In Search of the Perfect Investment

This is what the last five days looked like until close of business on Friday.

This is what the last five days looks like this morning.

Go figure.

From Business Insiders’ 10 Things to Know before (today’s) opening bell:

+ Crude oil hit a six-year low. West Texas Intermediate crude oil fell to $43.57 per barrel in overnight trade, touching its lowest level since March 2009. Currently, crude oil is down 0.4% at $44.66 per barrel.

+ Goldman Sachs says the euro will fall to $0.80. In a note released on Friday, the investment bank predicted the euro would fall to parity in six months and $0.80 by the end of 2017. The call comes a couple of days after Deutsche Bank announced it saw the euro hitting $0.85 before 2017.

+ Germany’s DAX climbed above 12,000 for the first time ever. Germany’s DAX (+1%) is making headlines, crossing the psychologically important 12,000 level, but it is Italy’s MIB (+1.2%) that leads Europe higher. Overnight in Asia, China’s Shanghai Composite (+2.4%) led and Australia’s ASX (-0.3%) lagged.  (The Australian dollar is down to 76.6 cents. It used to be over a dollar.)

The last year has been amazing unpredictable — the 50%+ collapse in the price of oil. The 25% increase in the value of the dollar. BIG things are not meant to change this fast!

 Paul Krugman wrote this piece in the New York Times a few days ago:

Strength is weakness
We’ve been warned over and over that the Federal Reserve, in its effort to improve the economy, is “debasing” the dollar. The archaic word itself tells you a lot about where the people issuing such warnings are coming from. It’s an allusion to the ancient practice of replacing pure gold or silver coins with “debased” coins in which the precious-metal content was adulterated with cheaper stuff. Message to the gold bugs and Ayn Rand disciples who dominate the Republican Party: That’s not how modern money works. Still, the Fed’s critics keep insisting that easy-money policies will lead to a plunging dollar.

Reality, however, keeps declining to oblige. Far from heading downstairs to debasement, the dollar has soared through the roof. (Sorry.) Over the past year, it has risen 20 percent, on average, against other major currencies; it’s up 27 percent against the euro. Hooray for the strong dollar!

Or not. Actually, the strong dollar is bad for America. In an immediate sense, it will weaken our long-delayed economic recovery by widening the trade deficit. In a deeper sense, the message from the dollar’s surge is that we’re less insulated than many thought from problems overseas. In particular, you should think of the strong dollar/weak euro combination as the way Europe exports its troubles to the rest of the world, America very much included.

Some background: U.S. growth has improved lately, with employment rising at a pace not seen since the Clinton years. Yet the state of the economy still leaves a lot to be desired. In particular, the absence of much evidence for rising wages tells us that the job market is still weak despite the fall in the headline unemployment rate. Meanwhile, the returns America offers investors are ridiculously low by historical standards, with even long-term bonds paying only a bit more than 2 percent interest.

Currency markets, however, always grade countries on a curve. The United States isn’t exactly booming, but it looks great compared with Europe, where the present is bad and the future looks worse. Even before the new Greek crisis blew up, Europe was starting to resemble Japan without the social cohesion: within the eurozone, the working-age population is shrinking, investment is weak and much of the region is flirting with deflation. Markets have responded to those poor prospects by pushing interest rates incredibly low. In fact, many European bonds are now offering negative interest rates.

This remarkable situation makes even those low, low U.S. returns look attractive by comparison. So capital is heading our way, driving the euro down and the dollar up.

Who wins from this market move? Europe: a weaker euro makes European industry more competitive against rivals, boosting both exports and firms that compete with imports, and the effect is to mitigate the euroslump. Who loses? We do, as our industry loses competitiveness, not just in European markets, but in countries where our exports compete with theirs. America has been experiencing a modest manufacturing revival in recent years, but that revival will be cut short if the dollar stays this high for long.

In effect, then, Europe is managing to export some of its stagnation to the rest of us. We’re not talking about a nefarious plot, about so-called currency wars; it’s just the way things work in a global economy with highly mobile capital and market-determined exchange rates.

And the effects may be quite large. If markets believe that Europe’s weakness will last a long time, we would expect the euro to fall and the dollar to rise enough to eliminate much if not most of the difference in interest rates, which would mean severely crimping U.S. growth.

One thing that worries me is that I’m not at all sure that policy makers have fully taken the implications of a rising dollar into account. The Fed, still eager to raise interest rates despite low inflation and stagnant wages, seems to me to be too sanguine about the economic drag. And the most recent Fed minutes suggested that some members of the committee that governs monetary policy were thoroughly clueless, apparently believing that inflows of capital would make the U.S. economy stronger, not weaker.

Oh, and one more thing: a lot of businesses around the world have borrowed heavily in dollars, which means that a rising dollar may create a whole new set of debt crises. Just what the global economy needed.

Is there a policy moral to all this? One thing is that it’s really important for all of us that Mario Draghi at the European Central Bank and associates succeed in steering Europe away from a deflationary trap; the euro is their currency, but it turns out to be our problem. Mainly, though, this is another reason for the Fed to fight the urge to pretend that the crisis is over. Don’t raise rates until you see the whites of inflation’s eyes!

City Affordability wins: Salt Lake City, Pittsburgh, and Minneapolis–St. Paul. “Among residents under 35, the Twin Cities place in the top 10 for highest college-graduation rate, highest median earnings, and lowest poverty rate.” Also, “the Twin Cities have the highest employment rate for 18-to-34-year-olds in the country.”

Unlike America’s coastal megatropolises, Minneapolis doesn’t benefit from a proximity to other rich cities and their intermingling of commerce. Instead, it’s so far from other major metros that it’s a singular magnet for regional talent. “There’s basically nothing between us and Seattle, so we’ve historically had all these smaller cities in Iowa, Nebraska, the Dakotas, and Montana that are our satellites,”

Minneapolis is so successful at turning medium-size companies into giants because its most important resource never leaves the city: educated managers of every level, who can work at just about any company.

Minneapolis. Good place to invest. Read more in the latest Atlantic.

The accidents of age. You replace your knee. Then you replace your hip. Then you trip on a rug on the way to the bathroom in the hotel you’re staying in. Bingo you fall on your entire weight comes crashing down on your leg. You break your femur which is the only bone of the human thigh. It is both the longest and the strongest bone in the human body, extending from the hip to the knee.

And the upshot? 104 days in hospitals and rehab. And you’re still in pain.

Suffice, none of us are spring chicken, any longer.

Be careful. the worst places to fall:

1. The bathroom

2. Any strange hotel with strange carpets and other implements of destruction.

3. The last step of any staircase. It will be taller or shorter than the other, and, hence, dangerous.

Hold the rail. Walk slowly in strange places. Wear your glasses.

Everyone seems to be in such a hurry to scream ‘racism’ these days.

The customer asked, “In what aisle could I find the Polish sausage?”

The clerk asks, “Are you Polish?”

The guy, clearly offended, says, “Yes, I am. But let me ask you something.

“If I had asked for Italian sausage, would you ask me if I was Italian?

Or if I had asked for German Bratwurst, would you ask me if I was German?

Or if I asked for a kosher hot dog would you ask me if I was Jewish?

Or if I had asked for a Taco, would you ask if I was Mexican?

The clerk says, “No, I probably wouldn’t.”

The guy says, “Well then, because I asked for Polish sausage, why did you ask me if I’m Polish?”

The clerk replied, “Because you’re in Home Depot.”

Once at Chicago O’Hare Hyatt giving an all-day seminar,  speech, I told some bad Polish jokes. At lunchtime one of the participants drove me around the neighborhood. It was loaded with Polish stores. My “jokes” weren’t appreciated. From then on I stuck to jokes about airlines and hotels.

Harry Newton who eyes the unpredictability of life: