Blog Posts by Daniel Gross

  • PIMCO’s Bill Gross: QE3, Inflation, Muted Growth on the Way

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    Another round (or two) of quantitative easing from the Federal Reserve, muted growth and an end to the 30-year bull run in government bonds.

    That's what Bill Gross, one of the largest bond investors in the world, sees for the U.S. economy in the coming year. Gross is co-chief investment officer of PIMCO, the giant asset managers whose Total Return Fund is the largest bond mutual fund with current assets of about $250 billion.

    Gross says long-term interest rates have been rising in recent weeks (here's a chart of the 10-year U.S. bond) for two principal reasons. "Yes, inflation is rearing its head. We're seeing that in oil prices and other commodities, and we're seeing it in the numbers," he said. The consumer price index has risen 2.9% in the past 12 months. In addition, Gross says, the Federal Reserve's "Operation Twist" is scheduled to end in a few months. Under this plan, the Fed sold short-term debt and purchased long-term bonds in an

    Read More »from PIMCO’s Bill Gross: QE3, Inflation, Muted Growth on the Way
  • Age of Austerity Makes Politics More Divisive: Author Edsall:

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    It's the economy stupid! The buzzword from the 1992 presidential campaign has resonated in ways simple and complex throughout the years. The campaign of 2012 is no different. This year's contest is set against the backdrop of an economy recovering from the hardest fall it has taken in 80 years, rising gas prices, a massive public debt, and significant questions about the future of taxes.

    But the pinched era of deleveraging, slow growth, and high unemployment has effects far beyond the ballot box, according to Thomas Byrne Edsall, the author of The Age of Austerity: How Scarcity Will Remake American Politics. Edsall, one of the deans of American political journalism, argues that limited economic horizons make American politics more pinched and polarized, less generous and forward-looking. Americans aren't inherently nasty or nice, or stingy or generous—but rather the economy makes them so. As we discuss in the accompanying video, if sustained growth covers up a multitude of political, fiscal and economic scenes, so sustained slow-growth exacerbates existing tensions.

    Edsall's book is a systematic inquiry into the effects of scarcity on the American political system. And his general conclusion is that the effects are quite bad. The political conflicts of the past few years highlight a political system at the breaking point, he argues. As a result of large deficits and slow growth, the longstanding compromise "between one party promoting a social safety net and the other party asserting that hard-earned tax dollars unjustly finance those benefits is no longer tenable." And that creates a "dog eat dog political competition over diminishing resources."

    In Edsall's view, prolonged austerity producing greater cleavage in voting behavior between races and genders, and accounts for rising hostility to immigrants. When there are fewer jobs to go around, people tend to be more concerned about foreigners coming in and taking them away. Edsall believes it is no coincidence that Arizona, one of the states whose government and local economy were hit hardest in the downturn, has been among the most aggressive states in enacting anti-immigrant legislation. (Of course, it also shares a very long border with Mexico.)

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    There's no such thing as a "hot hand" or a "clutch player." And home field advantage exists only in the mind of referees.

    These are a few of the insights gleaned from Scorecasting: The Hidden Influences Behind How Sports Are Played and Games Are Won. A collaboration between L. John Wertheim, a veteran Sports Illustrated correspondent and author of several books, and Tobias Moskowitz, a professor of economics at the University of Chicago, Scorecasting is what would happen if Moneyball met Freakonomics and spawned a child. The authors of the book, now out in paperback, apply data and insights into behavior to a range of sports-related issues.

    One of their most powerful insights is the observation and description of "omission bias" — the notion that people avoid taking action that could be controversial rather than go out on a limb. Omission bias can be seen in officiating in virtually every sport, as umpires and referees generally avoid

    Read More »from Scorecasting Author Wertheim: The Myth of the Hot Hand, Clutch Players, and ‘Icing’ Kickers
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    Every day, Michelle Leder and the crew at Footnoted.com comb through Securities and Exchange Commission filings in search of nuggets on executive pay, C-suite perks, and general corporate shenanigans. Every month she joins us to discuss the highlights and lowlights. February's crop includes a snake-bitten financial executive, an expose-worthy consulting deal at The New York Times Co. (NYT), a rare bolt of candor and humility from Netflix (NFLX), and fireman who are upset at Ralph Lauren (RL).

    His Name is Mudd. Literally. Daniel Mudd, son of the former NBC anchor Roger Mudd, enjoyed a soaring career in the finance field until a few years ago. He was the CEO of mortgage giant Fannie Mae until it went into federal conservatorship in the fall of 2008. Even though the company would require a massive bailout, Mudd walked away with a separation payment worth more than $9 million. Mudd quickly landed on his feet, as CEO of Fortress investment Group,

    Read More »from Footnoted.com: February’s Highlights (and Lowlights) in Executive Compensation
  • Jobs Report: Trend of Meaningful Growth Emerges

    When something happens once, it's a phenomenon. When something happens twice, it's a coincidence. When something happens three times, it's a trend. That's an old journalistic rule of thumb. And by that rule, February's employment report confirmed that we have a trend of decent employment growth.

    The headline number showed that the economy created a net 227,000 jobs in February. When the economy began to create jobs in significant numbers, analysts frequently pointed out that a job creation rate of 150,000 per month was barely enough to keep up with population growth, and wasn't enough to make a dent in unemployment. Now we're finally getting that growth. February marked the third straight month in which payroll jobs rose by more than 200,000. Gains could be seen in a range of industries: professional and business services, manufacturing, and health care. The construction and retail trade sectors shed positions.

    The job market is starting to look better now, and it's also starting to

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  • Reporting From Ohio: What Matters to Voters on Super Tuesday

    Toledo, Ohio — "It's fun again," said Joe Choate, manager of the sprawling General Motors powertrain plant in this city on the shores of Lake Erie.

    Near death in 2009, when GM filed for bankruptcy, the plant went down to a skeleton crew of about fifteen employees, as the factory and the local economy shifted into reverse. Today, the modern plant, bolstered by new business and investment — last May, GM (GM) announced it would invest $200 million in the plant -- is pumping out 5,200 transmissions per day. More than 2,000 workers are busy making front-wheel drive transmissions for the hot —selling Chevrolet Cruze and rear-wheel transmission for pick-ups and SUVs. "We brought all of our people that we had laid off, brought 250 other people in from GM sites," said Choate. "And now we're just bringing in new Social Security numbers" — i.e . new hires.

    The workers are feeling better, too. "There is an optimism that we see as a membership and a workforce, that maybe we've turned the corner

    Read More »from Reporting From Ohio: What Matters to Voters on Super Tuesday
  • FT’s Beattie: Ben Bernanke Is The Only Hero of the Financial Crisis

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    Can't anybody here play this game? That's what New York Mets manager Casey Stengel allegedly said about his epically incompetent team in the early 1960s. In his new e-book, Who's in Charge Here? How Governments Are Failing the World Economy, Alan Beattie, international economy editor at the Financial Times, asks the same question about the world's financial ballplayers. Surveying the wreckage of the last several years, Beattie finds very little competence in the individuals and institutions charged with stewardship of the world's economy.

    To his mind, the U.S. Federal Reserve headed up by Chairman Ben Bernanke handled the financial crisis best among the world's central banks, with the Bank of England. In fact he calls Bernanke, who is an expert on The Great Depression, the only hero of the financial crisis. But when he looks around the world, Beattie finds a lot of doctors making the wrong prescription. "The worst offenders are the

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  • Author Scheiber: Obama Economic Team Escaped Depression, Fumbled Recovery

    The dark economic days of early 2009 — hundreds of thousands of jobs lost per month, the Dow sinking to 6,600, a sense of chaos — may now seem a distant memory. But the legacy of the deep downturn, and the economic policies forged in that crucible are still very much with us. And, so, too, are the debates over the response by the Federal Reserve and the Obama Administration. Was the stimulus too much or too little? Did the central bank exert itself excessively to aid Wall Street? And did the elite cadre of brilliant economic minds that flocked to Washington in 2009 accurately diagnose the situation and prescribe the appropriate cure?

    In his timely, highly readable new book, The Escape Artist: How Obama's Team Fumbled the Recovery, Noam Scheiber, a veteran Washington reporter with a solid background in economics, delves into these questions.

    From the outset, Scheiber argues, the willingness of the Fed and Treasury to go all out to save the financial system was not matched by a similar desire by the administration to pitch big ideas to help the real economy. One of Scheiber's big scoops was the unearthing of a memo written by Christina Romer, the head of the Council of Economic Advisers, in which she argued that a stimulus of $1.8 trillion would be needed to return employment to healthy levels by 2011. But the memo never reached the president's desk, in part because the dominant political advisers believed a measure of that size was a non-starter. "I think they missed an opportunity out of the gate," Scheiber says. While the stimulus worked and helped get the economy back on a track of growth, it ultimately was a half-measure that disappointed. "They were right about the shape but didn't give it enough oomph to get escape velocity," for the economy, Scheiber says. (In the accomanying video, Scheiber joins me and my colleague Aaron Task to discuss his book).

    Read More »from Author Scheiber: Obama Economic Team Escaped Depression, Fumbled Recovery
  • Limited Gas Pains: Why the U.S. is Better Able to Handle Higher Gas Prices

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    As the price of gasoline continues to rise — yesterday, I paid a painful $4.25 per gallon — concerns are rising over the potential impact of expensive fuel on the overall economy. But, as Aaron Task and I discuss in the accompanying video, the U.S. economy is better situated to handle higher gas prices than it was last year, four years ago, or ten years ago. The upshot: higher gas prices are going to hurt, and will be painful for many. But they won't torpedo the economy.

    For a host of reasons, the world's largest consumer of gasoline is much less likely to be the victim of high gas prices than it was a few years ago. Here's why.

    First, compared with 2007 and 2008, corporate and personal balance sheets are in much better shape, and hence better able to absorb rising costs.

    Second, the U.S. is a bigger producer of oil than it was a few years ago. Oil consumption is in many ways a zero-sum game: more money spent by consumers on gasoline

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    By Daniel Gross

    "The West as such is not finished, but its global supremacy is over," Zbigniew Brzezinski writes in his new book, Strategic Vision: America and the Crisis of Global Power.

    But that doesn't mean the U.S. should simply sit back, detach from the evolving world, and see its influence decline, as Great Britain did in the years after World War II. Rather, as Brzezinski tells me in the accompanying video, the U.S. has an extremely important twin role to play.

    An adherent of the "realist" school of foreign policy, Brzezinski, a long-time national security expert, argues that in this evolving, interconnected world, it's simply impossible for one nation, or even one region, to dominate large chunks of the world the way Rome did 2000 years ago, or the Ottoman Empire did 500 years ago, or the British Empire did a century ago. "The world is now much more diversified," he says. "There is a new east in Asia, and there is a global

    Read More »from Zbigniew Brzezinski’s Strategic Vision: America and the Crisis of Global Power

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