The S&P capped its biggest 8-day percentage gain in almost four years yesterday—rising more than 7%. The catalyst for yesterday’s gains was the minutes of the latest Federal Reserve meeting. Investors decided the meeting minutes were dovish (they weren’t, they were neutral at best) and bid up shares in a fast and furious late day rally. … [Read more...]
Connecticut’s Pension Ranks #48
You read that right. Connecticut’s funding of its pension obligations ranks #48 in the country only to be outdone by Kentucky and Illinois. Connecticut, with a pathetic 51.9% of assets to pay future obligations isn’t even close to dealing with its unfunded pension obligations. Like so many other states in similar predicaments, i.e.: Rhode Island, they continue to hope that the stock market will bail them out. Connecticut assumes that it’s pension assets will earn a future rate of return of 8%. But, as I’ll point out, that basically means that it will need a 12% average annual return from the … [Read more...]
Germany Stumbles
Today Germany reported disappointing numbers for August industrial production, following yesterday’s report for new orders which also lacked encouragement. The reports may signal a slowdown in Europe’s largest economy. Perhaps unsurprisingly, in light of the disappointing numbers, Bloomberg is already identifying further stimulus as a cure for what ails the continent. Further extraordinary stimulus by the European Central Bank could also prove a boon if it pushes down the euro, making German products more competitive. The Frankfurt-based central bank will publish the account of its … [Read more...]
Bernanke Courage?
Former Federal Reserve Chairman Ben Bernanke is promoting his new book, The Courage to Act: A Memoir of a Crisis and Its Aftermath, writing in a WSJ op-ed what monetary policy can and cannot achieve: What the Fed can do is two things: First, by mitigating recessions, monetary policy can try to ensure that the economy makes full use of its resources, especially the workforce. High unemployment is a tragedy for the jobless, but it is also costly for taxpayers, investors and anyone interested in the health of the economy. Second, by keeping inflation low and stable, the Fed can help the … [Read more...]
Wall Street does it Again
We have written on this blog in the past that the monthly jobs report is very likely the most overrated economic statistic known to man. The labor department tries to estimate the change in the number of employed Americans each month on a base of over 140 million. The margin of error relative to the change in the number of jobs each month is huge. The initial estimate is often wrong and gets revised numerous times. The whole exercise is absurd. And to magnify the stupidity, Wall Street tries to forecast the number and then overreacts to any figure that is better or worse than consensus … [Read more...]
The Thing about Bubbles
The thing about asset bubbles is you never know what will cause them to pop or when they will pop. Valuations can tell you there is a bubble, but as a timing signal, valuations are not at all useful. The Biotech bubble has been one of the biggest in the market. So big in fact, that even Fed Chair Janet Yellen identified Biotech stocks as an area of concern over a year ago. The bubble only got bigger following her comments. Along with the fab five (Facebook, Google, Amazon, Netflix, and Apple) biotech stocks had been some of the best performers in the market. That was, until July. … [Read more...]
Retirement: A Magical Find
One of the best things about retirement is being able to do the things you want to do. One of my clients spends his time seeking ancient treasures. Here’s a recent email string from him: Interesting week. We had one search for a family of four who had managed to lose the route and ended up in an adjacent canyon. We used a night plane flight to locate the couple and their daughters (their flashlights) and evacuated them the following morning using a chopper out of Moab. Below is a ruin I stumbled on while on a canyon patrol. It held a magical find - a completely intact ceremonial kiva. … [Read more...]
The 4 Most Dangerous Words in Investing
This time is different or so says Adam Parker, Morgan Stanley’s Chief U.S. Equity Strategist in missive earlier this week. What is different? Here is Mr. Parker in his own words. “People have been saying corporate margins are too high for years. Our judgment is that most of these metrics are irrelevant for making any market-based assessment in time frames less than a decade, if at all." Think again about Black Friday being smaller than Amazon Prime Day. This is a great example of how the new economy is taking over the old and how historical relationships between economic factors and … [Read more...]
Monday Melee: Cash Is King
What we're reading. • U.S. Bonds Flash Warning Sign - The Wall Street Journal • Why GE's Diet Should Carry More Weight With Investors - The Wall Street Journal • As Xi visits the United States, China's economy is at a tipping point - Reuters • Cash beats stocks, bonds for first time in 25 years - Market Watch • Emerging Markets Go From Bad to Worse - The Wall Street Journal • Falling China Factory Gauges Rattles Hopes for Second-Half Growth - The Wall Street Journal … [Read more...]
Did Yellen Save the Stock Market?
Janet Yellen gave a speech yesterday at UMass Amherst titled Inflation Dynamics and Monetary Policy. Yellen was a bit more hawkish on monetary policy than she was during the press conference following the Fed’s latest meeting. The market is taking Yellen’s more hawkish tone as a sign that the global economy may not lead the U.S. into a depression after all. Good is good for asset prices again? Hallelujah to that. Or was it this report, by a JP Morgan derivatives analyst who became a rock star in the minds of many on Wall Street for his prescient calls on the market over the last month? The … [Read more...]
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