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April 2014

Estimating GDP is like pinning the tail, somewhere, on the donkey

Wall Street hangs on every number published by any government agency as if they are accurate to the 3rd decimal place.  The fact is, most are estimates, especially the GDP number. On top of this, the seasonal adjustment process probably was key in understating economic activity, and this GDP number is most likely going to be adjusted upward over the next two months (the number today was the first of three …Read More

Was Bank of America’s $4 billion error really an error?

The BofA so-called $4 billion “error” in its stress test calculations is, in my view, another sign of overbearing government regulations and their negative impact on the marketplace. The “error” was in the calculation of capital it would have under the Federal Reserve’s onerous stress test.  Apparently, the capital requirements of the Basel III regulatory regime are so complex that even the Fed’s army of inspectors didn’t catch the very …Read More

Not all insider trading is illegal

The term insider trading brings up a lot of negative connotations. Most people are familiar with some of the more notorious cases of illegal insider trading, like the Ivan Boesky case or Martha Stewart’s. Poor Martha was the subject of many jokes on late night television. Conan O’Brien said, “When reached for comment on the charges, Martha didn’t say much, only that a subpoena should be served with a nice …Read More

Are Equities Overvalued? Are We in a Bubble?

It is a mistake to equate the two questions. There is concrete evidence that equities are overvalued, mainly due to the monetary policies of the Fed and the world’s other major central banks.  And there are clearly some stocks that are in bubble land (those that have stratospheric P/E ratios). There are ongoing massive liquidity injections by the Fed ($55 billion/month), the Bank of Japan, the Bank of England, and, …Read More

Difference between golf balls, electric cars

You may be wondering what the difference is between a golf ball and an electric car. The answer is simple: You can drive a golf ball a lot farther, at least 200 yards or so. One of the drawbacks to owning an electric vehicle has been the range that it can be driven before it has to be re-charged. Car makers have been improving the range recently. According to the …Read More

Are markets misreading economy’s strength?

In April, volatility became the most visible characteristic of the markets, often fluctuating between gains and losses of 1 percent in a single session. Clearly, markets are confused and participants have low future visibility. Some participants worry about a slowdown in the U.S., others are concerned with China’s apparent growth problems, and still others point to high P/E ratios with little or no growth in top line revenues. Falling equity …Read More