The machinations and hand wringing from Euro-area politicians and bankers over austerity imposed by Germany in return for bailouts has masked the reality that Euro-area countries are quickly piling on government debt. Since the end of 2008 Euro-area debt as a percentage of GDP has risen from 70.8% to 96.4% with no end in sight. Does this look like austerity to you? … [Read more...]
The Heroin Connection
Heroin is a highly addictive drug. It is an opioid like morphine, codeine, and methadone. One of the reasons heroin is so addictive is that our brains have receptors for opiates that our body naturally produces—the endorphins produced during or after exercise for example. When an addict starts using heroin daily, his brain stops producing natural opiates because it is getting all the opiates it needs and more from the heroin. If the heroin addict continues using for years and years, he slowly trains his own body to cease all natural dopamine production. A dependency is created where the … [Read more...]
Thoughts on the Markets
Volatility has picked up in financial markets in recent weeks. It is still mostly noise at this point, but the sell-off has done damage to the technical picture of the market. The NYSE Advance/Decline line for stocks is in the tank, key moving average levels, support levels, and trend channels have been breached by various indices. Foreign stocks have sold off sharply. Commodities are sending a signal of deflation and/or global recession. It seems as the Fed ends quantitative easing, the rose-colored glasses are coming off. Of course, the Fed will try to jawbone markets higher and you … [Read more...]
Zero Percent Rates Holding Back Economy
Did you catch the story from last week where former Fed Chairman Ben Bernanke told an audience at a Chicago conference that he recently tried to refinance his mortgage and was denied? After all I’ve written about Dr. B. you didn’t think I was going to let this story slip by did you? It’s too juicy to pass up, but don’t worry, I’ll keep it clean. Bernanke attributed the rejection to mortgage lenders tightening credit conditions too much. That may be true, but I would like to offer an alternative explanation that the academic minded Bernanke (and his former Fed colleagues) may be … [Read more...]
Politics Matter
Even after the passing of some of the most economically damaging policies the nation has ever seen, there are still some investors who insist that politics and investing don’t mix. These investors somehow believe that economic and financial market performance are independent of policy. Seems hard to believe when you look at the structure of government. In the U.S., the President appoints the Federal Reserve Chairman and few would deny that the Fed plays a major role in interest rate markets and has influence over other asset markets. The Congress has the power of the purse. And one-fifth of … [Read more...]
The Party’s Over
A few years ago the Bank of England (BOE) used the chart below to explain the impact of money printing on the economy and financial markets. According to the BOE’s graph, there are two phases to quantitative easing, an impact phase and an adjustment phase. During the impact phase, there is a party on Wall Street. Asset prices soar far above what the underlying fundamentals would seem to support. The bonuses pile up and the liquor flows freely. Then, during the adjustment phase, economic activity and inflation pick up, but asset prices take it in the neck (red line). With the Federal … [Read more...]
The China Factor
With much of the investment world focused on geopolitical events in Europe and the Middle East and how much or how little money the Fed and the European Central Bank are going to print, China seems to have fallen off of the radar. It shouldn’t. China is a major player in the global economy. It is the world’s second largest economy and the world’s fastest growing large economy. China sucks up a majority of the world’s resources. It is the largest consumer of aluminum, copper, cotton, and coal just to name a few. If the Chinese economy craters, the world will feel the pain and if it … [Read more...]
The Economy’s Weak Link
One of the reasons this business cycle recovery has been one of the weakest on record is that it hasn’t been firing on all cylinders. The weak link among the cyclical sectors of the economy has been residential fixed investment. While there has been some recovery from the dark days of the financial crisis, adjusted for inflation, residential investment is no higher than it was 20 years ago. Non-residential fixed investment, which is made up of business investment in factories, equipment and intellectual property has already hit a new high. With the housing market looking more like it is … [Read more...]
Monday Melee: Strong Rail Traffic
Rail Traffic Signals Strong Growth What we're Reading Worst Things to Buy on Amazon (Kiplinger) Here's Why Fed Needs More Diversity of Opinion (Yahoo) The house made from 4,000 video cassettes and two tonnes of jeans (The Guardian) … [Read more...]
The Most Overrated Economic Indicator
The monthly employment report was released today. The headline payroll number in the employment report is probably the most overrated economic indicator released each month. Investors put far too much emphasis on a monthly data point that is revised twice in the following two months and then again once every year. In an economy with over 140 million workers, the Bureau of Labor Statistics attempts to determine how many jobs were added each month. Then it guesses at how many were added at businesses that it doesn't survey, and layers on top of that a seasonal adjustment that again skews the … [Read more...]
- « Previous Page
- 1
- …
- 67
- 68
- 69
- 70
- 71
- …
- 96
- Next Page »