201606.05
8
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What Now, Ms. Yellen?

Well, that was ugly. The lousy employment report released this past Friday threw the markets and probably the FOMC for a loop. Stocks didn’t really do anything – yet – but other markets more than made up for that minor oversight. The dollar was down 1.5% on the week, all of that after 8:30 Friday…

201511.22
9
1

The Closing Of The Global Economy

I don’t often write about global geopolitics because I think, in general, investors spend too much time worrying about things they can’t control or aren’t going to happen or wouldn’t matter much if they did. The best example is the Middle East which has been a mess my entire life and long before it for…

201510.25
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Muted Long Term Expectations

The US Central Bank has a dual mandate to promote maximum employment and stable prices. Originally, this meant the Central Bank would help to smooth the business cycles that tend to occur in an economy. When an output gap emerged, they would lower the interest rate. This would not only lower the debt burden on the…

201510.04
5
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A Self-Correcting Mechanism

An interesting side benefit of the Fed having pegged interest rates effectively to zero and having accomplished so little with QE, is that we get to see markets’ self-correcting tendency. Consider what has happened over the last year or so since the Fed made it clear their goal was to start normalizing policy, i.e. raise…

201509.20
2
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The World’s Central Bank

Well, thank goodness that’s over. The Fed met last week and decided to maintain the Fed funds rate in the 0 – 0.25% range in which it has been confined since the great financial crisis of 2008. Of course, the fed funds market is essentially kaput having been usurped by the Fed itself during the…

201508.09
3
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The Correction Gains Momentum

US stocks declined for the seventh straight day on Friday, a dismal streak not seen for almost four years. The S&P 500 is now down 5 of the last 7 weeks although in total it is just 2.5% below the all time high. If you just own the index I suppose that is not much…

201508.02
3
0

The New Normal Gets A Downgrade

It was back in 2009 that Bill Gross coined the term New Normal to describe the post-crisis US economy. That economy is marked by a reduced willingness to take risk in the private sector for a variety of reasons. No interest rate is low enough to induce corporate spending in an environment where aggregate demand…

201506.28
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The Market Waits For No One

Our lens suggests that the very low interest rates that have prevailed for so long may not be “equilibrium” ones, which would be conducive to sustainable and balanced global expansion. Rather than just reflecting the current weakness, low rates may in part have contributed to it by fuelling costly financial booms and busts. The result…

201506.14
2
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Smoothing Global Growth through Regionally Counter Cyclical Credit

“While most investors were preoccupied with deflation, related to last year’s plunge in oil prices, and the seemingly hopelessness of quantitative easing, a stealth recovery in private sector global credit demand was underway. We examined prospects for credit growth..which highlighted some surprising developments relative to the economic pessimism that had caused government bond yields to…