07.02.11

One of America’s favorite pastimes is to play the “what would the Founding Fathers say” game. Just pick an issue du jour, and ask the question. Given that today’s world (Google, Twitter, television) is probably way beyond even the imagination of the 18^th-century designers of the Constitution, the game usually says more about today’s partisan fights than about the Founders.

But on one contemporary issue the Founding Fathers did have strong opinions: the national debt. Had they been confronted with the question of whether the federal government should be allowed to default on its debt obligations, they would have spoken with one resounding voice: No! Pay the bills, service the debt. Don’t even think of defaulting or playing dice with global creditors for domestic political gain. End of argument. Read more…

07.01.11

This week, I’ve been treated to a visceral experience of the upside of a downside. Driving with my family through the Tetons and Yellowstone National Park, I have sat behind endless lines of RVs and assorted SUVs depositing masses of people who are swarming the parks, descending on Old Faithful concession stands, and snapping endless digital photos to be sent over Androids, iPhones and even Blackberries. From one perspective, that’s an experience of crowds and Americana. From another, it’s a living example of how a weak dollar is helping the U.S. economy. It’s also proof that for a nation that is suffering, we still have an astonishing capacity to take vacations and spend. Read more…

06.28.11

Cars 2 opened to lukewarm reviews and a smash box office, taking in $66 million domestically and another $42 million internationally during its opening weekend. The film’s ability to transcend unusually tepid reviews is clearly a testament to the power of the Pixar brand (another gift of Steve Jobs), which has generated a remarkable series of animated hits stemming from the Toy Story franchise that began in 1995 and continuing through gems like Wall-E and The Incredibles, as well as the first Cars. But this film also carries a loud and unmistakable message about alternative energy, automobiles and their shared future. Read more…

06.27.11

In the nearly 15 years that I’ve been writing about markets and managing money, there’s been a dramatic shift that has gotten only marginal notice. We’ve gone from having an optimism surplus to an optimism deficit. That may be a greater problem than the budget surplus becoming a deficit.

The belief that the future holds possibilities better than today is a necessary precondition to investing, starting a business and taking risks – all of which are key to a dynamic, vital economy. Yet that is precisely the belief that is less and less in evidence in the United States and more and more apparent elsewhere in the world. Read more…

06.22.11

Today we were treated to the second installment of the Federal Reserve’s new policy of openness with Chairman Ben Bernanke’s press conference. That followed on the heels of the statement by the Fed Open Market Committee about interest rates and the economy.

The statements were widely expected and had in fact been well telegraphed. The Fed acknowledged economic activity continues its long, steady and slow recovery, but “somewhat more slowly than the Committee had expected.” And as for employment, “recent labor market indicators have been weaker than anticipated.” Finally the Fed indicated that its $600 billion program of aggressively purchasing U.S. Treasuries (know as QE2) would indeed end this month, as it had said all along. Read more…

06.21.11

The latest out of Wall Street-land is a warning by analysts at Citibank that profits at Goldman Sachs and Morgan Stanley (and to a lesser degree at other banks as well) will show a sharp contraction for the second quarter of 2011. Leaving aside the inside baseball nature of one Wall Street firm issuing a negative report on other firms, the decline in profitability stands in contrast to the widespread perception that banks and investment houses are booming while the rest of the economy is suffering. Or does it? Read more…

06.20.11

The past few weeks in financial-land have been dominated by two combustible fears: 1.) that this time Greece really will default on its debts and plunge the Eurozone into chaos; and 2.) that this time China really will hit the brakes and bring much of global economic activity down with it. One of these fears alone would be enough to roil markets. Together they have been a potent and toxic mix.

Neither worst-case scenario is likely, but the China fears are especially overblown. At every point in the past decade, there has been talk of an imminent China slowdown, of an impending hard or soft landing that will leave many people holding worthless assets, making the mandarins in Beijing tremble and the population of China angry. But the idea that there might be neither a hard nor soft landing of the Chinese economy but instead no landing — that China will maintain an elevated level of growth and activity that will continue to bolster the global economic system — that possibility is dismissed as undue bullishness, excessive optimism, or outright starry-eyed naiveté. Read more…

06.17.11

On Thursday, the maker of the once-ubiquitous Blackberry devices, Research in Motion, reported its quarterly results. They were not pretty.

Having already cut its estimates weeks earlier, the company underwhelmed already low expectations. It confirmed that its new products meant to compete with the Apple iPhone and other increasingly popular smart phones would not be ready until at least the fall. The company is also attempting to retool its hastily and rushed-to-market Playbook tablet, which was supposed to be an alternative to the iPad but which by almost universal agreement was nothing of the sort. Read more…

06.16.11

Today, IBM officially marks its 100^th anniversary. But the company today bears remarkably little resemblance either to the sleepy Computer Tabulating Recording Corporation that was formed on June 16, 1911, or to the more iconic International Business Machines (renamed to one-up then rival National Cash Register in the 1920s) that was one of the dominant companies during the brief but spectacular American century.

In fact, IBM today is one of the great stories of a company pulling out of a death spiral and reinventing itself. Its heyday was in the 1960s, when it was an integrated mainframe computer company with perhaps the best sales force in the United States. It enjoyed intimate connections with government as well. But by the late 1980s, the once-impregnable Big Blue was suffering, its core businesses losing share rapidly to competitors ranging from Microsoft to Intel to a wave of new PC makers. At the beginning of the 1990s, the company was no longer profitable, its workforce was bloated and ineffective and it seemed likely to soon join the ranks of once-great and now extinct U.S. companies. Read more…

06.15.11

At the start of the week, Jeff Immelt, the CEO of GE and the head of President Obama’s task force on job creation, released an interim report on plans to boost employment in the U.S. The reactions have been relatively predictable. Immelt himself has come in for criticism — fair or not — as a corporate titan who has overseen job creation abroad and job destruction at home, and there has been no shortage of voices pointing to GE’s global profits that have not been subject to American taxation.

Of course, it isn’t just Immelt. The council is composed of a number of prominent CEOs, including Ken Chennault of American Express, and overall, the initiatives proposed by the Jobs and Competitiveness Council have received mixed reviews. The council calls for more vocational education to train unemployed workers with the skills needed for today’s more complicated manufacturing jobs. It suggests green and energy efficiency makeovers for buildings as a source of construction jobs, urges that policies to encourage foreign tourism in the U.S. will boost economic activity, and advocates more government-backed small business loans. The council also promises to report back in 90 days with more strategic and long-term solutions. Read more…