Federal Reserve/Monetary Policy

Sudden Interest in TIPS

Someone was apparently in need of 5-year TIPS late last week, as the yield dropped 14 bps on Thursday (from -0.06% to -0.20%) ahead of the holiday weekend. You might assign such a move to illiquid markets ahead of Easter, but the yield actually fell another 3 bps on Monday. Strangely enough, there was no .. read more

Bubbles Doing What Bubbles Do

Economists blaming weather for the real estate/housing “pause” were cautiously optimistic for March ahead of this week’s housing data windfall. Economists expect that sales rose 2.3 percent to a seasonally adjusted annual rate of 450,000 last month, according to a survey by FactSet. New-home buying dipped 3.3 percent in February. Harsh winter storms that month .. read more

The Unearned Age of Certainty

In continuing yesterday’s pointed critique of the current state of monetarism, there is another element to consider here. To reiterate, last year the yen devaluation was unquestionably seen as a catalyst toward rebirth of Japan Inc, and thus Japan economically (and maybe even demographically). This sentiment was as ubiquitous as it was accepted on faith: .. read more

Growing Detachment and Asymmetry Of Real Estate

I mentioned earlier today that pretty much the only sector of the economy (outside of government run lending for university waste) acting favorably toward interest rate “stimulus” was autos. Prior to the historic credit selloff and MBS rout in the middle of last year, you could add housing to the list. The latest figures for .. read more

McDonald’s Again

McDonald’s latest results confirm that something is very much amiss on the consumer side. Total global revenue grew only 1% Y/Y, including new store launches and acquisitions. However, as has been the pattern since 2012, US comparable store sales lagged markedly. The rate of contraction in Q1 was actually the worst in more than a .. read more

Death of Ceteris Paribus

It was the introduction of two Latin words that doomed the modern discipline of economics. As the mathematical modeling craze swept into what is now econometrics, the derivation of theories and, more importantly, the statistical “evidence” of those theories rested upon ceteris paribus – “with other things the same.” It is difficult to accept even .. read more

‘Wealth’ Effect Without Wealth

We have had an ongoing discussion of the “wealth effect” here, spurred by my colleague Margie Fernandez, including some good outside discussion. Current orthodox thinking is that there is significant downstream economic benefits from inducing rising “wealth”, such as can be done. Van Hoisington and Lacy Hunt, PhD from Hoisington Investment Management summarize it as: .. read more

Ignorance or Deceit, Yet Again

I may be a week late to the “most important chart in the world”, but it demands a rational response. I had thought that the commentary surrounding this week’s retail sales release was the height of rational expectations theory deception, but I was clearly wrong. In what is passing for analysis, some are proclaiming a .. read more