It's the residual of all the stuff we can't explain. It's not that our models are wrong, it's the dark matter that's out there. - Fed Governor Neel Kashkari, referring to the "term premium" in long term Treasury yields The curious task of economics is to demonstrate to men how little they really know about what they imagine they can [...]
Here is a brief summary of what is of concern to domestic and international policymakers, academics, community groups, and others. We might call these "known risks." Persistent inflation and monetary tightening Persistent or reaccelerating inflationary pressures Resilient economic outlook leading to further monetary policy tightening Volatile market conditions Entrenched expectations of higher inflation leading to higher realized inflation leading to [...]
This Fed report is meant to be a broad assessment of financial system stability. It's purpose is transparency in an attempt to identify vulnerabilities in the system not to try to identify areas for possible shocks. It looks at 4 broad categories and how they interact. Asset Price Valuation Household and Business Borrowing (Level) Financial Sector Leverage (Level) Funding (Current [...]
Well, I finally got it. I've been fighting COVID for the last week and while most of my symptoms have improved, I am not 100% yet. My goal from the beginning of COVID was to avoid it, if at all possible, until it became endemic and less lethal. It seemed logical to me, a layman, that it would follow this [...]
I think everyone can agree that stocks and bonds sold off last year because interest rates rose. You might get some argument about why rates rose but the fact they did is sufficient to explain the drop in stocks and bonds. It doesn't matter if you think rates went up because the Fed raised their target rate on Fed funds [...]
Jerome Powell has said repeatedly that the Fed's goal is to get rates higher and leave them there for an extended period of time. He believes that the mistake of the 70s was that once higher rates snuffed out inflation, the Fed cut rates too quickly and the inflation returned. I think the mistake of the 70s was that, by [...]
Stocks had a rip snorter of a rally last week and a lot of people are pondering the question in the title over this long weekend. The S&P 500 was down 20.9% from intraday high (4818.62, January 4th) to intraday low (3810.32, May 20th). From that intraday low the market has risen 9.1% in just six trading days. That still [...]
Fear tends to manifest itself much more quickly than greed, so volatile markets tend to be on the downside. In up markets, volatility tends to gradually decline. - Philip Roth Be fearful when others are greedy and be greedy when others are fearful. - Warren Buffett The new year hasn't gotten off to a great start for growth stocks or [...]
Dark leverage, that’s the real stuff. In a ledger-based monetary system, money creation comes from expanding leverage. Simple. Clean. Obvious. How it gets done, that’s the genius, the beauty, and the disaster. Call it money of account, or ghost money, fictional currency, whatever. It’s the secret sauce which, when you see it, you just can’t un-see it. This is the [...]
The market volatility this year has been blamed on a lot of factors. The initial selloff was blamed on a hotter than expected wage number in the January employment report that supposedly sparked concerns about inflation - although a similar number this month wasn't mentioned as a cause of last Friday's selling. The unwinding of the short volatility trade exacerbated [...]
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