Fed Policy and Inflation Risk, Martin Feldstein, Project Syndicate Physician Organizations Voluntarily Heal Themselves To Save Healthcare Dollars, Rick Ungar, Forbes MasterCard warns of possible security breach, Visa also reportedly affected, FoxNews U.S. corporate tax rate is tops, Kent Hoover, Buffalo Business First Brazil’s growth engine requires fuel of skilled labour, Adrian Saldanha, Financial Post … [Read more...]
Archives for April 2012
Gas Prices Threaten the Economy
Tight global oil supplies and tensions with Iran (among other factors) have pushed retail gasoline prices back above $4 per gallon. When gasoline prices surged to near $4 per gallon last year, economic growth slowed as purchases cut into consumers’ discretionary spending power. Should we expect another downturn in consumer spending now that gas is near $4 per gallon again? Gasoline prices have only been near $4/gallon for a few weeks, but the evidence suggests lower gasoline consumption (see chart below) and falling utility bills are offsetting the higher cost of gasoline. Over the last … [Read more...]
FOMC Minutes Paint a Dismal Picture for Savers
If you were unlucky enough to have to read the minutes of the Federal Reserve Open Market Committee (FOMC) released yesterday, you may have been disturbed by what you found. Within the notes on the view of the Federal Reserve Governors and Presidents in attendance (a.k.a. participants) you would have noted words and phrases like; uncertain, cautious, mixed, less strength, remained weak, remained depressed, gains might not be sustained, increased moderately, still sluggish, unemployment remained elevated, etc. Even optimistic notes from the Fed were guarded. On the euro-area crisis: In … [Read more...]
Record Junk Bond Yields
Low interest rates have understandably pushed investors into junk bonds. More money has flowed into junk bonds this quarter than any quarter since 1980. The average yield is 7.98%, another record—the lowest since 1980. Investors can blame the Fed’s zero-rate policy, thanks to which a 10-year Treasury yields 2.18%, for pushing them into junk bonds. While they’re being pushed into lower-quality bonds, investors are also being forced to look toward longer-maturity bonds to pick up yield. But wait until interest rates go up. The word to remember is duration. A bond’s duration is an … [Read more...]
Manufacturers Giving Markets Mixed Signals
The ISM Manufacturing Report on Business was released this morning and produced a composite index result that was slightly better than a survey of economists surveyed by Bloomberg had predicted it would be. You can see on our chart that the index is trending up slowly. The components of the index were broadly optimistic, but some that tend to the lead the market left doubt about the future. The Conference-Board uses ISM’s New Orders index as a component in its Leading Economic Index. In the recent report, the ISM New Orders index continued growing, but at a slower rate than in February. … [Read more...]