The chart below illustrates quite well how a Federal Reserve policy of easy money meant to “bring down unemployment” is hurting most those it intends to help. The black line is the average retail price of gasoline in the United States. As you can see, the price is hovering around $4.00/gallon. The blue line represents the percentage of consumer spending used to buy gasoline and other energy goods. This percentage has increased dramatically since bottoming out in December of 2008. What this means, is that Americans, with high unemployment and real wages that are shrinking, are spending a … [Read more...]
Archives for October 2012
GNMA Stands Apart
When you hear the names Fannie Mae and Freddie Mac or the term mortgage-backed securities, you don’t get a warm and fuzzy feeling, do you? Peace of mind and comfort don’t roll off of the tongue either. But some mortgage-backed securities do make sense. So what separates fish from fowl? Four letters: GNMA. “GNMA is the only mortgage-backed security that enjoys the full faith and credit of the United States Government,” reads the website. As you can see on the chart below, the spread between yields on 30-year GNMA mortgages and 30-year Fannie Mae mortgages averages about 8 basis points, or … [Read more...]
The Burger Flipper Recovery Continues
The Bureau of Labor Statistics released the September employment report today. The headline numbers are an increase in non-farm payrolls of 114,000 and an unemployment rate of 7.8%. The payroll number was in-line with estimates for subdued jobs growth, but the 7.8% unemployment rate was a shocker to economists. According to Bloomberg, the average economist was looking for the unemployment rate to tick up a tenth of a point in September. Employment growth of only 114,000 is barely enough to keep up with growth in the labor force. In fact, the labor force increased by 418,000 last month, more … [Read more...]
Stimulus Fading, New Orders Falling
The trend of slowing annual growth in new orders was completed this month with a sharp decline in for the first time since November of 2009. You can see on the chart the declining growth rates before each recession (shaded in gray). The current trend looks even worse than the two recessions earlier this decade. The effects of liberally employed monetary and fiscal stimulus seem to be fading fast as the market once again attempts to complete the recession it began in 2008. Look for a possible burst of activity at the end of the year when companies will pull forward future purchases to take … [Read more...]
VIDEO: Sam Zell- What We Need Now Is a Politician
VIDEO: Fed QE3 Induces Market `Irrationality,’ Brown Says
A Sure Bet for You
I remember how when I was growing up, my mother always told me she could buy five candy bars for a quarter when she was a kid. I just thought they must have been really cheap back then. Have you ever tried explaining inflation? Anyway, I hope you’ve saved enough money in your piggy bank because you’re going to need it. These days, we’re all living longer. And even though Federal Reserve Chairman Ben Bernanke has said he can control inflation, it’s easy to see on my chart of inflation expectations that the market doesn’t believe the chairman. Let’s say you retire at 65 and inflation is … [Read more...]