Last week the Federal Reserve updated its quarterly Financial Accounts of the United States Z1 (formerly Flow of Funds) meaning that we can recheck valuation levels of the stock bubble from alternate points of view (data). The most common valuation given by the report is Tobin’s Q which compares the estimated value of corporate equities (liability) to nonfinancial corporate business [...]
With last week’s release of the Financial Accounts of the United States (formerly known as the Flow of Funds; still designated Z1 by the Fed’s system) we can add to yesterday’s examination about bubbles and market risk. Putting the figures together, the composite picture is one where stocks are as stretched in terms of valuations to a degree only seen [...]
In February 2013, more than a year ago, Jeremy Stein, Federal Reserve Board Member, openly expressed concern over behavior in certain sectors of the financial markets. He categorized this as “reaching for yield”, but there was more than a whiff of caution in his exposition of leveraged loans and junk debt. “The annualized rates of PIK bond issuance and of [...]
Margin Debt New Record (FINRA) Stock Margin Accounts Net Worth (total margin debt minus free cash balances and credit) Finally Surpasses Dot-com Peak Rate of Change In Net Worth Total Margin Debt Scaled to Nominal GDP Shiller CAPE Tobins Q (market value of corporate equities divided by corporate net worth) Corporate Equities Scaled to GDP Does any of this scream [...]
Given recent and growing consternation about stock prices and financial assets, it has been heartening to some that so many people are now talking about bubbles. The logic here is that if everyone “knows” there is a bubble there simply cannot be one. Even Robert Shiller, newly minted Nobel Laureate, was pulled into the discussion. With the recent creep upward [...]
Market risk in whatever asset class is usually estimated by volatility, and conceptually thought out in that way. Higher volatility is typically associated with “riskier” markets, particularly stocks. Let’s assume that you have two market choices for investment. The first features a standard deviation (1-year period of weekly market returns) of 1.48% where the VIX is 12.83. The second market [...]
I wanted to concur but take Joe's weekend proposition in a slightly different direction. I think it is relatively clear that the Federal Reserve and Chairman Bernanke are intentionally hinting at “tapering” QE purchases in order to “talk the market down”. There are a lot of similarities between the monetary communications right now and 1996 when Alan Greenspan famously appealed [...]
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