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Investment Research Since 1978

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Featured Video: CNBC Interview with UPS CEO Scott Davis

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UPS has its finger on the pulse of the U.S. economy. The company moves 6% of U.S. GDP each day. UPS’s quarterly earnings reports and management comments offer important anecdotal evidence on the strength of the U.S. economy. UPS CEO Scott Davis is looking for 2% to 2.5% GDP growth next year and a 2-3% increase in holiday sales this year. … [Read more...]

The Phony Stock Market Rally

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The S&P 500 has been on a tear since the Fed first started floating the idea of quantitative easing 2.0. Since August 31, the S&P is up more than 11%. The gains are of course nice to see, but the rally is a phony. Stock prices are not rising on improving fundamentals or cheap valuations. Stocks are rising simply because investors are anticipating that the Fed will print more money. For proof that the rally is a phony take a look at the performance of the S&P 500 in terms of a hard currency such as the Swiss Franc. My chart shows that in Swiss franc terms, the S&P 500 still … [Read more...]

TIPS: Paying to Lose?

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What would you pay for inflation protection? Investors buying Treasury Inflation Protected Securities (TIPS) are now willing to pay as much as 0.37% annually for inflation protection. In other words, these investors are buying bonds that are guaranteed to lose money in real terms in order to protect their assets from inflation. Before you mock the idea, consider the alternatives. Nominal 5-year treasuries yield only 1.11%. Assuming inflation of 2%, that’s a negative .89% real return. In the treasury market these days, the winner is the investor who loses the least after inflation. … [Read more...]

Fed Makes Mistakes

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The Fed Compounds Its Mistakes – Allan Meltzer, The Wall Street Journal “The Federal Reserve seems determined to make mistakes…Anyone can make a mistake, but wise people don't repeat the same one. Increasing inflation to reduce unemployment initiated the Great Inflation of the 1960s and 1970s…The most important restriction on investment today is not tight monetary policy, but uncertainty about administration policy. Businesses cannot know what their taxes, health-care, energy and regulatory costs will be, so they cannot know what return to expect on any new investment…The only lasting … [Read more...]

The Fed’s Stock Market Manipulation

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The September jobs numbers from ADP and the Labor Department were released this week. The ADP survey showed contraction in private-sector jobs for the second month in a row. Economists were looking for a gain. The Labor Department’s nonfarm payroll survey showed private-sector jobs gain, but they were more than offset by a contraction in local government employment. On balance, both employment reports were soft and fell short of expectations. With Bernanke & Co. focused on unemployment, the Fed is now almost certain to restart its money-printing campaign following its November policy … [Read more...]

Employment Contracting

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According to the ADP Employment Report, private sector payrolls contracted for the second month in a row in September. September’s payroll numbers fell well short of economists' estimates. If the government payroll numbers mirror the ADP report, you can guarantee another ill-advised round of quantitative easing will begin at the Fed’s next policy meeting. … [Read more...]

Bernanke’s Biggest Fear

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The Fed created an uproar on Wall Street this week by changing the language in its post-meeting Federal Open Market Committee (FOMC) statement. The FOMC is, of course, the committee that sets monetary policy at the Federal Reserve. The new language that excited investors was the following: Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation … [Read more...]

Auto Loans Getting Longer

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Here is an interesting chart. This shows the length of new car loans in months. Some car buyers are now financing auto loans for up to six years. The average, according to the below chart is 64 months. Either cars are lasting longer or buyers are reaching to buy more car than they can afford. … [Read more...]