Green shoots scenario: Krugman calls recovery originally appeared on BloggingStocks on Mon, 08 Jun 2009 17:00:00 EST. Please see our terms for use of feeds.

Wall Street is supposed to be a support function -- helping CEOs come up with cash to make investments. But since Ronald Reagan, Wall Street has become the tail that wags the economic dog.

Today, Paul Krugman highlighted this by pointing out that in the 1960s, Wall Street accounted for 4% of GDP -- a figure that rose to 8% by 2007. Reagan began a process of deregulating Wall Street and in 2004, the SEC let financial institutions borrow way too much. The result is an unprecedented economic catastrophe, including an American International Group (NYSE: AIG) bailout that will cost another $1.6 trillion.

Continue reading With $1.6 trillion to go in AIG's bailout, it's time to trim Wall Street's power

With $1.6 trillion to go in AIG's bailout, it's time to trim Wall Street's power originally appeared on BloggingStocks on Fri, 27 Mar 2009 13:30:00 EST. Please see our terms for use of feeds.

However, Paul Krugman, the liberal Noble Prize winner, wrote an editorial in The New York Times attacking the plan as "Cash for Trash." Subsequently, Newt Gingrich, the former Republican Speaker of the House, announced on Fox News that he agreed with Professor Krugman. When senior figures on both left and right agree, it may be wise to look past the euphoria.

Continue reading The Geithner Private-Public Partnership: The cure may be worse than the disease!

The Geithner Private-Public Partnership: The cure may be worse than the disease! originally appeared on BloggingStocks on Tue, 24 Mar 2009 15:20:00 EST. Please see our terms for use of feeds.

Continue reading NYT's Krugman: Hopefully, 'Globalization 2.0' will fare better than 1.0

NYT's Krugman: Hopefully, 'Globalization 2.0' will fare better than 1.0 originally appeared on BloggingStocks on Mon, 22 Dec 2008 14:19:00 EST. Please see our terms for use of feeds.

Princeton professor and New York Times op-editorialist, Paul Krugman, just won the Nobel Prize in economics "for his analysis of trade patterns and location of economic activity." This award comes at a time when he has been weighing in on the debate as to how best to fix the financial crisis. And I found inspiring his suggestion that governments should inject capital into ailing banks -- an idea that has taken hold in the U.K. and may also prevail here.

Why did Krugman win the Nobel? His work bolstered a branch of economics called strategic trade theory which argues that countries can subsidize certain industries to gain global market share. Others have praised his work on the development of clusters of related industries and his equations that measure how economic shocks affect the current account, exchange rates and capital flows.

The official name of Krugman's prize is "The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel." He'll get $1.4 million, a gold medal and a diploma. I've agreed and disagreed with him but if his ideas about how to fix the financial crisis take hold, maybe he'll be able to find a safe bank in which to deposit his winnings.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Paul Krugman wins Nobel Prize. Can he safely deposit his $1.4 million check? originally appeared on BloggingStocks on Mon, 13 Oct 2008 09:31:00 EST. Please see our terms for use of feeds.

CNNMoney.com reports that gasoline hit a new record of $3.718 a gallon today. That's up 21% from a year ago when it sold for $3.06 (although I remember paying $2.20 a gallon in February 2007 for midgrade). The U.S. government could help out us poor gasoline consumers, but it refuses to do so. Meanwhile, in 2008, global oil supply is expected to grow more than global oil demand. So arguments that speculation has nothing to do with record oil prices fall flat.

Yet, this morning, the New York Times' Paul Krugman offered such an opinion. He concluded that oil is not a bubble. He doesn't really define what he means by a bubble, nor does he offer any numbers to back up his case that the price of oil is rising due to demand growth exceeding that of supply. He also throws in a comment about how if oil were a bubble, people would hoard it and they're not.

But numbers from the Energy Department suggest that global oil production will grow more than demand. Specifically, it expects global production to exceed global consumption by 0.8 million barrels a day (mmbbl/d). How so? The Energy Department forecasts global consumption in 2008 to rise 1.2 mmbbl/d from 85.4 mmbbl/d to 86.6 mmbbl/d. Meanwhile, it expects global oil production to grow 2.0 mmbbl/d from 84.6 mmbbl/d in 2007 to 86.6 mmbbl/d in 2008.

Continue reading Oil supply to grow more than demand so why is gas at a record high?

Oil supply to grow more than demand so why is gas at a record high? originally appeared on BloggingStocks on Mon, 12 May 2008 12:24:00 EST. Please see our terms for use of feeds.

Wal-Mart opens 81 stores this month; providing jobs? originally appeared on BloggingStocks on Wed, 05 Mar 2008 17:55:00 EST. Please see our terms for use of feeds.

Continue reading Fred Thompson quits presidential race; Ralph Nader looms

Fred Thompson quits presidential race; Ralph Nader looms originally appeared on BloggingStocks on Tue, 22 Jan 2008 16:05:00 EST. Please see our terms for use of feeds.

New York Times, CNBC partner to thwart Fox Business Network originally appeared on BloggingStocks on Mon, 07 Jan 2008 09:35:00 EST. Please see our terms for use of feeds.

New York Times op-editorialist Paul Krugman got one right today. And its Floyd Norris points out why the solution to the problem Krugman highlights could be SWFs (Sovereign Wealth Funds). Krugman does not know how much the financial industry's problems will cost and Norris suggests that SWFs -- government investment funds -- are worth between $2 trillion and $15 trillion.

Krugman's right that the Fed's four attempts to reboot the financial system have not worked because they dance around the most fundamental problem -- nobody knows the depth of the financial hole. If I was in charge, I would find out where all the toxic waste is buried and estimate the amount of capital needed to offset the cost of writing it down. In my view, it makes sense to mark the toxic waste to market and to raise capital at the same time.

Norris points out that SWFs could be part of the capital raising solution -- as they have been in the cases of Citigroup Inc. (NYSE: C) and UBS AG (NYSE: UBS). He also suggests two pitfalls of SWFs as a source of capital. First, they are government controlled which could allow the SWFs to use the resulting power over our financial institutions to further their political ends. Second, whenever a new acronym such as SWF emerges in the financial world -- and there have been plenty including Collateralized Debt Obligation (CDO) and Structured Investment Vehicle (SIV) -- Wall Street will find a way to profit from it in the short-term while sticking the long-term costs on someone else.

Continue reading Krugman gets one right and why SWF does not mean Single White Female

Krugman gets one right and why SWF does not mean Single White Female originally appeared on BloggingStocks on Fri, 14 Dec 2007 10:00:00 EST. Please see our terms for use of feeds.

In today's New York Times, Paul Krugman offers an explanation for the cause of the mortgage meltdown. While I think he comes close to the mark, he misses an important point: bankers will respond to incentives.

I would love to have the talent that warrants the platform Krugman has -- to opine on economic and political matters on the pages of the New York Times. Krugman uses that platform to suggest that the reason for the bad mortgage loans is that bankers "haven't been forced to give back any of the huge paychecks they received before the folly of their decisions became apparent."

My view differs from Krugman's. There is no way bankers will give back their paychecks after they've negotiated their contracts just because Krugman wants them to. In my view, the real issue is that bankers are like any other person and they will respond to incentives. If their pay was linked to both the costs and benefits of the loans they made, then they would care about the risk that the loan might not be repaid.

Continue reading Paul Krugman fails to explain the reasons for the mortgage meltdown

Paul Krugman fails to explain the reasons for the mortgage meltdown originally appeared on BloggingStocks on Fri, 23 Nov 2007 16:18:00 EST. Please see our terms for use of feeds.

Rupert Murdoch mulled offer for the New York Times originally appeared on BloggingStocks on Thu, 15 Nov 2007 19:04:00 EST. Please see our terms for use of feeds.

According to the New York Post, the New York Times Co. (NYSE: NYT) is considering ending its online paid service, presumably moving towards a pure advertising system. The paid service was used to further monetize readers of the most popular columnists at the paper, such as Paul Krugman and Thomas Friedman.

Even the columnists who are featured in the "Select" program have held reservations on the program since its inception, the Post goes on to say. But according to a NY Times spokeswoman, this segment has "met or exceeded all its goals since it started in 2005."

Fact is, the future of the online newspaper business is purely advertising-based. The new age of internet publishing with its extraordinarily low barriers to entry (think blogs) has made consumers even more adverse to paying for reading material on the internet.

I'd still avoid the New York Times and McClatchy (NYSE: MNI) -- they are declining businesses and I think the street is still overestimating the companies' earnings abilities in the next few years.

NY Times to end pay site? originally appeared on BloggingStocks on Sun, 22 Jul 2007 15:10:00 EST. Please see our terms for use of feeds.