Today Janet Yellen will go before the Senate Banking Committee to introduce herself (again) and be questioned by the panel of Senators. Her prepared remarks give us a good indication of her probable philosophy during her tenure as Fed Chair (assuming she is confirmed, which is likely). We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, … [Read more...]
VIDEO: QE cannot continue forever: Yellen
From CNBC: Fed Chair nominee Janet Yellen says her staff is monitoring the risks to the bond-buying program, and "does not see the program continuing indefinitely." Brilliant insight from the next Fed Chair. … [Read more...]
Watch Out! Big Drop in Small Business Optimism
Small businesses are the engine of the American economy. Today’s NFIB Small Business Optimism Index dropped from 93.9 to 91.6. It appears that the index is having a very hard time breaking out above 95, even though its historical average is 98.1. The greatest contributors to the index’s drop was a decline in hiring plans and worsening expectations for small business conditions. A record high number of the surveyed—37%—cited the political climate as a reason for their pessimism. A 2012 report from the SBA found that small business generated 46% of American GDP in 2008 (the latest data … [Read more...]
Approaching 100 Years of the Fed
December 23rd is the 100th Anniversary of the Federal Reserve. The chart below is a measurement of the value of a 1913 dollar today. As you can see the value has dropped some 95.7%. If the Fed’s dual mandate includes preserving the value of the dollar, it’s not performing its job. In contrast, according to Oxford Economics, the value of gold has remained remarkably steady over the centuries. “In the 1830s the price of gold in 2010 dollars was around US$450 per troy ounce, with the real terms price much the same in 2005, more than a century and a half later.” So while the value of the … [Read more...]
Who’s the Richest Person in Your State?
When the Fed starts pumping money into the economy, two groups of people tend to gain the most, the already wealthy and the government. Prices for assets like land and stocks are shooting up. So who’s the richest person in your state likely taking advantage of the Fed’s largesse? Below are each state’s wealthiest person according to Weath-X. State Person Net Worth (Billion) Alabama Marguerite Harbert 1.5 Alaska Robert Gillam 0.4 Arizona Bruce Halle Sr. 4.4 Arkansas James Walton 37.1 California Lawrence Ellison 46.4 Colorado Charles … [Read more...]
Short-termism Reigns at the Fed
For those of you who know our philosophy on investing, you know that we are regular critics of the short-termists on Wall Street, focusing their decisions on quarterly earnings data without taking into view the bigger picture. But perhaps the worst short-termist of all is the Federal Reserve. Take a look at the chart below of non-farm payrolls, released today, to get a clearer picture of what we’re getting at. The Fed has continued its quantitative easing based on what initially looked like slowing employment growth. But after revisions, payroll growth has been much stronger than initially … [Read more...]
VIDEO: Jim Rogers – Central Banks are Making a Terrible Mistake
Investor Jim Rogers shares his views on how Fed tapering will affect the world as it 'floats on a huge artificial sea of liquidity.' … [Read more...]
What We’re Reading 11-1-13
Bank Of America: "It's Getting Frothy, Man", Tyler Durden, Zerohedge.com Tapering Without Tears—How to End QE3, Ronald McKinnon, The Wall Street Journal Fed’s Bubble Alarm Stuck on Snooze, Jonathan Weil, Bloomberg China's Illusory Growth Numbers, Ruchir Sharma, The Wall Street Journal … [Read more...]
VIDEO: Plosser: Fed ‘clearly missed an opportunity’ to taper
CNBC: I look long-term, says Charles Plosser, Philadelphia Federal Reserve president, sharing his views on delaying tapering and explaining why he is not a "fan" of quantitative easing. … [Read more...]
Government Shuts Down-Private Sector Accelerates
After all the doom and gloom reports of catastrophe that would be caused by a government shutdown, ISM manufacturing data put the lie to such delusions. Perhaps a few more months of government shutdown would generate some consistent economic growth. … [Read more...]
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