This month the bright fellows at Harvard Business School came out with a new report. A lot of work went into its preparation. In fact, the report contains the culmination of five years of in-depth analysis of U.S. competitiveness and surveys of global business leaders and the general public.
“Problems Unsolved and a Nation Divided,” is the title. What these two independent clauses have to do with one another is unclear. But the way they are strung together it appears the authors believe they are somehow correlated.
Perhaps problems are unsolved because the nation’s divided. Or maybe the nation’s divided because problems are unsolved. Here we turn to the report’s executive summary for explanation…
“Overall, we believe that dysfunction in America’s political system is now the single most important challenge to U.S. economic progress. Many Americans are keenly aware that the system is broken, but are unsure why it is broken or how to fix it.
“While there is rising frustration with politics, there is, as yet, no framework for understanding the reasons for today’s poor performance and proposing effective solutions. Continue reading
Swing voters are a fickle bunch. One election they vote Democrat. The next they vote Republican.
For they have no particular ideology or political philosophy to base their judgement upon. They don’t give a rip about questions of small government or big government. Nor do they have any druthers about the welfare or warfare state.
In effect, they really don’t care. What’s important to the swing voter is much simpler. In fact, it can be boiled down to the following essential question. What have you done for me lately?
The answer to this question, of course, comes back to money. As far as the swing voter’s concerned, if their brokerage account’s growing they vote the incumbent party. If it’s shrinking, they vote the challenger party.
It doesn’t matter if the source of the stock market inflation is a fraud. Nor does it matter that a stock market correction will help reestablish financial markets on a firmer foundation. Continue reading
Expansions and contractions in global trade have played out over long secular trends for thousands of years. The Silk Road, for example, was established by the Han Dynasty of China in 130 BC, and allowed for continuous trade between east and west for nearly 1,600 years. In addition to economic trade, the Silk Road was also a conduit for culture and knowledge among its network of civilizations.
However, this trade route eventually came to an end. When the Byzantine Empire fell to the Turks in 1453 AD, the Ottoman Empire closed the Silk Road and cut all ties with the west. Geopolitical trends turned inward towards isolation.
In more modern times, global trade has been conducted by shipping cargo across the international waters of the high seas. Over the last 200 years trade cycles have often expanded for such lengthy periods that several generations will come and go while only knowing this half of the trend. During these episodes people come to believe increased global trade is a linear phenomenon. Continue reading
“Markets make opinions,” says the old Wall Street adage. Perhaps what this means is that when stocks are going up, many consider the economy to be going great. Conversely, when stocks tank it must be because the economic sky is falling.
For both scenarios the opinions range far and wide. A rising NASDAQ may compel a tech aficionado to proclaim we’re on the cusp of a new digital revolution. Falling manufacturing stocks may compel a protectionist to proclaim it is NAFTA’s fault.
So if markets make opinions, do opinions make markets?
Over the last decade or so, Fed dithering has midwifed a new opinion based form of market forecasting. From what we can tell, it involves taking economic data reports, interpreting how this will impact Fed policy, and then projecting out how this will influence the stock market. If we’ve pieced it all together correctly, the relationship between economic reports and markets goes something like this:
Good news is bad news. So, too, bad news is good news. Continue reading