The Online Investing AI Blog

The economy is much more sluggish than the members of the Federal Reserve Board and experts, in general, expected.

Economists are ratcheting back GDP growth expectations. What started out as optimistic has turned to rational. And, now, the projections for GDP growth are tenuous.

The Fed is suggesting growth will be in the 3 to 3.5 percent range.

What’s troubling is that the Fed and every other governmental budget officer has spent their wad on propping up the economy. Is there anything else they can do?

The answer is, “yes.”

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Investing, Money, Online Investing AI, US Economy fed, federal reserve board, growth, inflation, Money, recovery, supply, U.S.

Last week I read When Genius Failed, the fascinating story about the rise and fall of Long Term Capital Management (LTCM). This neat book offers us many important lessons.

For those unawares, LTCM was one of the largest, well funded and “smartest” hedge funds ever launched. In fact, two Nobel Prize winners for their work on options brought their brains. They were Myron Scholes and Robert C. Merton. How much smarter can you get?

There was one small problem. No amount of intelligence could save the fund from its traders, and their Achilles heel: their desires. Like a kid in a candy store, better judgement and moderation were overrun by greed. And it ended in the most spectacular hedge fund blow up in history.

What can we learn from this?

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Pic @ Flickr

We’ve seen tech bubbles.

Commodities bubbles.

Real estate bubbles.

While speculative bubbles tend to be naturally occurring segments of an economic cycle, there’s still some debate on what causes extreme bubbles–and their quick implosion. Some just say it’s the irrationality of people. Others blame the machinations of the free market system.

A recent post in Trader’s Narrative, opens up another possible reason for this rapid bubble-and-bust cycles: politics.

Politics are driving monetary policy.

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Business Strategy, Investing, Money, Online Investing AI bubble, economy, fed, federal reserve, government, GTO, interest rates, investing money, Money, politics

Frozen Economy by lrargerich @ Flickr

The Fed’s Beige Book business survey, which reported that the economy is improving “modestly” the last few weeks. (You can read a report on the Beige Book at Forbes.)

The survey looks at economic condition in 12 markets. A total of eight of those markets are starting to show signs of increased economic activity.

That’s a little silver lining. The report also indicates that hiring remains weak and may not reach past levels in six to eight years.

That’s right: six to eight YEARS.

“But wait,” I hear you say, “I thought you said there was a silver lining. People losing their jobs and struggling to find work isn’t good news.”

You’re right. It’s not good news. At all. But, bear with me, because there is positive news in this trend.

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Business Strategy, Money, Online Investing AI, Success, US Economy beige book, economy, fed, job, jobs, reserve, unemployment, work

“The recession is very likely over at this point”–
Ben Bernanke

Ben Bernanke is pronouncing us out of the recession woods. He isn’t the only one. Obama administration members are saying they see the light at the end of the tunnel.

There are economic signs that normalcy is returning, too. Job loss is slowing down. Consumers are returning (sorta). And confidence is rebounding.

But, not everyone is so sure. A number of financial experts are saying that for the amount of stimulus, we should be rapidly pulling out of the recession. But, we’re still limping.

The dollar, as the chart shows, is declining. The worse may be far from over on this recent slide, according to one financial blog.

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Investing, Money, Online Investing AI, US Economy ben bernanke, dollar, fed, federal reserve board, trading