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Fed Drives S&P 500 To Record Levels, Economic Fundamentals Still Soft

Holiday sales look flat. While online sales were up, sales at traditional retailers were lackluster. Penney’s, Kohl’s, L Brands, Macy’s, Urban Outfitters, Bed Bath & Beyond, all reported lower sales vs. a year ago. Meanwhile, in what looks to be a “frugality” or “trade down” movement on the part of the consumer, same store sales at Walmart, Costco, and Target rose. The Wall Street Journal reported that nearly 40% of exchange listed companies lost money in …Read More

Investor Prospects For 2020 And The Wall Street Casino

This is the time of year when I am supposed to make predictions for markets for 2020, or, at least give an outlook. This has become quite difficult to do in recent times as markets no longer appear to be driven by corporate fundamentals or macroeconomics. Rather, markets have been moved by: 1) passive investment flows; 2) corporate stock buy-backs; 3) TINA (There Is No Alternative), especially for baby boomers looking for …Read More

Fed Provides More Liquidity; Phase 1 Trade Deal, But No Corroboration On Jobs Report

Much has happened economically in the past couple of weeks including the Fed’s communication that it does not expect any rate actions in 2020, a Conservative Party sweep in the UK (which pays well in the U.S. for free marketeers), and a supposed “Phase 1” trade pact, although there won’t be a signed document until sometime in January (still time for Lucy to pull the football away – again!). The …Read More

FOMO, Momentum, The Fed, But No Fundamentals

As of this writing, the equity markets are on a three-day losing streak, caused by less optimism on the “trade war” file. And, while there were some positives in recently released economic data, most major economic indicators continue to show business contraction. The equity market has been driven by “the economy is strong” narrative, FOMO (Fear of Missing Out), momentum, and the injection of huge amounts of liquidity by the Fed (QE4). Unfortunately, …Read More

A Full-Employment Recession: Post-WWII Growth Model Flawed

There were three big interrelated economic events at the end of October. We had the first pass at Q3 GDP, followed by the Fed meeting (another reduction in the Fed Funds Rate), and the week ended with a much stronger than anticipated jobs report. The data continue to imply that the traditionally accepted post-WWII growth model (emphasis on positive aggregate GDP growth) is no longer applicable, and policies based on it …Read More

Demographic Trends: The Case Against Negative Interest Rates

Japan has a 2.2% unemployment rate, yet, for 30 years, they have not had any significant economic growth, due to their demographic structure. Today, the developed world has Japan’s 1990s demographic features, with falling fertility rates, rising dependency ratios (retirees/working aged), and, ultimately, declining populations. Under these conditions, aggregate GDP growth will be harder and harder to achieve. QE’s “Wealth Effect” All the central banks of developed economies have adopted the Fed’s …Read More