Global equity markets are selling off this morning and bond yields are rising as news that the European Central Bank considered removing a pledge to increase their bond-buying program if needed. Money printing by the world’s largest central banks has gone on for so long that it is easy to forget the massive amount of support they are providing to global financial markets. A quicker than anticipated end to the ECB’s bond buying program could remove some of that support. Bloomberg has the story. European Central Bank policy makers considered removing a pledge to increase their bond-buying … [Read more...]
Does Europe Need America Anymore?
Does Germany, and by extension Europe, need America anymore? German exports to Asia are growing rapidly. Exports from the country to the rest of Europe and to the U.S. are growing too, but at slower rates. German exports to China rose 12% in the first four months of the year, with exports to India rising at about the same rate, and exports to Vietnam jumping over 20%. Nina Adam, writing at the Wall Street Journal, suggests new business in Asia could offset any negative trade effects brought on by the Trump administration in the U.S. She writes: Mr. Trump has repeatedly criticized … [Read more...]
The Battle Raging for Your Grocery Money
The announcement of Amazon's purchase of Whole Foods was a big deal, but it also has raised the profile of a war that's been raging in the grocery business for years now. Americans seem to have become more price conscious and that has bolstered low-price stores like Aldi. They've also become more focused on online grocery shopping, which has helped many smaller companies gain a share of the market. But big grocers are having a tough time holding on to customers in the face of the new competition from low cost and online companies. Consumers are buying more of their groceries outside of … [Read more...]
This is why Calm Markets Should Worry You
Hyman Minsky was an economist whose theories were made famous during the 2008 sub-prime crisis. Minsky’s work focused on the fragility of financial markets. It was, and still is, mostly ignored by the mainstream economic establishment. The Cliff’s Notes version of Minsky’s work is that stability breeds instability. Calm markets encourage excessive risk taking which can lead to crisis. After decades of stability in the housing market resulted in one of the most devastating recessions on record, one might have hoped Yellen & Co., the folk with the most control over financial markets, … [Read more...]
Right to Work South Carolina is Flooded in Jobs
Another big company, this time BMW, has announced it will be bringing more new jobs to South Carolina. The state's business friendly, right to work status has been successful in attracting major manufacturers like Boeing, and now BMW, which already has a large plant in the state, will expand. BMW plans to invest $600 million in its South Carolina plant. CNBC reports: The German automaker said Monday it will add another 1,000 jobs and invest $600 million in the plant as part of a plan to boost annual production to as many 450,000 vehicles. "It's a great day for us here in Spartanburg and … [Read more...]
Inspired by Trump, Samsung May Bring Plant to South Carolina
Electronics maker Samsung may bring manufacturing of home appliances like refrigerators, washers, and dryers to South Carolina. The plant could bring 500 jobs to the town of Newberry. The Wall Street Journal reports: SEOUL— Samsung Electronics Co. is in late-stage discussions to invest about $300 million to expand its U.S. production facilities at a factory soon to be vacated by Caterpillar Inc., according to people familiar with the matter, with an announcement expected as early as next week. The facility eyed by Samsung is in Newberry, S.C., a town located about 150 miles northwest of … [Read more...]
Chicago Fed’s Charles Evans is Stumped by My Bezos Law
I love Amazon's proposed purchase of Whole Foods. But let's not kid ourselves. Amazon would not be where it's at today without the help of an ultra loose Federal Reserve. Where else is all that Goldman Sachs and indexing money going to go? Into cash? Please, in a "what have you done for me lately" world, the fast money needs a place to go. Amazon's confidence--thanks to its bloated stock price--is like playing the Super Bowl with a 50 point lead before leaving the locker room for kickoff. Now the Fed is trying to figure out what to do in a post-Bezos Law world. If you're not familiar with … [Read more...]
Pouring Fuel on the Fire in Financial Markets
If you thought the last nine years of manipulation, misallocation, and mispricing that was aided and abetted by misguided monetary policy was a problem, you ain’t seen nothing yet. As the FT reports, the Fed and other global central banks are re-evaluating their 2% inflation targets with an eye toward raising them. Why are Yellen & Co., thinking about raising their inflation targets? The theory is that if central banks can lower inflation adjusted interest rates more than they have in the past, they will be able to provide stimulus to the economy during the next recession. Sounds … [Read more...]
This is What Terrorizes the Fed
Imagine for a moment that you’re the Fed. You own all of these mortgages. You want to get out of them. You also want to increase interest rates. Aren’t you chasing your own tail recognizing that bond prices decline as rates go up? The Fed can fight this battle in the press but they can’t ignore the natural law of bonds. [gview file="https://www.youngresearch.com/wp-content/uploads/2017/06/h41.pdf" width="100%"] … [Read more...]
A Failed Fed Tightening
For the third time in the span of about twenty years, the Fed is in denial over an asset bubble its policies have helped foster. Bubble conditions are most obvious in the FANG segment of the stock market, but a value-based investor could point to many more areas of the market where values appear stretched. Yes, the Fed is now tightening policy, but the pace of tightening is about four years late and at a pace that the market finds laughable. Here, the Wall Street Journal presents the facts of a failed Fed tightening. Broad financial conditions are as accommodative now as they were in early … [Read more...]
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