– The Financial Times has been running a debate all week on whether the U.S. and E.U. ought to implement more fiscal stimulus or start reining in their fiscal deficits and reducing their debts: http://www.ft.com/austeritydebate (registration required). A couple of thoughts on this, from a layman’s perspective follow. First, it seems that if you Venn diagrammed most economists’ views, the area of overlap would be on the need for implementing some policies now to credibly restrain entitlement spending in the future.
Second, fiscal stimulus, if more is on order, ought to be of a sort that would increase the future productivity of our economy. Some infrastructure spending would seem to fit this bill (e.g., building more nuclear power plants to ensure a growing supply of low-cost energy), but there’s a political risk that we’d get green energy or Super Train boodogles instead. Of course, another problem with infrastructure spending is that it takes forever to get legal/regulatory approval to build anything in the U.S. Fiscal stimulus in the form of one-off cash payments (e.g., refundable tax credits) to consumers seems like a bad idea in that much of it will end up stimulating Chinese factories, and hair-of-the-dog stimulus is of course a bad idea.
– The other big economic question seems to be what’s happening with China, i.e., will it succeed in cooling its economy slightly while keeping it firing along at ~10% annual growth rates? I know where Hesperian stands on this (and, in his bearishness, he has the company of some well-known short sellers). The recent drop in the Baltic Dry Index supports the bearish view:
But, as a recent FT Lex column noted, the index is distorted because of the boom in ship building increasing the supply of dry bulk cargo ships, which puts some downward pressure on shipping costs. On the other hand, BHP’s iron ore output was up 16% in its most recent quarter. That, combined with the recent decline in Alloy Steel’s shares prompted me to think about adding more. I refrained from adding any AYSI shares above $2.29, as the stock ran to $3.15. My gut feeling is that a good price for the stock now, taking into account the current uncertainty, is somewhere between $1.50 and $2. So I put in a limit order to buy a few more shares in that range.
– On the up day, I picked up a few shares of and calls on VXX.
– Hat tip to Ilkka Kokkarinen for bringing this blog to my attention, The Last Psychiatrist. Some interesting stuff in the archives there. A couple of years ago, a writer named Lori Gottlieb created such a big stir with a piece she wrote in the Atlantic that she quickly got a deal to expand the article into a book; she turns out to be pretty interesting character. TLP gives his take on her here, and in the comments, someone links to this Jezebel interview with one of Gottlieb’s exes. Bizarre stuff.
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