Following the latest FOMC meeting yesterday, the Federal Reserve announced that it will maintain its zero-interest-rate policy until at least 2013. This is the first time the Fed has given the market a timeframe for keeping rates on the floor. Plunging global equity markets apparently panicked a reactionary Ben Bernanke. I guess you can’t blame him. After all of the hard work he put into artificially levitating stock prices with QE2, the market has given up almost all the phony gains in only two months. But Mr. Bernanke’s latest attempt at monetary stimulus may be worse than QE2. It is … [Read more...]
Archives for August 2011
A Crucial Bond Fund Metric
When it comes to your bond money, you want to live to fight another day. To make sure you do, I recommend that you keep the duration short and the credit quality high. Duration measures a bond’s sensitivity to interest rates. It’s the predicted percentage change in a bond’s price given a 1% change in interest rates. So if a bond has a duration of 2, and interest rates change by 1%, the price of the bond will change by 2%. A well-known financial publication recently produced a list of defensive bond funds. Only one of the funds had a short enough duration for my comfort level. So pay attention … [Read more...]
It’s Jobs Day
The Labor Department released the July employment report this morning. The headline numbers that economists follow are the monthly increase in nonfarm payrolls and the unemployment rate. Economists were looking for nonfarm payrolls to increase by 85,000 in July. The actual figure was 117,000, and when you add back the 23,000 jobs that were lost in state government due almost entirely to a partial shutdown of the Minnesota government, you have a nonfarm payroll number closer to 140,000. Not bad, but not nearly enough to get this economy moving. Assuming a 140,000 gain in payrolls in July, the … [Read more...]
S&P 500 Technical Analysis Update
The S&P 500 has now clearly carved out the head-and-shoulders top formation I wrote about in Young Research’s last two technical analysis updates. The price action in the market has a real weak look. Stocks blew threw their widely followed 200-day moving average and headed straight to their next support level near 1,200. The S&P 500 is down almost 8% in August alone. If the market can’t hold the 1,200-ish level, the index is likely headed to the 1,100 – 1,150 level where there is significant support. … [Read more...]
Bernanke Gets an “F”
How would you grade Federal Reserve chairman Ben Bernanke on the way he’s protected the value of your U.S. dollars? I give him an “F,” given that the dollar has lost over a quarter of its value compared to the Swiss franc in the year ending this past Tuesday. Members of the euro zone can’t be too thrilled, either. The euro, which was a bad idea from the start, has lost over a fifth of its value compared to the franc over the same time period. It has come to the point now where the Swiss are selling francs into the market to lower its value—at a sweetheart of a price, mind you. It’s a nice … [Read more...]