GMO's James Montier and Philip Pilkington have a nice piece up on the vast distortion that Fed policy has created in equity prices over recent decades. According to the researchers, it may not be the ultra-low rates that have created such lofty asset prices, but the Fed's willingness to step in at every market hiccup to prevent greater fallout that has led to the distortion. Some of the highlights are below. The full piece can be read here. ...But, from 1985 onwards, removing fewer days began to have a major and increasing impact on the market. In fact, FOMC days account for 25% of the … [Read more...]
Worthy Reads: Will Stocks Soar Under a President Trump?
Yellen has a mini revolt on her hands (Yahoo! Finance) Has Commercial Property Peaked (WSJ) RIP Andy Grove (Financial Times) The Saudi's Flinch (Financial Times) Will Stocks Soar Under a President Trump (Fortune) … [Read more...]
Worthy Reads: The Worst Advice
One of the Most Dovish Fed Decisions of the 21st Century (Bloomberg) The Worst Advice (WSJ) Central Banks now in Central Planning Business (WSJ) China Hoping for Another Stock Bubble (WSJ) Feds Pay Down Homeowner Mortgages (WSJ) Yellen Gives Inflation a Pass (WSJ) Canadian Banks Not Reserving Enough (WSJ) … [Read more...]
This hasn’t happened since the Bull Market Began
The S&P 500 gained more than 1% for the fifth consecutive time last week as the Fed decided to rip up its statutory mandate and go with its gut on policy. Five consecutive 1%+ gains in the S&P 500 is a rare occurrence in stock market history. Over the last 70 years, this has only happened on 12 other occasions (14 if you count the episodes when it happened in back to back weeks). The last time this happened was in the early weeks of the current bull market. How have stocks performed following a period of five weekly gains of 1% or more? Our chart shows the performance of the … [Read more...]
Worthy Reads: The Death of Cool Stocks
The Death of Cool Stocks (Money) Central Banks Pushing Mom & Pop Investors into Junk Bonds (ZeroHedge) Central Banks Losing Control of Currencies (WSJ) If No One is Trading, Is It Really a Rally? (WSJ) The Fed has a Major Credibility Problem (MoneyBeat) Government Debt Triple Prior Estimates (MoneyBeat) … [Read more...]
How to Invest your Portfolio after the Fed Move
I was driving into work earlier this week listening to Bloomberg Radio, and there was a guest on from one of Wall Street’s big banks. She was an investment strategist and she was being quizzed about what the Fed would announce later that day. Her opinion wasn’t much different than you would hear from any other strategist on the Street, but as I was listening, I was struck by how distorted global financial markets have become over recent years. This strategist proceeded to explain how the Fed was stuck between a rock and a hard place because if it didn’t hike rates, inflation would rise … [Read more...]
Greenspan Warns on Inflation
Former Federal Reserve Chairman Alan Greenspan talks with David Westin about central bank investments, potentially funding infrastructure investment through 30-Year treasuries, and why he sees a return of inflation. He speaks on "Bloomberg ‹GO›." (Source: Bloomberg) … [Read more...]
What we’re Reading: Gold Soars as Fed Ignores Inflation Risk
Gold soars as Fed Ignores Inflation Risk (MarketWatch) SEC Tries to Protect Investors from their own Laziness (WSJ) Internet Sales Boost Fedex (WSJ) Is Ackman about to Blow-up another Hedge Fund (Business Insider) Journalists Suck up to Fed (WSJ) Is this Rally for real? (Barron's) Recent Stock Rally Appears Overdone (Barron's) Is America's Tightening Cycle Almost Over? (Financial Times) Why Negative Rates are Harmful (Barron's) … [Read more...]
Will Yellen Change the Rules Again?
As the chart below makes clear, the Fed is meeting is now meeting its congressionally mandated objectives. The same objectives Yellen & Co., has thrown in the face of the public at every Fed meeting to justify a continued ultra-loose monetary policy when none was needed. Now that the mandate has been met, look for the Fed to dream up new and even less credible ways to keep the monetary spigot wide open. … [Read more...]
Morning Reads: China’s Looming Currency Crisis
The Spillover of Negative Rates (Bloomberg) China's Looming Currency Crisis (WSJ) Hot Money Moves into Emerging Markets (Financial Times) Investors Not Sold on Robo-advice (Gallup) ECB Distorting Corporate Bond Market (Financial Times) … [Read more...]
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