The latest readings on the health of the U.S. manufacturing sector came out this morning and they don’t paint a pretty picture. Industrial production has fallen in 8 of the last 9 months, and the year-to-year rate of change is now flirting with contraction. Manufacturing accounts for a much smaller share of the U.S. economy than it did in decades past, but it isn’t yet small enough to ignore. Stay tuned here. … [Read more...]
Archives for October 2015
Successful Investing Is a Mindset
In the October issue of Richard C. Young's Intelligence Report, Dick Young wrote about the mindset of a successful investor. A successful investor must have "a master plan that allows [him or her] to find comfort through thick or thin." Success isn't a stroke of luck, it's the result of exceptional planning and hard work. Dick writes: Je Me Sens Bien As you read this month's strategy report, Debbie and I will be in Paris. Practicing her French yesterday, Debbie asked me if I knew the meaning of je me sens bien, with James Brown as a clue. Well, not knowing for certain, I guessed, "I feel … [Read more...]
A Day of Reckoning is Coming
Sorry to be dramatic, but it is true. There is a huge disconnect between what the Federal Reserve is saying it is going to do with short-term interest rates and what the bond market has priced in. The chart below from Bloomberg compares the path of interest rates based on Fed funds futures contracts and the median estimate of rates from the Fed’s policy setting committee. Based on the Fed’s latest projections, short-term interest rates are expected to be at 1.375% by the end of next year and 2.625% by the end of 2017. Sixteen out of the 17 FOMC participants project interest rates of … [Read more...]
Tory Burch’s Commencement Speech at Babson College
I watched this inspirational video over the weekend: … [Read more...]
The Monday Melee: Merger Mania
Mega Deals Dominating headlines today have been the merger of Dell and EMC, and the long, slow courtship of AB Inbev and SABMiller that looks like it might be close to a resolution. M&A Trends … [Read more...]
Biggest Stock Market Rally in Almost Four Years
The S&P capped its biggest 8-day percentage gain in almost four years yesterday—rising more than 7%. The catalyst for yesterday’s gains was the minutes of the latest Federal Reserve meeting. Investors decided the meeting minutes were dovish (they weren’t, they were neutral at best) and bid up shares in a fast and furious late day rally. … [Read more...]
Connecticut’s Pension Ranks #48
You read that right. Connecticut’s funding of its pension obligations ranks #48 in the country only to be outdone by Kentucky and Illinois. Connecticut, with a pathetic 51.9% of assets to pay future obligations isn’t even close to dealing with its unfunded pension obligations. Like so many other states in similar predicaments, i.e.: Rhode Island, they continue to hope that the stock market will bail them out. Connecticut assumes that it’s pension assets will earn a future rate of return of 8%. But, as I’ll point out, that basically means that it will need a 12% average annual return from the … [Read more...]
Germany Stumbles
Today Germany reported disappointing numbers for August industrial production, following yesterday’s report for new orders which also lacked encouragement. The reports may signal a slowdown in Europe’s largest economy. Perhaps unsurprisingly, in light of the disappointing numbers, Bloomberg is already identifying further stimulus as a cure for what ails the continent. Further extraordinary stimulus by the European Central Bank could also prove a boon if it pushes down the euro, making German products more competitive. The Frankfurt-based central bank will publish the account of its … [Read more...]
Bernanke Courage?
Former Federal Reserve Chairman Ben Bernanke is promoting his new book, The Courage to Act: A Memoir of a Crisis and Its Aftermath, writing in a WSJ op-ed what monetary policy can and cannot achieve: What the Fed can do is two things: First, by mitigating recessions, monetary policy can try to ensure that the economy makes full use of its resources, especially the workforce. High unemployment is a tragedy for the jobless, but it is also costly for taxpayers, investors and anyone interested in the health of the economy. Second, by keeping inflation low and stable, the Fed can help the … [Read more...]
Wall Street does it Again
We have written on this blog in the past that the monthly jobs report is very likely the most overrated economic statistic known to man. The labor department tries to estimate the change in the number of employed Americans each month on a base of over 140 million. The margin of error relative to the change in the number of jobs each month is huge. The initial estimate is often wrong and gets revised numerous times. The whole exercise is absurd. And to magnify the stupidity, Wall Street tries to forecast the number and then overreacts to any figure that is better or worse than consensus … [Read more...]