Big Themes – Outlook 360 Spring Edition

Posted on May 15, 2013 by HighTower

Posted By: Matthias Paul Kuhlmey

I. Introduction

Five years ago, we founded HighTower in the midst of the 2008/2009 financial crisis. This, in itself, was a courageous undertaking at that particular time, and we certainly (in retrospect) contributed to a Big Theme ourselves (knowingly or not). The transformation of the financial industry is in full motion, with an increasing number of independent financial services businesses being established throughout the marketplace and across our nation. In this competitive landscape, HighTower was recognized as one of the fastest-growing, privately-held companies in the U.S., recently ranked #13 (lucky number) on the prestigious Inc. 500 list. Today, we are one of the leaders in the evolution of the independent model for financial advice.

To refresh our collective memories, in case the 360 format does not “ring a bell”: Our partnership is not bound to follow any single viewpoint. As we do not have to sell product, but rather provide advice to our clients, our business model allows us to reduce or avoid many conflicts we may have faced earlier in our careers as financial advisors. More importantly, we enjoy insight into leading opinions from Wall Street and beyond. On this basis, we made the decision, some time ago, to discontinue publishing a standard market outlook in lieu of a more reflective approach ̶ a “look around the industry,” or 360, as we named it.

In this 360 edition, we focus on themes that may not be relevant with respect to immediate financial market and related investment outcomes. Instead, we provide a selection of viewpoints from our respected HighTower Partners, with a focus on aspects that could lead paradigm shifts and may have an impact on investment allocation choices and outcomes in the long run. Whereas we recognize the importance of tactical and strategic allocation choices, it is monumental to also consider the “big picture,” specifically in an increasingly interconnected world, either to avoid risk or to seek an investment-relevant opportunity.

Topics covered include the challenge of feeding a growing world population, demographics and economic development, and the potential end of an independent Federal Reserve Bank.

Please follow this link for the full article: 2013 Q2 Big Themes

Hotel California

Posted on May 7, 2013 by HighTower

Posted By: Matthias Paul Kuhlmey

My colleagues consider my distinct (possibly questionable) assessment of good vs. bad hotels as “diva-ish” (some may even think I am an idiot). Possibly a full and extensive topic for another blog, I can assure you, that with nearly 20 years of combined personal and business travel experience, one begins to have a good sense of the “dark side” of accommodations hidden behind the shiny stars. This writing should have carried the title “Reality vs. Perception,” but in our attempt to not immediately reveal our planned course of writing, as well as to deliver on our traditional music reference, it turned out to be Hotel California, possibly the best-known song by the Eagles.

In 1950, Robert Schuman (not the composer, but the French Foreign Minister) became the promoter of a united Europe by announcing plans of the formation of the European Coal and Steel Community, which became the Foundation for the European Union (and later the EMU). On the surface, Schuman had the objective to establish a common value system, but part of his hidden agenda was to create an environment for European countries to never again be at war with their neighbors. German Chancellor, Konrad Adenauer, recognized as the first statesmen to have reconciled the relationship between France and Germany after WWII, subsequently bought into Schuman’s plan. Voilà.

With much “civic love” and reconciliation having taken place over the years, Germany’s Banking system now carries about $2.62 trillion in exposure to debt of other Governments across the world (Q4 2012), including $996 billion to the Euro area. When segregating those numbers to the PIIGS (Portugal-Italy-Ireland-Greece-Spain), German Bank exposure totals a little less than $400 billion (BIS) of an estimated Euro 8.3 trillion ($11 trillion) banking system (assets) or nearly 11% of German GDP (ca. $3.6 trillion at 2012 figures). Not a small chunk. These numbers do not even account for all the “other stuff,” including regular lending activities among banks, derivatives, etc. I guess Adenauer didn’t see this one coming.

Another lesson in perceived realities: On the “home front,” everyone appears to have gone “gaga” over the latest employment report and related unemployment rate of 7.5%(!). Admittedly, it is not too shabby compared to previous years, but underneath the surface the story is different. “In March, 7.6 million Americans who want more hours were stuck in part-time jobs, about the same as a year earlier and 3 million more than there were when the recession began at the end of 2007.” The job market is only improving on the “net line.” When considering more and more people leaving the labor force, along with an increasing number of “underemployed” workers, the real unemployment rate (U6) still stands at nearly 14%(!). More tragic is the development in youth unemployment across the globe, now being called “Generation Jobless”: “OECD figures suggest that 26m 15- to 24-year-olds in developed countries are not in employment, education or training; the number of young people without a job has risen by 30% since 2007 … Depending on how you measure them, the number of young people without a job is nearly as large as the population of America.” In Spain and Italy, respectively, youth unemployment ranges between 40 and 55%(!). The situation is unsustainable, but for now it’s a breeding ground for radical measures and political opinions.

The lyrics to “Hotel California” describe a “luxury resort where ‘you can check out anytime you like, but you can never leave.’ On the surface, it tells the tale of a weary traveler who becomes trapped in a nightmarish luxury hotel that at first appears inviting and tempting” … but then things change (as always). The Germans may have created this very constellation for themselves. In other words, it’s quite an expensive undertaking to “leave” now – either you pay up and help your ailing neighbors, or you let them fail, likely implying that Mrs. Merkel and friends would have to “bail out” or possibly nationalize the German banking system. Regarding the young and unemployed across the globe (and especially in Southern Europe), they are “stuck” in a similar dichotomy; improving headlines assessed on an incomplete basis with an underfunded education system, and their respective economies in dire straits.

What does this all mean in terms of investing?:

1. Beware of the vibrant “headline” news; we are most likely being told “stories of convenience.”

2. Should a “story of convenience” prove to be inaccurate, beware of volatility in markets.

3. As economic conditions continue to be “sub-par,” accommodative policies will exist (QE).

4. With further increases in the monetary base globally, asset price inflation will continue.

5. It will be fundamental to distinguish “inflated assets” from those that rise on good valuations.

6. As long as Central Banks keep easing, equity markets will have a “floor” … and so should bonds!

7. Central Banks will “take turns”: After the U.S., it is now Japan’s turn. Europe (likely) will be next.

8. No country can afford a strong currency (competitive devaluation). Identify future stores of value.

9. Don’t turn greedy and “chase” markets. Manage volatility. Understand risk-adjusted returns.

As HighTower is all about our 360 concept (i.e., “a look around the industry”), please find, in addition, an excellent opinion piece on Europe by our friends at Lord Abbett, specifically by Milton Ezrati, their Senior Economist and Market Strategist.

Left Pocket, Right Pocket

Posted on March 1, 2013 by HighTower

Posted By: Matthias Paul Kuhlmey

Markets have “shrugged-off the Italian scare,” and were off to yet another promised land of stellar returns in global equities. To keep our minds flexible, let us not forget to look beneath the surface. A common “confidence vote,” as it relates to the credibility of a sovereign nation, is the outcome of regular bond auctions held (a standard refinancing mechanism). And, there, was a nice surprise that helped market participants to initiate the recent turn-around: Italy was able to comfortably place a maximum targeted 6.5 billion Euro of long term-debt obligations. Relieved?!

Bond auctions held in most European nations, especially in Italy and Spain, are heavily supported by their respective domestic banks. According to data released by the European Central Bank (ECB), Italian banks purchased a record amount of government debt in January 2013, about 18.5 billion Euro(!), and (if this data point was not disconcerting enough) Monday’s auction was mostly absorbed by two Italian banks. Same deal, a little to the West, in Spain. Let’s not forget that these are the same (Spanish) banks, which require a minimum of 60 billion Euro in new capital and keep posting major losses. For some perspective, Spanish banking giant, Bankia, just reported the worst results ever recorded by a Spanish corporation, a screaming 19 billion Euro loss. Bankia was “bailed-out” by the European Commission in December of 2012 and continues to be nationalized ever since.

To round things up, there is another big player in the mix: the U.S. Federal Reserve Bank. The FED reports that most cash reserves held in the US banking system are “under the roof” of foreign banks operating in the U.S. In the month of January 2013, the FED injected a record of $237 billion into foreign banks, a number greater than the liquidity influx seen after the Lehman collapse in September 2008. Something going on here? Let’s broaden the picture:

The top five banks in the U.S. receive about $64 billion in government subsidies, an amount roughly equal to their annual profits. Stated differently, our banking system, at the top of the global “financial food chain,” with nearly $9 trillion in combined assets, would just about break even in the absence of “welfare considerations.” The profits those banks are reporting are essentially transfers from taxpayers to their shareholders. None other than FED Chairman Bernanke, in his testimony to the Senate Banking Committee earlier this week, stated that American banks receive implicit subsidies because the market believes they are too big to fail. OK, case closed!

The above is exactly the reason why we prefer to talk “crazy” at times. “Drop It Low” was just the perfect outlet …

Oops, I Did It Again

Posted on February 15, 2013 by HighTower

Posted By: Matthias Paul Kuhlmey

Thank you! – we have received very good feedback concerning our “Oops Upside Your Head” blog from earlier this week, but it seems the job is not done; specifically, we need to elaborate on the “what to do, what to do” part, with focus on “how to invest” to preserve purchasing power. In advance, however, an important side-note: Coinciding with our warnings, the big kahunas, politicians and financiers, alike, are stepping out everywhere, stating that the topic of Currency Wars is totally overblown. Sure … and sugar or tobacco is really good for you will probably be the next message. We wonder, in this respect, why the topic has made it onto the agenda of the G20 Meeting currently taking place in Moscow. Shouldn’t the “fearless leaders” of the world deal with more important stuff?

Back to business. The reverse logic of our “Oops Upside Your Head” writings is to have made an investment in our custom basket (Gold, Oil, Poultry, Timber) or in commodities in general. Alternatively, one may invest the money where the world is growing, especially in places not succumbing to limiting debt burdens. From the perspective of a retail investor, there are multiple viable options available, in ETFs, Mutual Funds, or even direct investments. When comparing those “currency-of-the-future” investments to the stated 80% loss of purchasing power the S&P 500 experienced between August 2000 and year-end 2012, the outcome is comforting: Dow UBS Commodity Index +64%; EM Debt Index +306% (we are talking bonds!); DJ Water Index +362%; Gold +503%.

As you may expect, there is a catch: Some “future currency” investments are only available in derivative form, and investors may not be able to hold “the real thing.” This aspect needs to be contemplated, given the increased likelihood of political interventions into financial markets. Volatility, a commonly accepted measure of risk, is another important consideration. Over the past 10 years, commodities experienced a Standard Deviation (measure of volatility) of 18.47%, as compared to the S&P 500 at 14.77% and the Barclay’s Aggregate (bonds) at 3.55%. Thus, commodity-related investments can be “tough to stomach” for investors.

It is central to our investment portfolio construction to identify and consider elements of “real value” and, at the same time, to manage volatility through an active macro overlay coupled with the “right” combination of asset classes and respective money managers: Art vs. Science vs. Art.

In conclusion: Credit is due (as credit is how we pay for things these days ) for not only having made two music references this week, but two that start with “Oops.” Also, thank you, Matt Harris, for the Britney pitch (Oops, I Did It Again).

Oops Upside Your Head

Posted on February 13, 2013 by HighTower

Posted By: Matthias Paul Kuhlmey

We have been pretty much in your faces (our apologies), regarding the big and rather pressing topics, such as asset price inflation, real (global) purchasing power, and related currency wars. In this respect, it was with great delight (at least for us) to have read the latest publication by QB Asset Management, stating (in our words, somewhat simplified) that anticipating the big correction in equities may be rather questionable … given that assets have already crashed in real terms! Yep, point taken. You may think, what kind of mind game are we playing now?! QB’s message is exactly aligned with our constant warnings of clients losing real purchasing power related to their equity investments. In other words, the S&P 500 at a level of 1,500 is not as valuable as it used to be, years ago, when the index traded at 1,500 before (regardless of answering the question of value or not).

In our “Sis’-In-Law” fashion, let us explain: Everyone has gone gaga over the fact that equity markets in the U.S. have been trading at or near historic highs. When considering the increase of the S&P 500 from 666 points in March 2009 (after the sell-off during the credit crisis) to 1,500+ today, simple price appreciation has been more than +125%. When applying a real return equation, however, the outcome is substantially different. For our purpose, let us assume we are spending our “S&P 500 Money Units” (including dividends paid on underlying stocks, aka “total return”) on an equally-weighted “basket” of Gold, Oil, Timber, and Poultry (commodities that represent our lifestyle demands). The result: Real Purchasing Power of the S&P 500 has been decimated; e.g., it’s down -80% since March 2000 (near-historic S&P 500 high at 1553.11), down -45% since September 2007 (S&P 500 historic high at 1576.09), and up only 15% since March 2009 (Total Return) vs. the nominal price appreciation of 125% or total return of nearly 136% (i.e., when accounting for dividends received and applicable tax withholding) we have seen in the S&P 500.

The cynic among us may argue that, at the same time, our S&P 500 will buy us more cars, technology, clothing, etc. Really? Whereas certainly an argument can be made, it is the price of “what feeds the system” that needs to be recognized: agriculture (food), energy, etc. All other considerations are interesting, but of little practical (and real life) relevance. What to do, what to do? In awareness of our concept, it is essential to identify “currencies of the future” that can hold value in light of loose monetary policies promoted by most Central Banks and/or political interventions into capital markets. Don’t believe it? It is no coincidence that Venezuela’s stock market has been up 850% over the past 2 years, mainly as a result of the country’s currency devaluation practices … and the saga continues: Just 2 days ago, Hugo Chavez devalued the Boliva by 32%, the 5th intervention in 9 years.

Please don’t think our writing is “talk of distant worlds.” Currency interventions have become a prominent tool of policy makers’ approach to competitive devaluations (aka “beggar-thy-neighbour”). Today, almost every nation is involved in such practices, directly or indirectly. The U.S., through the FED, is leading the efforts, by still injecting about $85billion every month into the financial system. After the dot-com bubble burst in 2000, Alan Greenspan exercised the “Greenspan Put,” providing cheap money to the world by lowering the Fed Funds rate from about 6.5% to less than 1.5% by 2003. Thus, it is no coincidence that the S&P 500 has lost 80% since 2000, as indicated by our above purchasing power analysis. Moral of the story: think of everything in alternatives. Asset price inflation is not the same as attractive valuations and earnings driving stock prices higher; this is a distinct difference when evaluating the attractiveness of an investment.

And the blog title? Just some good mind-bending content and (of course) our required music reference. Tradition is tradition.

Rock Star

Posted on February 5, 2013 by HighTower

Posted By: Matthias Paul Kuhlmey

It’s not what you’re thinking: this isn’t a music reference, as one may expect (knowing our blogs). In fact, the “Rock Star” title was awarded to Euroland’s single currency, the Euro (the one that was supposed to have failed last year – blink, blink). None other than Axel Merk, known for his expertise in foreign exchange markets, is asking the pressing question: “Euro: Rock Star of the Year?” Admittedly, Mr. Merk is raising points that are very valid. In our own words, an oversimplified summary: The ECB, under Super Mario (Draghi’s) leadership, has simply discovered how to inflate the xxxx out of the Eurozone’s entire mess and is helping the system to recover (for now).

Back from the stars to real world problems. Spain is now (back) in the spotlight, but is definitely not a bright spot. And, yes, it is one of the nations using the Euro, and part of the Eurozone (for now). Whereas global equity markets are “on fire,” with positive developments pretty much everywhere, Spanish stocks traded down 9% (!) just last week. Aside from political issues potentially derailing much needed economic reforms, the Spanish unemployment rate has reached a “whopping” 26%. Considering that Spain is the 13^th largest economy in the world, recent developments should be more than alarming.

With other parts of Europe not so hot, either (and this not a weather reference), let us put Mr. Merk’s Rock Star allure and the recent rise of the Euro into a different context. We’ll call it the “Rock Bottom Theory,” to stay on the topic of rocks. How about: The Euro is not really getting stronger in relation to the US-Dollar, but the Dollar, on the other hand, continues to become much weaker?” The Trade Weighted US-Dollar Index, a measure of the value of the US-Dollar relative to other world currencies, continues to trade near historic lows, currently trading at a value of 73, as compared to 148 in the mid-1980s.

The bottom line: What may look good on the surface (a recovering Euro reflective of diminished stress in the Euro-system) may be the blunt reality of Mr. Bernanke’s ill-guided attempts to further inflate the system with Dollars. The FED Balance Sheet more recently topped the $3 Trillion mark (ca. $800 Billion pre-Financial Crisis), and even Benny B.’s companions, are now voicing concerns. Dennis Lockhart, Federal Reserve Bank of Atlanta President, recently stated: “I do think the growth of the Fed’s balance sheet could have longer-term consequences that are worrisome. While I’ve supported these policy decisions to date, I acknowledge legitimate concerns.”

Legitimate concerns! Be aware investors, long Euro or not, especially considering that the expansion of Central Bank balance sheets around the globe has fueled one or more asset bubbles already, stocks possibly included.

The Whole Story – Radio Interview with Matthias Kuhlmey

Posted on January 30, 2013 by HighTower

Posted By: Matthias Paul Kuhlmey

With equity indices trading near or at historic highs, it is more relevant than ever to understand the concept of real purchasing power. It has been our well-established opinion that equities are not as “valuable” as they were in other positive market periods.

To learn more about our work and asset allocation solutions provided to our respected clients, please listen to my appearance on the Whole Story segment of Chuck Jaffe’s Moneylife radio show.

Please follow the above hyperlinks for the referenced material, and for further insight, read our mini-whitepaper on this subject, entitled “(H)Edge Plus – A New Frontier in Asset Allocation.”

The Sis’-in-Law Edition

Posted on January 28, 2013 by HighTower

Posted By: Matthias Paul Kuhlmey

My sister-in-law came clean yesterday: She is no longer reading our blogs … but(!), she has created a folder in her email application to save all incoming “bloggery,” in case there is another power-outage (i.e., at a later time). Yeah, right! My astonished inquiry resulted in a good-enough discovery: “It is all too complicated,” she explained. Admittedly, my sister-in-law is a smart woman, but our oft-complex perspective on the exploration of the financial world does not really appeal to her. We can use this example as our guide to do a better job of offering clear and simply stated messages for the good of all our readers; after all, this is crucial for our message to become wide-spread!

The state of the (financial) world explained in easy terms: There is too much! [Sidebar: all following comments are not reflective of the world's general misery (i.e., misallocation of “stuff”), but mainly reflective of societies' mature economies.] Repeat: There is too much! Whereas it has been humankind’s objective and motivation to maximize output based on given input (we call this efficiency), this idea has become even more important for some of us to “feed” into our general overabundance, e.g., bigger meals, cars, houses, etc., with only marginal (if any) gains achieved; AND these “improvements” don’t necessarily contribute to a healthier state of mind or better Flow … at the same time, a record number of Americans (nearly 50 Million) are receiving food stamps. Simply, too much!

The financial system has been supporting our “needs,” with credit and financial derivative creation in the trillions; it is a given fact that all outstanding financial derivatives total $1,200 Trillion, or about 20 times(!) the value of our entire global economy, and that U.S. Consumer Credit (securitized) has increased from practically zero in the 1940s to $2.8 Trillion today. In other words, we are even “feeding the beast” with money we don’t have or possibly will never make (hence, the term “financial instrument creation”), which is a viscous cycle.

Can financial markets perform well, given such a state of affairs? Yes, absolutely; it is a function of the very same (see above), and considered asset price inflation. As more and more people are understanding that their future money may not hold the same or any value it once did (as it can be created out of thin air), investors are acquiring everything that possibly can represent value in the future, such as commodities, stocks, precious metals, etc. (and this increased demand is driving up prices, as a simple function of supply vs. demand). So, what looks good on the surface (nominal returns), may be rather “cancerous” at the very core. Further, asset price inflation can “mask” real value; this is why the current investment landscape is one of the most challenging and deceiving we’ve encountered!

We wrote some time ago: As once before in previous highly-developed nations, we are dealing with the consequences of mostly greed-driven excess and the consequent need for consolidation. It is similar to an addictive individual battling the temptation and, often, the overuse of substances (or else) over a lifetime, and typically only implementing necessary change after facing a severe health-related crisis. Ultimately, all becomes a balancing act that requires a) acceptance of the fact that a problem is present, b) willingness to change, and c) recognition that change will eventually be beneficial.

Is this better, Katie?

Drastic Measures

Posted on January 24, 2013 by HighTower

Posted By: Matthias Paul Kuhlmey

This blog could have carried many titles: The Fairy and the Apple tree; La La Land, Part 2; or Drastic Measures – we are going with the last. In case you have not seen our Economic Update for 2013, it is a worthwhile read, especially when reflecting on this blog entry. Most industry professional continue to see a positive environment for equity markets in the New year (so far, so good), and yet we have to remind, in party-pooper fashion, that massive Central Bank stimulus has been one of the key drivers of investment performance – a concept also known as asset price inflation.

When inflation becomes a concern, what is closer to our hearts than owning something that can hold value? Over centuries, Gold was considered a good fit in this category. If(!) there were not the findings of Duke professors Campbell Harvey and Claude Erb: 1) the real price of gold is very high compared to historical standards; 2) there’s little evidence that gold has been an effective hedge against unexpected inflation whether measured in the short- or long-term; 3) Gold isn’t a currency hedge; 4) there’s no proof that gold is a good investment when real returns on other assets are low;… (but at least) 5) if key emerging market countries owned gold on levels like more developed markets, the price of gold would likely rise. Cool.

The last point on the above list is the catch. At the end of the day, it is more often sentiment and psychology determining investment outcomes (not in the long run, though … or only in a world where valuations do not matter anymore). Quite openly, this is true for equities; it’s not that the economy “lifted” markets to new highs, but the “back-stop” provided by Central Banks did – or did we already forget about financial jugglers Benny B. or, more prominently, ECB’s Mario Draghi?: “I will do anything it takes.” Now the big shocker, possibly quite bullish for gold, and a true “psychology driver” (based on all the wrong reasons according to Harvey): the Germans want out! Last week, the Bundesbank decided to move 674 tons of Gold from the vault at the Federal Reserve Bank in New York back to domestic territory. Surprised, considering the stuff isn’t worth anything (cynical)?

Quite possibly, the Germans have some bills to pay, which wouldn’t be a surprise given the country’s cost of “saving” their very own experiment called the European Union; “give credit where credit is due.” This new motto has now been embraced in China, where Apple has allowed consumers (for the first time) to buy the company’s gadgets on credit. Way to go, when sales at home suffer (BREAKING NEWS: Apple profit $13.81/share vs. $13.87 last year and shares down 10% in after-hours trading), the new advantage in international sales (now 61% of revenues, with China up +67%) has to be secured somehow. Considering that the Chinese are holding all these valuable Dollars, and we (in the U.S.) have all the nifty iPhones, the chance has come to finally settle a long-nurtured conflict: Exchange Treasuries against iPhones, possibly a real value consideration on both sides …

Mr. Nice Guy

Posted on November 7, 2012 by HighTower

Posted By: Matthias Paul Kuhlmey

This morning, when I asked the ferry operator if business was good (with a slightly sarcastic tone), as still thousands of commuters are depending on the NY Waterway, instead of the train (prolonged impact of Sandy), his answer was quick: “… for us, still the same …” Point rightfully taken.

Four more years of potentially the same were granted to the people of America, with Mr. Barack Obama successfully defending his presidency by winning 303 electoral votes vs. Governor Mitt Romney’s 206. One may like the results or not, but, it seems wherever a poll is taken, President Obama is considered a thoroughly nice guy and a paradigm of how the United States is still perceived: A free country of great opportunity, no matter where your path of life originated. Really?

The world outside the U.S. had a slightly different take on Obama’s victory, with the U.S.-Dollar and equity futures down, and Gold “soaring” higher. The explanation, from our point of view, is quite clear: Obama and his policies are aimed at rebalancing wealth and continuing a reflationary approach to an economic recovery; i.e., a wealth-transfer from the wealthy to the “not-so-well-offs.” His right-hand man, Benny B., one of the reckless Central Bankers on the globe, will do his part – for sure.

Wealth transfer how? As an overly simplified example, with mortgage rates at 8%, an over-burdened home “owner” with a million-dollar mortgage paid $80k in interest expenses, a saver, at the same time, could have collected $60k in interest on his million investing in Government Bonds. In today’s, low-rate environment, a home-owner is “rewarded” with only paying $30k in interest, and a saver is “penalized,” receiving $10k on his investment; thus, it is a classic transfer of wealth or redistribution of opportunity from savers to debtors. This concept, in its very core, has led investors to accept more risk than they ordinarily would, often beyond what may be considered suitable for them (think of the retired or elderly who have resorted to high-dividend stocks for income). Further, ill-guided monetary policy has led to false rates in bond markets and, last but not least, “propelled” equity markets to levels that cannot be explained on the basis of commonly accepted valuation models (only when compared to bonds, but, as stated, the comparative basis is false to begin with).

Mr. Nice Guy or not, monetary policy or an “inflationary touch” cannot lift the U.S.-economy out of “the funk,” so other measures have to be applied; this is (sorry, victorious people) where Mitt Romney was right in his campaign. We explained before that dealing with a balance-sheet recession requires, among other things, a fiscal adjustment.

Congratulations to President Obama and his family. At least (for non-Obama supporters) the First Lady can keep her exemplary garden at the White House and continue her great leadership with respect to education. No wonder that a strong vote supporting Obama’s victory came from women.