Insights and Research

Cash Does Not Mean Capex, IBM Edition

Related to yesterday’s observations about corporate cash, the broken record of IBM revenue continues to demonstrate the unwillingness of American businesses to freely spend on capex. While attention continues to focus on China and Asian results, not without good reason, the domestic and larger “Americas” segment continues to drag. Revenue in China is down 20% .. read more

On April 17th, 2014, posted in: Economy, Markets by Tags: , , , , ,

‘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

Intentions On Housing

I speculated in May last year that the introduction of the taper concept was in large part due to what Jeremy Stein articulated in February 2013, namely the idea that certain “markets” were becoming overheated in the “reach for yield.” In essence, it amounted to an attempt to “talk down” assets, chief among them the .. read more

Low Inflation Taper Theory

There was considerable attention given to Janet Yellen’s appeal toward “optimal control” language in prior speeches and toward her confirmation. The idea is such that the newly committed 2% inflation target does not need to be a “rule.” Under optimal control, the FOMC may tolerate an inflation rate above that target if it allowed unemployment .. read more

Always the Dollars

Even though the data is stale by the time of its eventual release, I think the TIC figures still maintain some relevance. If nothing else, even on a rear-facing basis, it provides more consistent data to confirm or deny previous narratives. To this point, that description includes central banks mobilizing dollar assets to deflect continuous .. read more

The Inconvenient Marriage of Yuan and Gold

The latest money growth figures from China seemed to have brought back worries over more disorder in finance. Tomorrow the Chinese government will release GDP figures for the first quarter and current expectations (I know) are for 7.3% Y/Y growth. That would be the slowest rate of expansion in memory. The two are inextricably linked .. read more

Ignorance or Deceit?

When you encounter rational expectations theory you cannot help but see its totalitarian potential. The most basic premise is that policy expectations influence the behavior of agents, and thus changes in policy expectations influence changes in current behavior. If the Fed makes you think it will take an “inflationary” stance, then theory proponents expect that .. read more