201609.23
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What Actually Is Transitory

The end of the week finds the initial release of “flash” PMI readings across much of the world. In what will be surprising only to economists and policymakers, the commonality is “slowing.” It is never good to find universal deceleration, of course, but especially so in the second half of 2016. To begin with, whatever…

201609.23
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…And The Treasury Market Is Trying Very Hard To Kill The Legend

As noted earlier today, the bond market is not truly a mystery or middle. In very simple terms that even Alan Greenspan might be able to understand, rising inflation and economic opportunity are reflected in higher interest rates and a steeper yield curve; full stop. The bond market, however, does not possess a crystal ball…

201609.23 0

We Are Stuck In Depression Until The Legend Of The ‘Maestro’ Finally Dies

Alan Greenspan is confused – again. The man who admitted to the world a decade ago he didn’t know much if anything about interest rates is now trying to change that reputation by suggesting yet again interest rates are set to rise. In testimony before Congress in February 2005, the then-Chairman of the Federal Reserve…

201609.22
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Lack of Resale Inventory Further Points To ‘Something’ Changed

The pace of new home sales fell again in August according to the National Association of Realtors. On a seasonally-adjusted annual basis, the rate of resales registered 5.33 million compared to 5.38 million in July and 5.29 million in August 2015. The growth rate on sales has clearly slowed, and the NAR itself finds that…

201609.21
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Like Everything Else, History Repeats (Almost Exactly) Because Power Truly Corrupts

With both the Bank of Japan and Federal Reserve today undertaking policy considerations at the same time, it is useful to highlight the similarities of conditions if not exactly in time. As I wrote this morning, what the Fed is attempting now is very nearly the same as what the Bank of Japan did ten…

201609.21
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Yellen’s Words Are Irrelevant; ‘It’ Is In Her Numbers

There is absolutely no need whatsoever to pay any attention to what Janet Yellen says. There is even less call for parsing the increasingly ridiculous FOMC statement, particularly with regard to inflation where it will continue to suggest “professional forecasters” are the only way (left) to measure monetary policy effectiveness. Instead, four times a year…

201609.21
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It Doesn’t Work

What good is a target or even an emphatic commitment to it if you have already proven you can’t achieve it? So far the only “market” that really counts isn’t buying the new promises, either. We’ll see if that is just a knee-jerk reaction or if it re-ignites the contrary “dollar” trend that had so…

201609.21
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When It Doesn’t Work, Just Promise To Keep Doing It Until It Does

On July 14, 2006, the Bank of Japan raised its benchmark overnight rate off zero for the first time since introducing the world to ZIRP in 1999. In doing so, the BoJ noted that the Japanese economy in its view continued to “expand moderately” and that risks inside the economy were “balanced.” The central bank…

201609.20
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Earnings And Valuations Update; Still Nowhere Near Good

At the end of July with a majority of the 500 companies included in the S&P 500 index having reported their earnings, the tabulated EPS (as reported) was figured around $24.09. That was already down sharply from just a month earlier when compared to analysts’ expectations from just before Q2 earnings season started. In late…

201609.20 1

The ‘Wealth Effect’ Didn’t Die, It Was Never A Valid Concept No Matter How High Stocks Go

Over the years, the “wealth effect” has been taken as a core component of monetary policy. Central bankers will not admit it, of course, but particularly stock prices are a central element of their strategy. It almost has to be that way given that the modern version of econometrics applies rational expectations theory as a…