Economic Outlook

Many people are complaining today about low yields in the bond markets. They are complaining, that is, at the same time they are buying.

The Basel Committee on Bank Supervision launched a new siphon hose into the kiddie pool last week in the form of several new recommendations on bank capital requirements.

Last Thursday afternoon a natural gas main in a densely populated San Francisco suburb exploded, destroying dozens of homes and creating a fiery mess. Over one hundred homes were damaged, but fewer than 10 people were seriously hurt and only four deaths have been reported as of this writing.

Recently, I had an email exchange with a long-time friend and bond broker with whom I've done business for more than 15 years. Our topic of conversation was the potential for the SEC to enforce a fiduciary duty on his industry.

The bullets we need for economic recovery have been with us all along. For evidence, you need look no further than the first report card on Fannie and Freddie since conservatorship.

There is much to be learned about life by simply observing human behavior.

Last week, I had an opportunity to learn something about myself that was both surprising and revealing with regard to the analysis of economic and policy woes of today.

In February 2007, HSBC shocked the analyst community when it put aside $10.6 billion to cover future losses on bad mortgage debt. Other lenders were in a similar situation and a cascade of dour mortgage market predictions kicked off the - take your pick of names - liquidity, consumer leverage, credit quality, stock market, bond market, CDS market, sovereign debt, mismatched funding, euro, trade deficit, currency reserve, and interest rate crisis.

In my conversations with CFOs lately, I am hearing more and more about their desire for higher return.

The ratings agencies have largely escaped public scorn throughout the current financial crisis, including the recent regulatory reform signed into law. A notable exception is the legal liability foisted upon them regarding the ratings they place on specific issues.

Followers of the Fed have always been challenged with interpreting its written or spoken word. From the early Greenspan days, Fed-watchers spent countless hours scouring speeches, testimonies and written releases, parsing every single word in search for clues of coming Fed actions.