Dollar weakness, among other things, has already lifted American exports smartly during this cyclical recovery and likely will continue to do so for some time, even if Washington dithers.
Fed Follies
by Milton Ezrati of Lord Abbett,
With the Federal Reserve seeming to embrace another round of what it calls ?quantitative easing? and what the cognoscenti in the financial community quaintly refer to as ?QE2,? a couple of questions naturally emerge: first, will the additional monetary ease help the economy? and second, is it warranted? On both counts, the weight of argument seems to fall on the negative side, though in the short run the added liquidity will likely boost markets.
Economic Insights: Housing - Stability, Not Recovery
by Milton Ezrati of Lord Abbett,
Despite poor housing sales this past spring, the residential real estate market fundamentally seems to have found stability. Significant growth in housing will, of course, likely wait for years, and there is no mistaking the risks, especially if banks fail to manage foreclosures and the effective 'shadow inventory' of unsold homes. But for all the potential pitfalls and the lack of growth, probabilities still suggest that the economy has already passed through the ugliest period for housing and that the healing has begun.
Swedish Surprise
by Milton Ezrati of Lord Abbett,
Although export-oriented Sweden initially suffered during the 2008?2009 global economic downturn, the economy bounced back quickly, achieving one of the fastest growth rates among developed economies. Unemployment, which had been forecast to rise to 10 percent of the work force, never went above 8 percent. The reason for Sweden's success may be the country's approach to economic stimulus. Instead of relying heavy government spending, Sweden?s government reserved two-thirds of its stimulus for across-the-board tax cuts, applied only to income generated from work.
Mexico - Problems and Prospects
by Milton Ezrati of Lord Abbett,
Mexico's drug-related violence is a tragedy for the country and a conundrum for all those who invest there. However, as long as the U.S. economy can continue its advance, slow as it will likely be, Mexico?s economy, equity market, and currency should find support. Once the recovery in the United States begins to create jobs, as it should later this year and into 2011, remittances from Mexican nationals working north of the border will begin to add marginal momentum to Mexico?s economic growth, and hence to its market prospects.
Commodities - More Signs of Life
by Milton Ezrati of Lord Abbett,
The rise in commodity prices during the past few weeks offers yet another sign that the U.S. economy will avoid the dreaded double-dip recession and continue to grow, albeit slowly. Some of the commodity price rise, of course, reflects little on the economy. Gold's price increase, for instance, mirrors generalized fears on a number of fronts. The surge in agricultural prices stems from particular crop failures. However, industrial commodities, including energy, are connected to the economy, giving broader economic significance to their healthy price gains.
Munis - The Good, the Bad and the Ugly
by Milton Ezrati of Lord Abbett,
The recession and huge market reverses of 2008?2009, aside from their immediate adverse effect on revenues, have revealed decades of fiscal mismanagement. Now the ongoing economic recovery should gradually relieve the most acute fiscal pressures, and states and cities will have to rectify the mistakes of this long legacy. For the long-term municipal bond investor, the risk going forward resides in the debt of the laggard states and cities, those that do the least to correct the abuses of the past. The investment opportunities lie with those who do the most to correct fiscal imbalances.
Economic Insights: On Leverage and Earnings
by Milton Ezrati of Lord Abbett,
More than anything else, a relentless increase in operating leverage colors earnings behavior, particularly in times like the present. Because businesses continue to seek efficiencies by increasing the use of equipment, software, and facilities in the production process, it also seems likely that earnings will become even more volatile. Equity markets may eventually discount the fundamental change but, in the interim, they too promise volatility along with earnings. That volatility offers opportunities to investors who are aware of the situation.
Economic Insights: A Dispute Over Corporate Finances
by Milton Ezrati of Lord Abbett,
In the midst of all the uncertainty these days, one comfort to which investors have clung is the record $1.8 trillion in cash on corporate balance sheets, by some estimates. But of late, even this bright spot has come into question. The cash holdings, some have argued, are more than offset by a continued growth in corporate debt and other liabilities. Matters are, as ever, more complicated than they appear, but corporate finances (even after considering liabilities) nonetheless look firm enough to offer something positive in the economic and investment climate.
Deflation?Does America Have a Japanese Future?
by Milton Ezrati of Lord Abbett,
It is still hard to see the United States following in Japan?s footsteps, as so many have suggested of late. The differences between the two economies remain vast and still far outweigh any similarities. Probabilities suggest, then, that the United States will miss a Japan-like deflation and a lost decade and that, if America suffers deflation at all, it will do so for only a short time. But since the differences are less pronounced than they once were, matters bear close watching, as each nation?s policies unfold and their respective economies react.
Euro-Dollar Ambiguity
by Milton Ezrati of Lord Abbett,
The euro seems to have the edge over the U.S. dollar for the very near term, if only because the EU seems poised to shake off the lingering negatives of its spring crises. Beyond that, the dollar seems to have the edge. More rapid growth on the west side of the ocean should trump modestly higher rates on the east. Longer term, however, the shifts again back to the euro, as European governments should be further along than the United States in addressing the fiscal excesses that all nations concerned incurred during the 2008?2009 crisis.
Japan: Not This Time Either
by Milton Ezrati of Lord Abbett,
If Japanese prime minister Naoto Kan wants to avoid the pitfalls of the past, he must take a longer-term, more gradualist approach to the nation's fiscal problems and find solutions that avoid heavier taxes. His present inclinations, however, suggest that Japan will in fact make the old mistakes and will consequently wait longer for sustained growth and, as in the past, will find little fiscal relief.
Tax Growth
by Milton Ezrati of Lord Abbett,
The Bush tax cuts of 2001 and 2003 are set to expire at the end of this year. If the president and Congress just sit on their hands, income taxes will rise across the board, from the lowest to the highest brackets, as will estate, capital gains and dividend taxes. Much debate swirls around the economic effects of these imminent tax increases. Most agree that the heightened tax burdens will detract from the flow of spending and the general dynamism of the economy.
Small, Large, Both?
by Milton Ezrati of Lord Abbett,
Small capitalization equities, until recently, have done remarkably well, tempting some to conclude that these sorts of stocks have done their thing and that it is now time to migrate increasingly toward the large side of the capitalization range. A slight underperformance by small stocks since April may have reinforced this reasoning. It would be a mistake, however, to abandon small capitalization holdings altogether in favor of large cap issues. In six of the past 10 economic cycles, small caps continued to lead large caps in the second year of a recovery, and sometimes even longer.
Double-Dip Double Take
by Milton Ezrati of Lord Abbett,
The ongoing and widespread concerns about an economic double-dip warrant still more discussion. Previous analyses here have looked at the government data and concluded that, whatever the risks, the probabilities favor continued, if moderate economic growth. This discussion extends the analysis to less common economic indicators, particularly measures of shipping. Though the picture here is mixed to be sure, it, too, leads to the conclusion that the double-dip, though possible, is not probable and that growth will likely continue, albeit slowly.
What Multiples Are Telling Us Now
by Milton Ezrati of Lord Abbett,
The market will begin the next 18-24 months with multiples neither high nor low. Treasury and corporate bond yields, however, look low relative to the same history over which the historical multiples are calculated, seemingly leaving room for stocks to carry higher-than-average multiples. At the same time, prospects for further earnings gains seem good. Earnings have come in 25?30 percent above the easy comparisons of the past year, and as long as the economy continues to grow, which is likely, these good earnings figures should continue.
Double-Dip? Seven Reasons Why Not
by Milton Ezrati of Lord Abbett,
It seems these days that half the headlines in the financial media fear a double-dip recession, as do half the conversations on Wall Street. There certainly are risks, not the least in Europe's financial difficulties. But still, there are reasons to question such widespread concerns. History, after all, offers only one true double-dip experience, and that grew out of a policy error. Moreover, the actual data on the economy flies in the face of such an outlook. Milton Ezrati outlines seven reasons to doubt the double-dip outlook.
Exports and the Economy
by Milton Ezrati of Lord Abbett,
Double-dip fears are on the minds of investors, and Europe?s troubles feature large. Concerns in this particular area run along three lines: first, Europe will fly apart and precipitate another financial collapse; second, stagnation in Europe will stall world growth; and third, dollar appreciation will weaken the American economy by choking off exports. Each concern is legitimate, and the risks real. But especially on the last two, the American economy is much less vulnerable than people suggest.
Results 201–250
of 265 found.
