Financial Bubbles | timiacono.com - Part 3

Retirement Regrets

There’s nothing really surprising in this Bankrate.com survey of regrets current and future retirees have about their current or future retirement.

Too little saving and too much debt account for two-thirds of the responses with the other third split about equally between None (the correct answer) and “Something else” (which screams out for some elaboration, given that it’s a pretty big share of the responses).

Low financial literacy and our consumer culture (buying things you don’t need with money you don’t have) work against those with the best intentions and, in the end, this is kind of like the obesity epidemic where, “eat less, exercise more” is easier to say than do.

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Vancouver’s World Class Freak Show

That’s one tough bubble they’ve got north of here in Canada’s housing market and, apparently, China’s got a lot to do with its durability as detailed in this story at Maclean’s.

Does anyone call it “Hongcouver” anymore? Maybe that name isn’t as funny as it once was…

There was neither the time nor the desire for an exhaustive analysis, but it didn’t take long to turn up the chart below from the Fed’s Survey of Consumer Finances that seems to contradict the conclusion of former Minneapolis Fed President Narayana Kocherlakota (from this Bloomberg story) that, from 2010 to 2013 “the rich didn’t fare particularly well” .

I guess it just depends on how rich you are and, just speculating here, but it’s likely that the top curve above would show an even bigger divergence from the others the more you separate the richest of the top 10 percent from the rest of that group.

Interregnum Cometh

Mark Hulbert over at Marketwatch correctly points out that heightened uncertainty associated with quadrennial presidential elections isn’t a real good thing for equity markets as equity markets famously hate uncertainty in any form.

The elections of 2000 and 2008 weren’t particularly good for stocks, though it took some time for the turn-of-the-century market rout to fully develop. The more interesting example of the deleterious effect of interregnums is that of 1932, that is, when FDR took over after Hoover and, between the election results and the new administration taking charge, the financial world almost came to an end.

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Draghi on Root Causes

I get a kick out of someone with great authority (especially central bankers these days, given their quickly fading super powers) speaking confidently about the root causes of some problem as if you’re an uninformed ignoramus (i.e., not an economist) if you don’t see what is so obvious to them and people like them. Such is the case with ECB chief Mario Draghi’s explanation to the Germans about why interest rates are freakishly low.

To wit:

They (low interest rates) are the symptom of an underlying problem, which is insufficient investment demand across the world to absorb all the savings available in the economy. And so the right way to address the challenges raised by low rates is not to try and suppress the symptoms, but to address the underlying cause.

Got it?

It’s the ‘ol “lack of aggregate demand” root cause canard (i.e., as opposed to the more sensible reckless, multi-decade expansion of credit and debt that artificially raised aggregate demand) that future historians will someday have fun with, that is, after the current set of top economists and central bankers are completely discredited.

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