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Are markets too exuberant?

Equity markets hit new highs during the Thanksgiving shortened week. Markets often move in anticipation of changes in policy. This post election market, however, appears to have instantaneously adjusted to what it perceives will be policy outcomes. Such outcomes, however, are by no means guaranteed; some outcomes may take several quarters, others years, if at all. This has been quite a stretch for markets where next month is considered “long-term.” There …Read More

Post-election market drama

Last Tuesday evening, while dining with family and business associates, I had one eye on the elections and the other on the Dow Jones Futures Index, a proxy for the Dow Jones Industrials (DJIA) in the non-trading hours. At one point, the futures were down 900 points, and I was drooling over the prospect of one of those quite rare buying opportunities produced by extreme market fear, irrationality and emotional distress. …Read More

Painted into a Corner A Review of the Economic Environment Entering Q4/16

While Q3 started out much better than the very slow economy of the first half of 2016, August’s data was very weak although there was some bounce in September.  So, we enter Q4 with some serious concerns about the fragile state of the economy, where an outside shock or policy mistake could have serious consequences.  Unfortunately, the policy tools, or lack thereof, that are available should the economy slip into …Read More

The 1937 mistake – will Fed make it again?

The markets breathed a sigh of relief (up 164 followed by 99 Dow points) when, in the middle of September, the Fed decided not to raise the federal funds rate. The DJIA was as high as 18,538 on Sept. 6, but fell 504 points over the next six trading days, including three days in a row of significant gyrations (down 395, up 240, down 258). The past week continued the …Read More

Reconciling a 1-percent economy with record market highs

The recovery from the Great Recession has been the most sluggish in post-WWII economic history.  This is vividly displayed in the nation’s recent GDP report.    The Commerce Department estimated that the economy grew at a snail’s pace over the last 3 quarters: 0.9% in Q4, 0.8% in Q1, and 1.2% in Q2.  Yet, all of the major U.S. stock market indexes recently closed at all-time highs.  For many, warning lights …Read More

Why Helicopter Money and Unconventional Monetary Policies Won’t Help the Economy

The equity markets continue to flirt with record highs while the yields on fixed income instruments are at or near all-time historic lows.  Generally, those two market movements are not compatible.  Everyone feels a high level of anxiety about the economic future.  Ben Bernanke visited the Bank of Japan in early July to help them set up a new experimental monetary policy dubbed “helicopter money.”  And we are living in …Read More