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As Irwin Stelzer argued in a recent opinion article in the Wall Street Journal, Spain’s Prime Minister José Luis Rodríguez Zapatero seems to be an admirer of Charles Dickens’s character Mr. Micawber. When asked what he plans to do about Spain’s 11.4% fiscal deficit, first he promises to extend the retirement age, only to later [...]

Most of us have about 20 years to secure our retirement – from our mid 40s to our mid 60s. That has been an absolute disaster for my generation, with inflation-adjusted returns on a global equity portfolio being down about 23% over the past decade. The problem confronting us is that we continue to be stuck in a structural bear market which we define as a market where returns are low because valuations (P/E levels) are under pressure.

Unfortunately, this is likely to continue for several years more. Following the liquidity crisis of 2008, we have entered a so-called balance sheet recession. When that happens, the first priority becomes to minimise debts at the cost of pretty much everything else. As both households and corporates change their mindsets about debt, governments may be forced to pick up the slack; otherwise we would enter a very deep recession. Therefore we’d better get used to many more years of large government deficits.

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My favorite economic entertainer is back with his usual over-the-top semi-apocalyptic comments about government officials, the U.S. and more.  Here are a few choice quotes from Dr. Doom followed by the full videos of his session on Squawk Box on CNBC Europe below.
On Obama
I don’t have a very high opinion of Mr. Obama. I was [...]

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Employees of US states and cities have much better pension plans than do Average Americans and this is creating some serious budgetary problems, one reason to be very careful in assessing municipal bonds, particularly general revenue ones.
A recent FT article puts some numbers on this problem:
The US public pension system faces a higher-than-expected shortfall of [...]

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While many companies can use the huge increase in market returns to mask a looming pension crisis, the problem is still acute. Because of actuarial accounting, pension funding problems are pro-cyclical.  Companies look flush with cash during upswings to the point where the pensions can actually goose earnings.  During downswings, this process works in reverse.
When [...]

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This story is on the front page of Business Week:
Detroit Mayor Dave Bing is struggling to save his city from fiscal calamity. Unemployment is at a record 28% and rising, while home prices have plunged 39% since 2007. The 66-year-old Bing, a former NBA all-star with the Detroit Pistons who took office 10 months ago, [...]

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Morgan Stanley’s piece on Treasuries Priced for Perfection…for Now! is pretty bearish. The basic gist is that while the ten-year represents fair value today, because inflation expectations have become unanchored, Morgan Stanley expects the yield to rise from 3.3% to 5.5%. That’s a disaster of 1994 proportions. Obviously, given some of my recent comments, this [...]

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Economist’s View: "China and the American Jobs Machine" (And don’t fall into the Blame Asia Meme http://bit.ly/pseaY)
买黄金! | egghat’s blog (This German post says that owning gold was illegal in China six years ago. Now the message to get into gold is everywhere there.)
Toddlers insensitive to fear go on to commit crimes – [...]

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Bill Gross of Pimco spoke on Bloomberg with Tom Keene and Ken Prewitt. He thinks the U.S. is entering a new normal of low nominal GDP growth. However, financial bets have been made on 6-7 percent nominal GDP (think pension liabilities).  Unless we get 5-6% nominal GDP growth debt deflation and deleveraging dynamics (the D-process)will [...]

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I have really started to dislike municipal bonds as an asset class. They have seen a huge rally along with almost every other financial asset but the underlying fundamentals are weak because of financial distress at states and municipalities.
Last week, I wrote a first piece on this topic, based on some work by Philip Greenspun [...]