Was the Pound Ready to Get Walloped? Even before the Brexit vote was in, analysts were decrying the overvaluation of the British Pound. Here Gary Howes at poundsterlinglive.com writes before the vote: The British pound may rally on the outcome of a Remain victory to the EU referendum, but ultimately the move could prove fleeting. This is according to two prominent research institutions - Morgan Stanley and Capital Economics. “In our opinion, GBP is overvalued as GBP-supportive interest rate and yield differentials are inadequate to help to fund the UK’s 7% GDP current account deficit,” … [Read more...]
The First RAGE Gauge Reading Signals High Risk
For June 2016, my RAGE Gauge signals: High Risk Tension is high on the social and economic fronts. FBI Background checks continue to trend higher, dissatisfaction with the direction of the country is trending high, and the underemployment rate (U6) isn’t real encouraging in this sluggish economy. But it’s a sluggish economy with inflation. You need only look at your checkbook and credit card bills, not the government’s worthless CPI, to find it: Education, Condo’s in Boston/NYC/Miami, food (the type you buy) and taxes to name a few are sky-high. Gold is up 20% YTD. Your dollars are getting … [Read more...]
Hedge Funds on Wrong Side of Brexit
What will be the bigger loss for hedge funds, the money lost on their exclusive exit polls, or bets that are no longer in the money? The 2 and 20 crowd— they take a 2% fee per year on your portfolio and 20% of your gains—has got to be on the wrong side of this trade. All night/day Thursday the polls had Brexit as a Remain. The 2 and 20 crowd, and their leverage, are playing God with other people’s money—you know, retired teachers who have entrusted their retirement to the government who outsources that responsibility to these so-called fiduciaries. ZeroHedge quotes James Butterfill, head of … [Read more...]
RAGE Gauge: Can’t Get No Satisfaction!
Another component of my RAGE Gauge is Americans' dissatisfaction with the direction of the country as measured by Gallup's poll of "Satisfaction With the United States." The poll asks responders the simple question "In general, are you satisfied or dissatisfied with the way things are going in the United States at this time?" This is a great gauge of Americans' overall contentedness, and elevated dissatisfaction could be a sign of pending social unrest or other dislocations in the economy as a whole. Today Americans are dissatisfied at rates higher than the fifteen year average. This indicates … [Read more...]
Investing in Water
You can learn a tremendous amount about investment trends by thinking in terms of your family’s survivals needs. Lately, I’ve been keenly interested in ways to tap into the vast supply of sea water surrounding Newport, RI. Desalination is not cheap but I believe it is what the future will look like—where you, the individual will be empowered. More on a DIY watermaker here. … [Read more...]
Dividend Growth is Key
BlackRock’s Global Chief Investment Strategist Richard Turnill on the importance of dividend growth. This week’s chart shows how U.S. dividend stocks have outperformed the S&P 500 over the past year, a trend we have also seen in other regions, as ultralow bond yields have intensified the hunt for income. Year-to-date flows into dividend-focused exchange traded products (ETPs) have reached $7.4 billion, more than seven times the 2015 total, according to our data. So what’s next for dividend stocks? We don’t see strong demand for dividend stocks dissipating anytime due to low interest … [Read more...]
RAGE Gauge: The Real Unemployment Rate
The typical headline unemployment numbers the American news media reports (U3) are inadequate for measuring not just unemployment, but underemployment. Many part time employees would prefer full time employment. The U6 unemployment number you see above includes more of the employees left out by the headline number; those who are marginally attached to the workforce, and those who are employed part time for economic reasons. The effect of the expanded definition is a fuller understanding of how many Americans aren't working as much as they would like to. The U6 rate is an important component … [Read more...]
The Monday Melee: New Housing Reality
Credit Scores Strengthening Banks are licking their lips over the reduction in the number of Americans who are considered sub-prime borrowers. The Wall Street Journal reports: The share of U.S. adults with credit scores that are considered “subprime” fell to 20.7% in April, the sixth consecutive year-over-year decline and the lowest level since at least 2005, when Fair Isaac Corp., or FICO, started tracking the data. The ranks of subprime borrowers swelled during the financial crisis, peaking at 25.5% in 2010 as mortgage payments, credit-card bills and other debts went unpaid. The … [Read more...]
These are the Guys in Charge of the Economy?
Jim Bullard, the President of the St. Louis Federal Reserve Bank, and one of the Fed members calling for rate hikes as recently as March (and just last month said he was considering one in June) has moved from hawk to uber-dove. Mr. Bullard now thinks the Fed should stay on hold for two and a half years. It would seem that a single weak employment report was the catalyst to drive Mr. Bullard to change his outlook and model for the U.S. economy. He now says the economy is in a new regime. It is more than a little concerning that the guys in charge of the economy are basing their decisions … [Read more...]
Pensions: Left on the Hook will be the Taxpayer
Ike Brannon, a visiting fellow at the Cato Institute, explains how the Puerto Rico rescue makes state pensioners the big winner. Right now, states cannot declare bankruptcy, which is one reason why states have traditionally been able to borrow at such low rates of interest. However, financial markets have come to realize, belatedly, that Illinois (along with other states) is making promises to its lenders that it will have trouble keeping. Puerto Rico was not supposed to be eligible for bankruptcy either, but the legislation before Congress will allow the territory to reduce its debt, both … [Read more...]
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