Take a look at this Federal Reserve induced recovery. … [Read more...]
Higher Wages on the Horizon
Job openings hit a more than 13-year-high yesterday. The rising number of job openings signals continued improvement in the labor market. Job openings are also up as a percentage of the unemployed. There is now a job opening for every two unemployed workers. The higher number of openings signals that stronger wage growth may finally be on the horizon. My chart shows the ratio of job openings to unemployed workers versus the annual rate of change in the employment cost index. Job openings tend to lead wage growth by about six months. If we are to believe the signal being sent by the job … [Read more...]
Survey Says? Optimism Growing.
The NFIB Research Foundation’s survey of Small Business optimism ticked up this morning, continuing a trend of recovery from some of the worst readings ever. But optimism still hasn't reached its historical mean, and this late in the business cycle, it’s hard to imagine small business owners reporting robust optimism before the economy is tested once again. … [Read more...]
Piping Hot Growth
Four Percent! Can you believe it? The first estimate of second quarter GDP growth was released this week and it came in at a piping hot 4%. That is the third highest quarterly growth rate since the recovery began and only the seventh time in the last 56 quarters that growth has been so high. But before you start celebrating, I should note that the 4% growth rate comes with an asterisks. Much of the growth in the second quarter was simply catch up from an especially weak first quarter. After revisions, the Bureau of Economic Analysis said GDP in the first quarter contracted at an annual … [Read more...]
Gut Check: Confidence Rises to Post Recession High
Consumer confidence has risen to another post-recession high. The Conference Board's Index of consumer confidence has nearly topped its historical mean, something it hasn't done since October of 2007. … [Read more...]
Martha’s Vineyard & Newport Booming
On Saturday afternoon downtown Newport, RI was packed. Cars were bumper to bumper and as Becky and I were preparing our boat, a 31 foot Grady White Canyon, for departure from the Newport Yachting Center, we both agreed that “summer’s here.” And after the winter we had in New England, it’s not a second too early. As we passed Castle Hill off to our portside we set our course for a beautiful afternoon cruise through Buzzards Bay to Mattapoisett, MA—where I grew up—for a cookout at my sister’s house. Our children arrived by land thanks to generous grandparents offering to drive them over by … [Read more...]
Rates to Rise by March: It’s About Time
President of the St. Louis Fed, James Bullard, knocked the market on the chin a bit yesterday by saying that rates would be going up by March. It's certainly about time they did. Savers and retirees have been bearing the brunt of the nation's attempt to use misguided monetary policy to generate growth for too long. As Bloomberg notes here, Bullard's statements contradict Fed Chair Janet Yellen's statements somewhat, adding uncertainty to the market. … [Read more...]
Catalyst for a New High
The S&P 500 closed at yet another new high yesterday. The market was flat until about 2:00 pm. What was the catalyst that drove prices higher after 2:00? The nation’s esteemed and astute Federal Open Market Committee announced the results of their latest policy meeting. Despite building evidence that inflation is accelerating and that the labor market is tightening, Yellen & Co., said inflation is still too low. They also told us that even though the unemployment rate has come down faster than the Fed expected, the labor market is actually worse than the headline unemployment rate … [Read more...]
Birth of a Crisis
In the aftermath of the last financial crisis, the Federal Reserve somehow managed to come away with its reputation mostly intact. Big commercial and investment banks took most of the blame for the mayhem. And rightly so. But the impetus for the crisis was born of a prolonged period of Fed engineered ultra-low interest rates. Bernanke & Co., held rates far below normalized levels in an attempt to ward off the deflation Bogeyman (just as Yellen & Co., are doing today). Investors responded by reaching for return. There was an insatiable demand for yield. With rates so low, every basis … [Read more...]
Once in a Lifetime Stress?
You need to check out this stress index. The Kansas City Financial Stress Index is a monthly measure of stress in the U.S. financial system based on 11 financial market variables—including the high-yield bond/Baa spread, volatility (VIX), and the correlation between returns on stocks and Treasury bonds. As you can see in the chart below there’s not a lick of stress to be found. It’s like sailing in a light puff of wind on a Summer afternoon here in Newport, RI. But light puffs of wind don’t last forever. There’s a reversion to mean coming that's more like the 15-20 knot wind on a … [Read more...]
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