President Obama will be meeting with some community bankers at the White House today.  As he did last week in his meeting with Wall Street's kingpins, the President will undoubtedly encourage the community bankers to lend more.

But first, he has some explaining to do: Specifically, why the government is doing everything it can to save Wall Street but is allowing smaller banks to fail--a double-standard that is presumably forefront in the mind of most community bankers.

Beyond that elephant in the room, the meeting will be a brainstorming session designed to figure out how to persuade the banks to start lending to small businesses again.

Part of the problem is that loan demand is down.  Part of the problem is that the banks are still preserving capital to protect against losses from old loans.  And part of it is that banks can currently make enormous profits from lending risk-free to the government, so there's little incentive to take on additional risk.

The real answer of what to do about it is likely "be patient."  Our debt problem took two decades to build.  We can't "deleverage" back to normal overnight.

See Also: Consumer Debt Burden Less Crushing Than It Was A Year Ago

The yield curve - the difference between rates on short- and long-term Treasuries - is at its highest level ever "and signals that investors are expecting a stronger economic turnaround ahead," The WSJ reports.

A steep yield curve has two major practical ramifications:

• It's a great time to be a banker, part 379: Because banks can borrow from the Fed at short-term rates near zero, higher long-term rates mean even bigger risk-free profits for the industry.
• It sucks for the rest of us, part infinity: Because most mortgages and many other types of loans are pegged to long-term rates, a steeper yield curve means a higher cost of borrowing for most consumers and businesses.

The yield curve typically steepens when investors shun long-term Treasuries because they feel riskier assets will do better because of economic growth and when they fear inflation, which erodes the value of fixed-income securities. Before this year, the last time the yield curve was near current levels was 1992 and 2003, i.e. when the economy was emerging from recession and on the verge of rapid growth. Many are drawing the same conclusions from today's levels.

The yield curve has historically been a better economic forecaster than other market metrics like, say, the stock market. Recall the yield curve inverted in 1999 (meaning short-term rates were higher than long-term rates), correctly forecasting the coming recession even as the stock market continued its bubblicous behavior for several more months.

"It's different this time" are the most dangerous words on Wall Street. Still, it's worth exploring why the steep yield curve maybe isn't signaling sharp economic growth...

Click "more" to view the rest of the post and embed the video.» More

From The Business Insider, Dec. 22, 2009:

Heads up to Marc Faber fans: Mr. Gloom Boom Doom has given an extensive interview with the Economic Times of India, laying out some specific ideas for the coming year.

You can read a full transcript here. Among other things, he likes wheat, sugar, and natural gas, and he hates the US for all the obvious reasons

Perhaps his most surprising, uber-contrarian call is that he's bullish on... Japan! He says it's the ultimate contrarian play:

So Marc Faber what are your keen investment themes and ideas for 2010?

I avoid US government bonds I think as a contrarian you really want the contrarian play. You should buy Japanese stocks and Japanese banks this is the absolute contrarian play. Nobody is interested in Japan all the funds have withdrawn money from Japan they have given up on Japan I guarantee you the economy would not do well, forget about the economy the population is shrinking but you can have an economy that does not do well but the companies do well that is a big difference and I think the Japanese banks are very depressed. All the banks in Asia have actually recovered very strongly but not the Japanese banks so as a contrarian play I would look at that.

Full transcript >

Click here to view the 3-part interview.

More coverage from The Business Insider:

Marc Faber: Dubai was just the tip of the sovereign default iceberg

Japan's central bank last week kept interest rates steady, as the country continues to battle price declines. As the world's second-largest economy struggles against flat domestic demand, an aging population and pervasive sense of pessimism, prospects look grim for it to emerge from a 20-year economic malaise anytime soon.

"That culture of dynamism and energy in the economy, and forward looking, they don't quite have that yet," says our guest Emily Parker, senior fellow at the Asia Society.

Parker, who has written extensively about Japan and Asia for The WSJ and other publications, says Japan still faces major hurdles including:

Mounting public debt. Japan's public debt is nearing 200 percent of GDP, and room for fiscal expansion is small, as Reuters reports. The government not surprisingly is scrambling to cut spending for the next fiscal year.

Aging population. With the country's rapidly aging citizens and strict immigration policy, Japan is struggling to shift to a domestic-demand led economic expansion. "They need to shift their model from being so dependent on exports," Parker tells Aaron and Henry. But what's going to replace that export-led economic model remains unclear, she adds. "And the resistance to immigrant is very deep," with the topic not even on the table for discussion.

Finally a crisis?...

Click "more" to learn about Japan's changing relationship with China, and to embed the video.

Earlier:

Good News! America isn't following the same path as Japan, Asia expert says

Weakness among financials has given bears plenty of fodder to declare: That's it. The rally finally is over.

Don't throw in the towel, says our guest Charles Lemonides, chief investment officer at ValueWorks.  Just don't expect financial stocks to lead the next leg of the rally. "I don't think the group that gave you leadership last time is the group that's going to give you leadership next time," Lemonides tells Henry in the accompanying clip.

Sectors he's focused on include technology (such as HP), pharmaceuticals and big industrials such as Boeing, 3M and Dow Chemical. "We have money put to work in all of those places," he says.

Another key sector to watch: natural gas.  Current prices, even after a recent rally, are still more than 50% below their highs.  Lemonides thinks that's likely to change thanks to Exxon Mobil.  The oil giant recently purchased XTO Energy, placing a $31 billion bet on natural gas.  "The biggest oil company, arguably, is now switching teams and I think is going to work very hard to promote natural gas use in the United States," he says.

Click "more" to get Lemonides take on health-care legislation's effect on pharma, and what the natural gas boom could mean for domestic growth and jobs.

As the U.S. economy has retreated from the edge of a financial cliff, America's recovery repeatedly has been compared to Japan's. Both countries suffered a collapse in asset prices, followed by a government scramble for some kind of stimulus response.

Many market watchers say America is going down the same path as Japan, a frightening prospect considering Japan's economy is well into its second "lost decade".

However, "I actually don't think it's a terribly fair comparison," says our guest Emily Parker, senior fellow at the Asia Society.

Case in point, initial policy reaction in Japan. While there are plenty of critics of America's recovery and stimulus packages, Parker said Japan's response (including recapitalization of failing institutions and monetary policy) only emerged after years of "severe" inaction. The zombie "no bank will fail" concept originated in Japan, she notes.

Also crippling Japan's recovery was a false sense of recovery, as reported by some media groups at the time, says Parker, who has written extensively about Japan and China for The WSJ and other publications. Despite reports of recovery, Japanese citizens remained pessimistic about their future, she says.

Click "more" to learn about Japan's generation-old business model and what needs to change if the world's second-largest economy is finally going to get back on track.

"It's clear the great recession is over!," says Barry Ritholtz, chief executive of Fusion IQ and author of the Big Picture blog. The world didn't end, as many predicted late last year and early this year, and Ritholtz thinks many will be surprised by the economy in 2010.

Not because we'll see a robust recovery, rather, because we’ll see more of the same; an economy characterized by weak employment, weak housing and the continuation of what he describes as a mild recession.

As for investing in the new year, Ritholtz reminds viewers to expect the unexpected.

From The Business Insider, Dec. 18, 2009:

Investors need to always remember to separate their economic and political ideals from the act of making money in the market.

We're reminded of this after seeing Robert Ebeling at Mises deliver the same old radical free markets argument about how we should end the fed:

1) Fed funds rate manipulation leads to a fake price of money in the market, which 2) leads to unsustainable asset bubbles.

Thus 3) we should end the fed and let the market show us the real price money.

Robert Ebeling from Mises: What is being ignored is the more fundamental question of whether the Fed should be attempting to set or influence interest rates in the market. The presumption is that it is both legitimate and desirable for central banks to manipulate a market price, in this case the price of borrowing and lending.

...

Interest rates, like market prices in general, cannot tell the truth about real supply and demand conditions when governments and their central banks prevent them from doing their job. All that government produces from their interventions, regulations and manipulations is false signals and bad information. And all of us suffer from this abridgement of our right to freedom of speech to talk honestly to each other through the competitive communication of market prices and interest rates, without governments and central banks getting in the way...

Click "more" to view the full post.

More coverage from The Business Insider:

• Bernanke's refusal to raise the inflation target is idiotic
• Bernanke: The dollar carry trade bubble is only a problem if the economy gets weak again

Berkshire Hathaway's search for a potential successor continues as questions persist: Can the insurance/investing giant duplicate its past success without the legendary Warren Buffett at the helm? There's also a question of whether Buffett himself can replicate his incredible performance now that Berkshire has grown so dramatically.

"Berkshire is not necessarily a bad investment [but] it's a lumbering giant right now," says our guest James Altucher, managing partner of Formula Capital.

That's why Altucher recommends a number of alternatives to the insurance/investing business model -- chiefly Markel (MKL) based in Virginia. Like Berkshire Hathaway, Markel is in the property and casualty insurance business. Premiums in turn are used to invest.

And just like Berkshire, Markel focuses on investing in tactile businesses like Pool Corp. (POOL), Home Depot (HD), and CarMax (KMX). Oh, and teeth. More accurately, Patterson Companies (PDCO) and Dentsply (XRAY), which both make dental equipment.

The investment selection reflects Markel's chief investment officer, Thomas Gayner. While not nearly as famous as Buffett, Gayner invests with a similar value approach and has produced an enviable track record: annual returns of 14% in the past 10 years vs. a flat performance for the S&P 500.

As Altucher tells Aaron in the accompanying video, Markel indeed may be the new Berkshire. Click "more" to embed the video.

Stocks fell Thursday morning as traders reacted to a string of disappointments, from Citi's secondary offering to FedEx's third-quarter guidance and an unexpected rise in jobless claims.

Weakness in the stock market was also attributed to renewed strength in the dollar, which continues to benefit from concerns about the Eurozone generally, and Greece particularly. (Click here for a primer on sovereign debt risks.)

Still, it's worth noting the dollar came into Thursday's session at a three-month high while major averages were just a touch below their best levels of the year. In other words, the much-vaunted inverse relationship between the dollar and the stock market hasn't been working so well in recent weeks.

The question is whether the relationship is breaking down or this apparent change of trend is mainly a function of the calendar.

Dennis Gartman, publisher of The Gartman Letter, believes there has been a "WATERSHED shift" in the dollar's trend. (Caps his.)

"The dollar is moving sharply and violently higher, most notably relative to the [euro]," he writes. "And we are now more and more convinced that this is something more than a mere correction in what had been a long bear market for the dollar but is instead the beginnings of a long bull market instead."

If true, the implications would be profound for investors worldwide...

Click "more" to view the rest of the post and embed the video.» More