Trying to prove that common sense and good judgment must be innate, Narayana Kocherlakota, the President of the Federal Reserve Bank of Minneapolis and graduate of the venerable Princeton University at the age of 19 is out with a speech on monetary policy that makes Argentina’s central bank sound credible. For those of you who don’t follow this stuff regularly (something you can give thanks for on Turkey Day), Kocherlakota is the Fed president who 12 months ago flip-flopped from hawk to uber-dove. In a speech yesterday, displaying more than a touch of hubris, Kocherlakota, likens today’s … [Read more...]
Archives for September 2013
Household Balance Sheets Send Ominous Signal
The Federal Reserve released its quarterly flow of funds data yesterday. One of the key items in the Fed’s quarterly report is the net worth of households. The good news from the report is that household net worth increased in the second quarter. The bad news is that growth in household net worth once again outpaced growth in disposable income. Since the value of an asset is determined by the income that asset can be expected to generate, there should be some relationship between household net worth (assets minus liabilities) and income. That is to say that asset prices should be bounded by … [Read more...]
What We’re Reading 9-26-13
A roundup of articles we found interesting this week. Bubbles Tomorrow, Yesterday, but Never Today?, John C. Williams, FRBSF Economic Letter Uttin’ on the Itz , W. Ben Hunt, Ph.D., Epsilon Theory Banning Demon Coal, Review & Outlook, The Wall Street Journal Occupy QE, Stephen S. Roach, Project Syndicate Firms Drop, Rather Than Upgrade, Cheapest Health Plans, Scott Thurm, The Wall Street Journal Has the Fed Been Fooled by Phony Jobs Numbers? , Matthew C. Klein, Bloomberg … [Read more...]
Bernanke’s Jobs Farce
Matthew Klein at Bloomberg is out with an insightful piece on the folly of the Bernanke Fed’s obsession with “the data.” As we’ve pointed out regularly on this site and in our monthly strategy reports, the Fed is implementing emergency monetary policy using signals from economic data that is 1.) a poor predictor of future economic growth and 2.) regularly revised. Klein summaries a new paper that lays out in detail large distortions in the monthly jobs data. This is silly, but it wouldn't matter except for two recent developments. First, the Fed has become hypersensitive to monthly jobs data. … [Read more...]
VIDEO: China’s economic growth more like 4% – Marc Faber
Marc Faber, Editor of the Gloom, Boom and Doom report explains why Chinese growth could slow down to a maximum of 4 percent. He also thinks gold, silver and Japanese equities are inexpensive. … [Read more...]
Dividend Paying Stocks and Taxes
This year the tax on dividend paying stocks for the highest wage earners, thanks to Obamacare, is 23.8%. One way to avoid this tax altogether is to invest in dividend paying stocks in your tax deferred accounts. If you have a 401k collecting dust in a corporate account somewhere then now is the time to do an IRA Rollover to Fidelity or Vanguard. Don’t let inertia get the better of you. Set-up a brokerage account and construct a portfolio of high yielding dividend paying stocks tax-free. If your investable assets are around $2 million and want to speak with me directly about how to do this, … [Read more...]
VIDEO: Buffett Calls Federal Reserve History’s Greatest Hedge Fund
Bloomberg: Billionaire investor Warren Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank’s ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion. … [Read more...]
Should the Market Believe the Fed?
After this week’s about face from the Federal Reserve, market participants couldn't be blamed for not wanting to rely too heavily on smoke signals from the Fed. After signaling that the central bank would taper its purchases of bonds for months, Ben Bernanke and friends have come out saying they’ll hold off. Caroline Baum at Bloomberg quotes UBS economists calling Bernanke & Co., “The Fed Who Cried Wolf.” "The Fed Who Cried Wolf" was the title of a commentary by UBS economists (in a research paper to clients, so no link). "The Federal Reserve passed on an unusual opportunity: to begin the … [Read more...]
VIDEO: Druckenmiller: Fed lost chance for a ‘freebie’ in not tapering
CNBC: Stanley Druckenmiller, former chairman of Duquesne Capital, and Jimmy Dunne of Sandler O'Neill discuss the decision to delay tapering. … [Read more...]
7 Fed Meeting Takeaways for Investors
Below are some thoughts on the implications of the Fed’s dovish surprise at yesterday’s FOMC meeting. The actual economic impact of the Fed’s decision not to taper its money printing campaign isn't all that significant. What is significant and more meaningful is the signal the Fed sent, and the implications that signal may have for future policy and investment strategy. 1.) The probability of a late-1990s style stock market bubble-and-bust just increased measurably. The U.S. stock market is already at one of its most richly valued levels in history. The Fed’s dovish posture at the latest … [Read more...]