If you were waiting for a correction in stock prices to put some money to work, you got your chance last week. The Dow Jones Industrial Average was down nearly 1000 points at the low Monday and closed down 725, a loss of a little over 2%. The S&P 500 did a little better but closed down 1.5%. It looked [...]
In February 2013, Federal Reserve Board Governor Jeremy Stein gave a speech at a research symposium produced by the St. Louis branch of the Federal Reserve that shocked quite a lot of people. QE3 and QE4 were still quite new, but here was a Board member talking just months after their start of “reach for yield.” His assessment of risks [...]
The entire point of leveraged positions is the margin of safety. That is true on both sides of that equation, as for the provider and the borrower/user. In the most famous examples of collapse, from AIG to LTCM losses were never really the issue. None of them could withstand instead collateral calls to their liquidity reserves. As noted last week, [...]
The link between stock prices and oil has been especially high of late, and that has left quite a few traders and experts stumped. For a good long while any impact from oil was denied as only “transitory” or even helpful to consumers through some sort of “tax cut” effect. In January 2016, however, liquidations appeared regularly in one alongside [...]
As doubts surrounding QE have grown, there has been a somewhat detectable if still small trend in central banker repentance. Alan Greenspan to an extent has embraced a more decentralized and market framework in his public comments even though he has yet, to my knowledge, actually repudiate his own work more directly. As noted a few days ago, former BoE [...]
To illustrate just how badly Monday’s selloff (and yesterday’s late day reversal) seems to have shaken core confidence in the overriding narrative (ALL IS WELL!) you need only view the drastic reversal on what stock prices supposedly mean. With QE’s producing little or no tangible economic benefit, certainly nothing specific with which its proponents can easily point to, they have [...]
In March 2013, orthodox economists were brimming with optimism. There were some rough patches in 2012, to be sure, but the Fed stepped up with a QE3 in MBS and then a QE4 in UST. Since the power of monetarism is a central pillar of the orthodox outlook, the future could only be even brighter than it was. The lackluster [...]
With the advance report on GDP for Q2 set to be released this week, economists are working hard to explain why it doesn’t represent the utopian delivery that they swear had already occurred via monetary intervention. There is, in immediate terms, the universal appearance of “residual seasonality” in the past few months as an almost complete revulsion to even the [...]
Having now passed the anniversary of the “rising dollar”, it is interesting to see the related and continued effects on the stock bubble(s). As should be obvious by now, stock buybacks, funded via corporate bonds and loosely categorized C&I loans, are responsible for the post-QE3 nearly uninterrupted rise. Repurchases are forming a separate “liquidity” conduit, indirect leverage if you will, [...]
Greece really should not matter, at all, outside of the tragic plight of the Greeks themselves. You’ll see that message echoed particularly inside the US where the status quo takes a contradictory turn toward reasonableness in order to justify further what isn’t. This is all about asset prices and how they have been so skewed almost everywhere that when one [...]
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